Can You Sell Your Home By Email? #458

By Jennifer Clee
B.A., LL.B.

The New Brunswick Court of Appeal recently considered whether an exchange of emails between a prospective buyer and seller of residential property constituted a binding contract.¹

The property was listed for sale on Kijiji. After an initial phone call, the buyer and seller negotiated a sale by email. The seller emailed the buyer offering to sell the property for $160,000, providing the buyer assumed the mortgage and paid her legal fees. The buyer emailed agreeing to assume the mortgage, pay the seller's legal fees and offer $155,000. The buyer also emailed asking if his wife could view the property. The seller emailed back advising the buyer that she would accept his offer. The buyer's next email suggested he have a purchase and sales agreement drafted and proposed a closing date. Three hours later the seller emailed the buyer advising that after speaking with her partner, she was not prepared to sell the property. The seller was the sole owner of the property.

The buyer sought a judicial determination that the email exchange resulted in a binding agreement. The buyer argued that the email exchange constituted a written agreement, contained all the essential contract terms, satisfied the definition of electronic signature under New Brunswick's Electronic Transactions Act² (NB ETA), and therefore satisfied that provisions under that province's Statute of Frauds³ which, like BC's Law & Equity Act⁴, provide that no contract for the sale of land is enforceable unless the agreement is in writing and signed by the party charged.

While the case concerned New Brunswick legislation, BC's legislation is substantially the same.⁵ The BC Electronic Transactions Act⁶, like the NB ETA, provides that contracts for the sale of land may be entered into electronically providing the parties agree, and providing the other common law requirements for contract formation are satisfied. Both Acts provide that the legal requirement for a signature is satisfied with an electronic signature and define electronic signature similarly, as information in electronic form that a person has created or adopted in order to sign a document and that is in, attached to or associated with the document.

While the lower court found a binding agreement, the Court of Appeal held otherwise. The higher Court acknowledged that the emails satisfied the written requirement of the Statute of Frauds and commented, without making any conclusion in this case, that it was possible that the method of the seller identifying herself in the emails could satisfy the definition of electronic signature under the NB ETA, and thus the requirements of the Statute of Frauds.

The Court also acknowledged that the email exchange contained the essential elements for a contract: parties, price, property. However, applying the objective standard of the "reasonable bystander", the Court concluded that the parties lacked the requisite intention to contract, a criterion for contract formation. In reaching its conclusion, the Court considered the fact that neither the buyer nor his wife had viewed the property, the buyer's reference to a future draft agreement, and the fact that the buyer was unaware of the terms of assuming the mortgage.

The following passage illustrates the Court's concern with finding enforceable contracts by informal electronic communications, particularly in transactions involving the sale of residential property:

"The notion that a person can sift through a series of emails, identify the 3 P's, find a signature that satisfies the Electronic Transactions Act and, correlatively, the Statute of Frauds, and then have the court fill in any necessary contractual terms is simply out of step with reasonable expectations of today's typical consumer. There are still instances where formalities count. The purchase of a home is one of them."⁷

The decision is encouraging as the Court recognized that the sale of real property is a sophisticated process, where formality is required and consequently, the expertise of licensees.

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