Can a Text Message Create a Binding Contract? The Legal Risks Hidden in Everyday Business Conversations

This article is for general informational purposes only and does not constitute legal advice. Contract law varies by jurisdiction. Consult qualified counsel before relying on this content.

The $2.8 Million Text

In 2024, the Montana Supreme Court considered a dispute that began with a few dozen words exchanged on a phone. Daniel Perl had purchased a home built by Chris Grant’s construction company for $1,775,000. The home had problems, and negotiations between the parties eventually shifted to Jay Grant, Chris’s brother, who was acting as a consultant. When a buy-back proposal circulated, Jay texted that the Grants were “happy with all the terms you laid out” and referenced a January 15 closing, a deposit at signing, and the balance in cash. The Perls later disagreed about whether a deal had been struck and tried to proceed with litigation over the construction defects. The Grants argued the text exchange had already settled everything. The district court agreed. The Montana Supreme Court affirmed: those texts, read in context, satisfied the state’s statute of frauds and formed an enforceable settlement agreement. The construction lawsuit was barred. (Perl v. Grant, 415 Mont. 61, 542 P.3d 396 (2024).)

The Perl case is not an outlier. Across the United States, courts are applying traditional contract formation principles to text messages, emails, Slack messages and other digital communications, and the results are not always predictable. For legal professionals advising clients on commercial relationships, the question of when an informal message crosses the line into a binding obligation has become one of the more practically consequential issues in transactional and litigation practice.

Can a Text Message Create a Binding Contract?

The direct answer is yes, in appropriate circumstances. Under US law, the medium through which an agreement is reached does not determine its enforceability. A contract formed by text message is subject to the same legal requirements as one formed in a signed document, by handshake, or over the phone. If an offer is made, accepted, supported by consideration, and the parties have the requisite intent and authority, the agreement can be binding. Whether a particular exchange meets those requirements depends on its specific content, context, and the law of the applicable jurisdiction.

The harder question is not whether texts can bind, but when they actually do. Courts have reached different conclusions depending on whether material terms were present, whether the parties expressed intent to be bound before formal documentation, and whether the person sending the message had authority to act for the organization.

The Legal Requirements for Forming a Contract

Under general US contract law, a binding agreement requires:

1. Offer: A proposal to enter into an agreement on specific terms.

2. Acceptance: Agreement to those terms by the offeree, without material modification.

3. Consideration: Something of value exchanged between the parties.

4. Mutual assent: Genuine meeting of the minds, objectively manifested.

5. Definiteness: Terms that are sufficiently certain to be enforced.

These requirements apply regardless of whether the agreement is written on paper, exchanged by email, or typed on a smartphone at midnight. The Restatement (Second) of Contracts does not prescribe form; it asks whether there was assent. Courts looking at text message disputes are applying exactly that framework.

For certain categories of contracts, additional requirements apply. The Statute of Frauds, which exists in some form in every US state, requires specific types of agreements to be in a signed writing. These typically include contracts for the sale of real property, contracts that cannot be performed within one year, and the sale of goods above a certain value (under UCC Article 2). Whether a text message can satisfy a Statute of Frauds writing requirement, and whether a sender’s name counts as a signature, has been among the most litigated questions in this area.

How Courts Evaluate Texts, Emails, and Digital Conversations

Courts reviewing digital communications for contract formation ask several questions:

Are all material terms present?

An exchange that says “I’ll sell you the property for $3.4 million” combined with a reply saying “Agreed” is far more likely to form a contract than one that says “we’re close on the price” and mentions a future meeting to discuss terms. Courts are more likely to find a binding agreement when the key commercial terms, price, subject matter, parties, and timeline, are either present in the messages or can be determined by reference to documents the messages incorporate.

Did the parties intend to be bound before signing a formal document?

This is frequently outcome-determinative. If one party’s messages indicate that finalization awaits a formal document, the court will often find no binding agreement yet. When the messages read as a completed deal and a later document was contemplated only as a formality, the result may be different. In a New York lease dispute analyzed by Forbes contributor Joshua Stein (Jan. 2024), a text exchange about a “settlement amount” failed to bind the parties partly because one message proposed preparing a formal settlement agreement, which implied the deal was not yet complete.

Is the informal tone of the message relevant?

Generally, no. Courts in Massachusetts, New York, California and elsewhere have held that informality of style does not strip a message of legal effect. The Massachusetts Land Court observed in St. John’s Holdings that texts of “relative informality and brevity” can form a valid agreement if they contain the essential elements. What matters is content, not tone.

Does a typed name at the end of a message constitute a signature?

Under the Uniform Electronic Transactions Act (UETA) and the federal Electronic Signatures in Global and National Commerce Act (E-SIGN), an electronic symbol or process executed with the intent to sign can constitute a signature. Courts have found that a person who types their name at the end of a text or email may have “signed” it for statute of frauds purposes, provided the intent to authenticate, rather than merely identify, can be shown. Automated email footers are treated with more skepticism, because they typically lack that intent.

Key US Court Cases and Their Lessons

St. John’s Holdings, LLC v. Two Electronics, LLC (Mass. Land Ct. 2016)

In a commercial real estate negotiation, a broker texted a request to execute a letter of intent and signed it “Tim.” The court held the texts, combined with the letter of intent to which they referred, contained sufficient material terms and that “Tim” at the end of the message could satisfy the signature requirement under Massachusetts law. The court took a contextual approach, examining how the parties had treated the deal throughout negotiations.

The St. John’s case was later complicated on appeal by a dispute over whether the broker had actual authority to bind the seller, which illustrates that satisfying the Statute of Frauds is only one element of the analysis. Whether the person sending the message had the power to bind the entity they represented is a separate and equally important question.

Lesson: A typed name or sign-off in a business text can constitute a signature. When authority is unclear, the enforceability question is not over even if the message content is legally sufficient.

Perl v. Grant (Mont. S. Ct. 2024)

As described above, the Montana Supreme Court held that a series of texts sent by Jay Grant, a consultant for the seller’s family company, satisfied the statute of frauds and formed an enforceable settlement agreement. The dissent flagged the authority issue, noting Jay was only a consultant and may have lacked binding power. The majority’s affirmance of summary judgment for the sellers means the settlement barred the buyers’ construction claims.

Lesson: Even a consultant, not a principal, can create binding obligations through digital communications, at least in some jurisdictions. Authority should be defined clearly and respected in practice, not just on paper.

Walsh v. Abate (Fla. 4th DCA 2022)

A buyer’s agent and seller’s agent exchanged emails and texts agreeing on a $3.4 million purchase price. No written contract was signed by both parties. When the seller accepted a competing offer, the buyer’s assignee sued. The Florida appellate court affirmed dismissal. Florida’s statute of frauds (Fla. Stat. § 725.01) requires real property contracts to be in a signed writing, and the unsigned agent communications could not meet that threshold.

Lesson: Even clear, specific and price-definite text exchanges may not form a binding real estate contract if the state’s statute of frauds requires a signed writing and no signed document exists. Walsh is a reminder that the law does not treat all digital communications identically, and that Florida’s statute of frauds is among the more demanding in this context.

Starace v. Lexington Law Firm (E.D. Cal. 2019)

The plaintiff challenged the enforceability of an arbitration agreement. She had replied “Agree” in response to a text from the defendant. The court enforced the agreement, finding that the single word was sufficient acceptance and that the text exchange satisfied the requirements for contract formation.

Lesson: A one-word reply to a business proposition can bind the sender. The length of the message is irrelevant to its legal effect.

Karaduman v. Grover (Ithaca City Ct. 2019)

A landlord’s text-message promise to refund a security deposit was enforced by a New York small claims court. The court stated that “text messages are recognized by courts as having the import of letters and emails.”

Lesson: Even informal, consumer-level text exchanges can create enforceable obligations. The principle applies up and down the commercial scale.

Luxor Capital Group, L.P. v. Seaport Group LLC (N.Y. App. Div. 2017)

An instant-message exchange about a stock purchase was held unenforceable. The court found the messages showed “an intent not to be bound,” partly because the exchange referenced further documentation and agreement on terms not yet resolved.

Lesson: Expressing in real time that a deal is “subject to contract” or “subject to further agreement” can defeat a later claim that a binding deal was struck. This cuts both ways: it can protect a party that does not want to be bound but can be used strategically to avoid enforcement by the party that later benefits from walking away.

Electronic Signatures, E-SIGN, and UETA

The federal E-SIGN Act (15 U.S.C. § 7001 et seq.) and UETA (adopted in some form in 49 states plus DC) establish that electronic records and signatures generally cannot be denied legal effect solely because they are in electronic form. These laws are technology-neutral. They do not prescribe any particular format; an electronic signature can be a typed name, a scanned image of a physical signature, a checkbox, or any other symbol made with intent to sign.

Key practical points:

Intent is the decisive element. A name typed at the end of an email saying “We have a deal, regards, Jane” is more likely to constitute a signature than an automated footer that appends the sender’s contact information to every outbound message. Courts have generally held that automated footers lack the intent to authenticate a specific communication.

Consent in commercial settings. Between sophisticated businesses, consent to conduct transactions electronically is generally implied from conduct, including the parties’ pattern of exchanging binding communications electronically. In consumer transactions, the E-SIGN Act imposes additional disclosure requirements before electronic records can substitute for paper documents in regulated contexts.

Exceptions. Both E-SIGN and UETA exclude certain categories of legal instruments from their scope, including wills and testamentary trusts, family law matters, court orders, and certain notices required by statute in physical form. These exclusions vary by state under UETA.

The Statute of Frauds interaction. E-SIGN and UETA do not eliminate Statute of Frauds requirements; they determine how those requirements can be satisfied electronically. A state’s Statute of Frauds still requires a writing and signature for covered transactions. What E-SIGN and UETA clarify is that a digital record and a typed name can satisfy those requirements, provided the content and context support it.

One significant exception: California’s Statute of Frauds (Cal. Civ. Code § 1624(d)) specifically excludes text messages and instant messages from the category of “signed writings” that satisfy the writing requirement for real property transactions. This is a notable departure from the general technology-neutral approach, and California practitioners advising on real estate or long-term contracts should account for it specifically.

The Risks of Informal Communications and Employee Authority

Perhaps the most underappreciated risk in this area is not the content of a message, but who sends it.

Under US agency law, an employee or agent can bind a company to a contract if they have:

• Actual express authority: They were explicitly authorized to enter into the agreement.

• Actual implied authority: Authority that follows necessarily from their role or from a pattern of conduct the employer knew about and did not prohibit.

• Apparent authority: The company’s words or conduct led a third party to reasonably believe the employee had authority, even if they did not.

The apparent authority concept is particularly significant in digital communications. In CSX Transportation, Inc. v. Recovery Express, Inc. (D. Mass. 2006), the court held that an email address alone, without other corroborating manifestations from the principal, was insufficient to create apparent authority. But the same court’s reasoning acknowledged that if the principal had created other indicators alongside the email, the result might have been different.

In practice, a procurement officer who regularly emails vendors to place orders may create apparent authority for those communications, even if a company policy requires a purchase order. A business development executive who texts a counterpart “we can do that for $50,000, you have my word” may have committed the company, even if the term sheet is not signed. The company’s pattern of conduct, not just its internal policies, determines the scope of apparent authority that third parties can rely on.

The gap between policy and practice. Many organizations have policies requiring contracts to be in writing and signed by specified officers. Those policies matter for internal accountability and for third parties who are on notice of them. But apparent authority can be created despite those policies if the company’s actual conduct over time contradicts them. A policy that lives only in the employee handbook and is not enforced operationally offers limited protection.

The contemplated formal agreement problem. A related risk arises when parties reach agreement in principle by text or email and then delay execution of a formal document. During that window, one party may act in reliance on the informal agreement. Courts disagree on whether the informal agreement alone is binding in the interim. The safest position, if no binding obligation is intended until signing, is to say so clearly in the message itself: “This is subject to execution of a written agreement and is not binding until signed.”

Text Messages as Evidence in Commercial Litigation

Even when a text exchange does not form a contract, it can be significant evidence in commercial disputes. Messages showing a party’s understanding of a deal, an acknowledgment that obligations existed, an admission of breach, or a representation made to induce reliance can all be discovered and used at trial.

Practical implications:

• Preservation obligations. Once litigation is reasonably anticipated, a litigation hold applies to text messages, just as it does to emails and other documents. Failure to preserve texts can result in spoliation sanctions. Consumer-grade messaging apps, including certain auto-deleting platforms, present real preservation problems for companies that have not addressed them in their retention policies.

• Authentication. Text messages are generally admissible as evidence if they can be authenticated, meaning a party can show the message is what it purports to be and was sent by the person claimed. Screenshot evidence is common but can be challenged; metadata and carrier records offer stronger authentication.

• Context matters. Courts read text exchanges as a whole. A single message pulled out of context may look different when the full thread is produced in discovery. Parties should assume that the other side will obtain and review the full thread in any litigation involving a text exchange.

• Informal tone is not protection. A message that says “I know we screwed this up, let me figure out how to make it right” is not protected from discovery by its informal style. It is an admission, readable by a jury.

Practical Safeguards for Legal Teams and Businesses

Based on the case law and statutory framework above, the following measures reduce the risk of unintended binding obligations through digital communications:

1. Define authorized signatories clearly and enforce the definition in practice. A contract policy is only as effective as the conduct that supports it. If individual employees regularly commit the company to commercial arrangements by email or text without consequence, the policy may be losing its legal protective function.

2. Use clear “subject to contract” language in preliminary communications. If a negotiation is ongoing and no binding deal is intended yet, say so in the message. Phrases such as “subject to execution of a formal written agreement” or “not binding until signed by both parties” create a contemporaneous record of intent that courts can point to. This is standard practice in sophisticated M&A and financing contexts and should be extended to commercial negotiations conducted by text or messaging app.

3. Train client-facing and operations personnel. The legal risk in digital communications arises most often not in deals negotiated by lawyers, but in the day-to-day communications of procurement, sales, operations, and business development staff. A procurement manager agreeing on price and delivery terms by text may have just formed a contract, regardless of whether a purchase order follows.

4. Review enterprise messaging tool terms of service and retention settings. Consumer-grade messaging platforms may not offer the retention and export controls necessary for litigation holds. Enterprise tools with administrative controls, retention policies, and exportable logs reduce both the preservation risk and the evidentiary complications.

5. Know your state’s Statute of Frauds. California’s carve-out for texts in real property transactions, Florida’s demanding writing requirement, and other state-specific rules mean that a uniform approach across jurisdictions is not workable. Transactions with a real property, long-term performance, or multi-state dimension should be reviewed with state-specific law in mind.

6. Treat settlement and change-order communications as carefully as original contracts. Some of the most consequential text-message cases, including Perl v. Grant, involved not original deal-making but subsequent modifications or settlements. The same rules apply. A text-message settlement reached without counsel can be as binding as a signed agreement, and the cost of challenging it may exceed the value of the original dispute.

Conclusion

The technology is new. The legal framework is not. Courts applying traditional offer-and-acceptance analysis to text messages are not doing anything unusual; they are applying principles developed over centuries to communications that happen to travel by cellular network rather than post. What has changed is the practical reality that more commercial decision-making now takes place in informal digital channels, often without the structural safeguards that traditionally accompanied contract formation.

For legal professionals, the takeaway is specific rather than general. The risk is not that texts are some new category of legal instrument requiring a new body of law. The risk is that a client’s employee, agent, or counterparty has already formed an agreement through communications that neither party thought of as a contract, and that this agreement will surface in litigation before anyone thought to check.

The clearest protection is also the simplest: be explicit about intent at the time of communication. A message that says “we’re aligned on the commercial terms, let’s get this into a written agreement” is a different legal instrument from one that says “agreed.”

Frequently Asked Questions

1. Can a text message create a legally binding contract under US law?

Yes. Courts in multiple US jurisdictions have held that text messages can form binding contracts when they contain the essential elements of contract formation: offer, acceptance, consideration, mutual assent, and sufficiently definite terms. The medium does not determine enforceability; the content and context do.

2. Does a “thumbs up” emoji or a one-word reply like “Agreed” count as acceptance?

It can. In Starace v. Lexington Law Firm, a single-word “Agree” reply to a text was held sufficient to form an enforceable arbitration agreement. Courts in other jurisdictions have taken a similar approach, though the result depends on whether there was a clear offer on the table and whether the response can reasonably be read as unambiguous acceptance. Emoji courts have not yet produced consistent US precedent, though a 2023 Canadian case held that a thumbs-up emoji confirmed a contract, reflecting a direction of travel that US practitioners should note.

3. Do text messages satisfy the Statute of Frauds?

In most states, they can. Courts in Massachusetts, Montana, New York and elsewhere have found that text messages constitute writings and that a typed name can serve as a signature for statute of frauds purposes. California is a significant exception: Cal. Civ. Code § 1624(d) excludes text messages and instant messages from the signed writing requirement for real property contracts. Florida applies a demanding writing standard that informal agent communications have failed to satisfy. State-specific analysis is essential for transactions involving real estate or long-term performance.

4. Can an employee bind a company through a text message or email?

Yes, under certain conditions. An employee can bind a company through digital communications if they have actual express authority, actual implied authority (arising from their role and conduct), or apparent authority (meaning the company’s words or conduct led the other party to reasonably believe the employee had authority). Internal policies alone do not eliminate apparent authority if the company’s actual practice has been inconsistent with those policies.

5. What is the difference between the E-SIGN Act and UETA?

The Electronic Signatures in Global and National Commerce Act (E-SIGN, 15 U.S.C. § 7001) is a federal law enacted in 2000 that prevents electronic records and signatures from being denied legal effect solely because they are electronic. UETA (Uniform Electronic Transactions Act, 1999) is a model state law adopted in similar form by 49 states and DC. Where a state has adopted UETA without material modification, E-SIGN generally defers to it. Both laws are technology-neutral and do not mandate any particular signature format. Neither law eliminates Statute of Frauds requirements; they determine how those requirements can be met electronically.

6. If parties agree by text to “finalize the details later,” is the text still binding?

This is one of the most litigated questions in this area and the answer depends on context. Courts generally ask whether the parties intended to be bound immediately, subject only to memorialization in a formal document, or whether they intended to be bound only upon execution of the formal document. Language such as “subject to contract” or “not binding until signed” in the text itself creates a contemporaneous record supporting the latter interpretation. Silence on the question leaves the court to infer intent from the totality of the exchange, which produces inconsistent results.

7. How are text messages used as evidence in commercial litigation?

Text messages are discoverable and generally admissible in US commercial litigation if they can be authenticated. They are subject to the same litigation hold obligations as emails: once litigation is reasonably anticipated, a party must take reasonable steps to preserve relevant texts. Failure to preserve can result in adverse inference instructions or other spoliation sanctions. Courts read text threads as a whole, so a message that appears benign in isolation may be significant in the context of the full exchange.

8. What should legal teams do to reduce the risk of unintended contracts through digital communications?

Key measures include: defining and enforcing authorized signatory policies consistently with actual practice; using explicit “subject to contract” language in preliminary negotiations; training business development, procurement, and operations personnel on when their communications can bind the company; reviewing the retention and export capabilities of messaging tools used for business communications; and applying state-specific statute of frauds rules to transactions involving real property, long-term performance obligations, or multi-jurisdictional elements.

Sources

• Perl v. Grant, 415 Mont. 61, 542 P.3d 396 (2024) — Quimbee summary; Inman analysis

• St. John’s Holdings, LLC v. Two Electronics, LLC, 2016 WL 1460477 (Mass. Land Ct. 2016) — Bowditch summary; Past Paper Hero

• Walsh v. Abate (Fla. 4th DCA 2022) — Dinsmore analysis

• Starace v. Lexington Law Firm (E.D. Cal. 2019) — cited in Skadden analysis

• Karaduman v. Grover (Ithaca City Ct. 2019) — cited in Skadden analysis

• Luxor Capital Group, L.P. v. Seaport Group LLC (N.Y. App. Div. 2017) — cited in Skadden analysis

• CSX Transportation, Inc. v. Recovery Express, Inc. (D. Mass. 2006) — Studicata summary

• E-SIGN Act, 15 U.S.C. § 7001 et seq. — LexPlug overview

• Uniform Electronic Transactions Act (UETA, 1999) — LexPlug overview

• Skadden client alert, “Sign at the DM: The Enforceability of Text Message” (Aug. 2021) — PDF

• Joshua Stein, “Text Messages Can Create a Binding Contract — Sometimes,” Forbes (Jan. 11, 2024) — Forbes