Appellate Division Ruling Holds E-mail Correspondence May Create Binding Real Estate Contract

Naldi v. Grunberg, 80 AD3d 1 (1st Dept. 2010), leave to appeal denied, 2011 NY Slip Op. 71494 (NY May 3, 2011)

At issue in Naldi v. Grunberg was whether the defendant had breached an agreement to give plaintiff a right of first refusal to purchase certain real property in New York City.  Plaintiff contended that the right of first refusal was granted by defendants in an email describing the terms of the contemplated transaction.  Defendants moved to dismiss the complaint on several grounds, including that email correspondence was not sufficient to overcome the requirement that real estate contracts be memorialized in writing (NY Gen. Obligations Law § 5-703), and that even if email were sufficient, generally, to overcome the statute of frauds, there was no meeting of the minds in this particular case.  After reviewing both the state of the law in New York and the particular facts of this case, the Appellate Division held that e-mail correspondence can satisfy the “writing” requirement for creating binding real estate contracts, but that here, no such contract was created as there was no meeting of the minds on essential terms.

On the general issue of whether e-mail correspondence can satisfy the statute of frauds applicable to real estate transactions, the Court rejected a narrow statutory construction proposed by the defendants that would have effectively limited the binding power of e-mail correspondence to a few contexts that were expressly listed in a 17 year-old statutory amendment.  Instead, the Court found that e-mail has become a commonplace tool for conducting business of all kinds, including real estate business, and that it is an accepted form of memorializing binding agreements in a variety of contexts and in other jurisdictions.  Thus, the court held, a binding agreement pertaining to the sale of real estate could be created via the exchange of emails by the parties to the transaction.    

The Court found, however, that no such agreement existed on the facts of this case.  Based on its analysis of the record of correspondence between the parties and the plaintiff’s other admissions in the Complaint and elsewhere, the Court concluded that the parties had not come to a meeting of the minds on the essential terms of the alleged contract.  In particular, the Court noted that the right of first refusal was contained in a counteroffer from the defendants that rejected plaintiff’s initial offer to purchase the property for $50 million.  Thus, the Court concluded, absent documented acceptance of that counteroffer by the plaintiff, the right of first refusal did not become binding on the defendant, and defendant was free to sell the property to another party. 

The importance of this case is two-fold.  First, anyone contemplating a real estate transaction of any kind is now on notice that a binding agreement can be created by e-mail.  Second, Naldi  serves as an important reminder of the need for specificity in the documentation of contracts, generally, and particularly those contracts that are heavily negotiated, such as those pertaining to real estate transactions.  Anyone contemplating such a transaction would benefit considerably by having all correspondence relating to the deal go through their attorney, who can ensure that their intent is effectively conveyed, and that all agreements between the parties to the deal are properly memorialized (or that nothing is agreed to unless the client clearly and unequivocally means to agree).