The coronavirus (COVID-19) has changed many of our personal and professional lives. This includes working from home and increased communication by email. During this time, many business decisions will be made through email, including entering into contracts. Owners, developers, and contractors should be aware of the pitfalls associated with negotiating contracts by email. While released prior to COVID-19, the Texas Supreme Court’s recent decision in Copano Energy, LLC v. Bujnoch on the formation of contracts via email (and the attendant pitfalls) has taken new significance given the current remote work environment. Now, more than ever, the circumstances mandate the necessity of drafting emails with clear intent.
In 2011, some Texas landowners granted pipeline easements to an energy company. In 2012, the energy company approached the landowners about a second easement for the construction of another pipeline. Representatives for both parties proceeded to correspond via email regarding the second easement. In December 2012, the secretary for the attorney representing the homeowners and a landman for the energy company exchanged emails discussing a potential meeting between the landman and the attorney. In preparation for the meeting, the secretary requested details regarding the easement, to which the landman responded with the following:
It will be a 24 inch gas line … I will be asking for an additional 20 feet of new right of way … I will be asking for additional feet of temporary workspace…
While it is unclear whether the proposed meeting occurred, in January 2013, the landowners’ attorney and the landman exchanged emails directly. The landman’s email included the following language: “…[the energy company] agrees to pay your clients $70 per foot for the second [pipeline] it proposes to build…” The landowners’ attorney responded with the following: “in reliance on this representation we accept your offer and will tell our client you are authorized to proceed with the survey on their property.”
In February 2013, the parties continued to discuss the easement through letters and emails in which the energy company offered to pay one of the individual landowners a higher amount per foot for the easement. This offer was never accepted. Later that month, the landowners provided the energy company an amended agreement. The energy company responded that it was fine with the changes.
In March 2013, the deal went sideways. With the energy company being bought out, the acquiring entity sent a “compensation proposal” to the landowners, which was entirely different than the prior discussions between the parties. Consequently, the landowners became frustrated, and the second pipeline was not built.
The landowners filed suit asserting that the energy company breached a contract to sell an easement to them for $70 per foot. The energy company moved for summary judgment, which was granted. However, the court of appeals reversed the trial court’s decision holding that whether a contract was formed should be decided by the factfinder at trial. The energy company then appealed the reversal, and the Texas Supreme Court granted the energy company’s petition for review.
On review, the Texas Supreme Court reiterated that a contract for the sale of real estate – which includes a pipeline easement – must be in writing. This statutory requirement is known as the statute of frauds. There are similar statutory requirements in most, if not all, states. The court explained that emails satisfy the writing requirement and one or multiple emails can create a contract. However, the “essential elements of the agreement” must be certain from the language in the emails, without resorting to oral testimony. Taking this into consideration, the main issue before the court was whether the December 2012 and January 2013 emails created a contract.
The court noted that the January 2013 emails clearly contained an offer and acceptance, but the emails did not specify what was being offered and accepted. While the landowners did not dispute this fact, they claimed that the terms of the contract were contained in the December 2012 emails. Specifically, the landowners claimed that the essential terms, the easement’s location and size, were specified in the December emails. To the landowners, the terms of the easement were discussed in December 2012 and then offered and accepted in January 2013. With the emails combined, the elements of a contract were met.
The court disagreed. First, the December 2012 emails did not reflect an agreement to be bound by the easement terms described. To form a contract, the language must clearly express the parties’ intent. When analyzing a chain of emails, the language is just as, if not more, important. The court explained: The “e-mail’s context must be carefully examined to determine whether it truly evidences the grave intent to be legally bound.”
In this case, the December 2012 emails were in anticipation of a future, in-person meeting between the parties. First, the attorney’s secretary specifically requested information in anticipation of the meeting. Second, the language within the emails was phrased in the future tense. For example, the following language was used: (1) the energy company “will be asking” for terms; (2) the energy company “will be buying” an additional easement”; (3) the easement “will be” located on the north side; (4) the easement “will be” 24 inches. This “futuristic” language – the use of “will be” – contemplates later negotiations and does not satisfy the statute of frauds. Therefore, the December 2012 emails did not reflect an intent to be bound – a vital element of contract formation. As a result, the contract was unenforceable, and the Texas Supreme Court reversed the court of appeal’s decision.
While Copano is a Texas case, it provides a lesson for all businesses, including owners, developers, and contractors: Double check your emails before sending, and scrutinize your opposition’s emails before responding. Draft your emails with a purpose, and understand the intent and context of the emails you receive.