In order for a contract to be valid and legally binding, there must be an agreement between the parties. The agreement must also be evinced in writing in some cases, such as when the contract contemplates a sale or services which will cost more than $500. This is called the Uniform Commercial Code.
As the means of writing has drastically changed in the last few decades, we are more accustomed to digital writing such as emails and text messages. But can those qualify as the type of writing which make a contract legally binding? Let's find out.
Key Takeaways
- For a contract to be legally binding, it must include an offer, acceptance, consideration, mutual assent, capacity, and legality, regardless of whether it's in written or digital form like text messages.
- Under the Illinois Uniform Electronic Transactions Act, electronic records, including text messages, can be legally binding if all parties agree to conduct transactions electronically.
- While text messages can form a legally binding contract, challenges such as lack of clarity, context, and specific formal requirements may complicate their enforceability.
What Makes a Contract Legally Binding
In order for a contract to be legally binding, it must meet a specific set of criteria. These are:
- There must be an offer and an acceptance. This means that a clear offer was made, and this was followed by the other party's acceptance of the offered terms.
- There must be consideration. This means that something of value is being exchanged between the parties. Most often, this refers to money being given in exchange for something which carries a value of that amount. Let's say you want to buy a house. In order to do so, you must give the seller money, and in exchange, they give you the house.
- There must be mutual assent between the parties. This means that both parties agree to the specific terms set forth in the agreement. In your purchase of the house, the seller can't unilaterally agree that the sale will be done as is. You have to also agree to this. There is no such thing as a unilateral agreement. The whole point of an agreement is that both sides fully agree. Otherwise, there is no deal. This may seem like stating the obvious, but it is a crucial tidbit that will pump the brakes on the process if it is not fully fleshed out.
- The must be capacity on the parts of each party. This means that the parties are capable of legally entering into a contract. Let's say, for example, that someone wanted to enter into a contract with someone who is in a coma. This would be a no-go for obvious reasons.
- Another seeming no-brainer is that the contract must be in regards to something that is legal. You can't have a legal contract for something that is itself not legal. You can't legally enter into a contract for the sale of illegal drugs, for example.
Text Messages as Contract Basis
A text message exchange may work as a legally binding writing for the purposes of a contract. But it must include all of the above-mentioned requirements. If a text message exchange includes a clear offer and an acceptance, evidence of consideration, and mutual assent between the parties, the parties can be shown to have the necessary capacity to enter into a contract, and the subject matter is clearly not illegal, then a text message exchange can indeed be used as a legally binding form of entering into a contract.
- For a clear offer and an acceptance to be part of a text message exchange, it must be very clear what the offer is, and the recipient must respond in a way which shows that they have accepted.
- For evidence of consideration, the text messages must show that something of value is being exchanged, such as money, in return for some type of goods or services.
- For there to be mutual assent between the parties, the text message exchange must show that the parties are all clear on the terms and have all agreed to them.
- For there to be capacity and legality, it is the same standard as with any other type of contract.
Illinois Rules
In Illinois, the Uniform Electronic Transactions Act will have specific details which apply to a contract entered into via electronic means such as text messages. The Act states that "This Act applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct."
If the parties do indeed agree to conduct their transaction via electronic means, then the Act says that electronic records and signatures will have the same legal effect as traditional hand written signatures and paper documents would. This cannot be unilateral though – all of the involved parties must be ok with doing this.
Challenges of Trying to Use Text Messages for Contract Formation
Contracts require a clear understanding of the intent of the parties, as well as of the terms and conditions to the contract. Because text messages are often written in a shorthand form, and can include abbreviations and emojis, etc, they may not be clear and specific enough to satisfy this requirement for there to be a legally binding contract. This can lead to disputes and challenges down the line.
Another related issue may be the evidence needed to show the intent and understanding of the parties. It may be hard to prove that both parties were really on the same page during the text message exchange if there is not enough context, clarity, and specificity.
It is also important to remember that certain types of contracts will require additional specific forms. This will happen in the case of a real estate transaction. A text cannot satisfy the exchange of financial information, for example, because records will be required from the parties' financial institutions. You can't just text someone that you're good for the money in a real estate transaction; you will also have to provide proof to back this up, and it will not be enough to try to do so by text.
In Conclusion
A text message exchange may be legally binding for a valid and enforceable contract to be formed, but it would have to satisfy all of the above requirements, such as an offer and acceptance, consideration, mutual agreement, capacity, and legality. If it does satisfy all of these, it may work out just fine. However, it also comes with some challenges in terms of proving the validity of the contract in question, so it is best for you to familiarize yourself with this topic and go through a more formal process. It is always advisable to enlist the help of a professional.
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