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Modern Communication Methods Affect Contractual Protections

Added by Hawley Troxell in Articles & Publications, Business Law on May 1, 2011

Did you know instant messaging, Twitter, Facebook, e-mail, and other text-based communications can nullify contractual protections against unintended contract amendments? Almost every contract has some version of this boilerplate: “This contract may be amended only by a writing signed by both parties.” An essential purpose of a written agreement is to serve as evidence of a deal between parties. The “signed writing” or “anti-oral modification” clause protects this essential purpose by nullifying claims that a contract was modified by oral agreement, or by a written document that was discussed but never signed by both parties. And it worked well in a world where most communication was either oral or by postal letter.

Today, however, much business communication is conducted via instantaneous, electronic text-message tools such as instant messaging, text messaging, Twitter, Facebook, and e-mail. Although we tend to think of these tools as providing an equivalent to an oral conversation, our communications on these networks are, in fact, written. And at least one court has ruled that an instant message exchange can create a binding contractual amendment despite the contract’s signed writing clause. The key facts in the case were that in an instant-message exchange one party proposed an amendment to a written agreement and the other party accepted the amendment. The court reasoned that the exchange was written and, therefore, not a prohibited oral modification. This reasoning, therefore, extends to all written communication technologies.

The court in the instant-messaging case discussed above did not address the question of whether an instant message also constitutes a “signed writing” as required by the typical signed-writing provision. Under Idaho law, however, an electronic communication such as a text message could be deemed a signed writing. Idaho is one of several states to have adopted the Uniform Electronic Transactions Act. Under this Act, any electronic communication that can be uniquely associated with an individual can be deemed an electronic signature if the court determines that the individual intended to sign the communication.

The take away for contracting parties is that they must think before they communicate electronically. Parties who are willing to forgo the convenience of electronic communication could choose to redraft their boilerplate to exclude all but written amendments signed in ink and physically delivered. This solution, however, will be inconvenient for most businesses today. The only practical, workable solution is to remember that no written form of communication is informal or nonbinding.

If you would like more information or have questions regarding this topic, please contact a member of our Business Group or callĀ 208.344.6000.