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Business Litigation Alert: "Sign on the Dotted Text?"

Enforcing Contracts in the Mobile Age

A handshake used to be the universal sign of a sealed deal, but today, agreements have gone digital and transactions are often handled via phone or instant message. But does this kind of electronic communication constitute an enforceable contract? Are you bound by what was discussed over an email or text message?

Two hedge funds, Perry Capital LLC and Solus Alternative Asset Management LP, are currently fighting over just those questions. Solus has filed a lawsuit against Perry over whether an enforceable contract was in place when they agreed to trade $195 million of claims on Bernard Madoff’s bankrupt firm by phone and instant messages.

Perry denies there was a deal, particularly one that can be enforced in court; however, contracts for these kinds of transactions do not necessarily have to be in writing, and it is a common practice for them to take place via phone or email.

How do you protect yourself and your business interests when communicating electronically?

  1. Make sure you consider your responses to any electronic communication carefully. Remember, it is subject to the interpretation of the reader, which can often be the opposite of what you intend.
  2. Agreements made over the phone, email, instant message, etc. can be enforceable. Do not agree to anything if you do not intend to follow through.
  3. Try to get as much in writing as you can. It is still the most enforceable version of a contract available and leaves little room for anyone to question its validity.

With smart phones and other forms of mobile communication dominating the business world, these kinds of disagreements will surely become more commonplace. This makes it critical for you and your employees to carefully monitor any and all forms of communication, as you could be signing on the dotted line, even if that line is floating in cyberspace.

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