In the spirit of Halloween, Le Norman Operating v. Chalker Energy Partners III is about a scary statute: The Texas Uniform Electronic Transactions Act, the UETA.
A group of sellers led by Chalker went “by the book” in selling oil and gas assets in the panhandle. They set up a formal bidding process and hired Raymond James to advise. When LNO expressed interest, the parties signed a confidentiality agreement providing that Chalker would not be bound, “ … unless and until a definitive agreement has been executed and delivered[.]”
LNO submitted a formal bid; counter-offers were exchanged; LNO pulled out of the bidding process.
Then, channeling Boris Karloff, the 2017 LSU Tiger footballers, and John Snow, the deal rose from the dead. Several days later LNO, in an email not submitted in accordance with the formal bid process, proposed a transaction.
The next day Raymond James accepted the bid via email: “We have the group on board to deliver [the assets] subject to a mutually agreeable PSA.” A Chalker representative emailed LNO congratulations on “winning the bid” … “[LNO] is going to do great with our assets.”
Two days later, Jones Energy submitted a bid. Chalker accepted, signed a PSA with Jones, and closed with Jones. Litigation ensued.
Did the formal bid process and the CA control the transaction (meaning Chalker was not bound until a PSA was signed)? Or did the emails bind Chalker?
The trial court granted summary judgment for Chalker: no contract was formed because LNO’s bid was not in accordance with the bid procedures.
The UETA governs electronic contracts, including your signature on a card reader at Home Depot and your impulse Amazon purchases. The UETA also applies to emails in negotiations for sophisticated contracts if the parties “agreed to conduct transactions by electronic means.” Whether parties so agree is determined from their conduct. Negotiating over email constitutes evidence an agreement to conduct the transaction by electronic means.
Perhaps the scariest part is that an “electronic signature” is sufficient to establish a contract. An electronic signature is an
“electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with intent to sign the record.”
Texas courts have held that an email signature block, or even the sender’s name in the “From” line, can constitute an “electronic signature.”
The court of appeals returned the case to the trial court for a jury to decide whether the emails constituted a “definitive agreement” sufficient to bind Chalker:
- the emails could constitute a binding contract under the UETA because they had signature blocks and identified the sender in the “From” line;
- there was evidence Chalker waived the bid procedure requirements by email acceptance of the email bid;
- the CA’s “definitive agreement” requirement could be satisfied by emails because the CA did not define a “definitive agreement”.
Thanks to the UETA, the wise negotiator treats every email as though it could lead to a binding contract. Every email you are likely to send has a UETA “electronic signature”. Spooky.
That said, what does “subject to” mean, if not “there’s more to do before we have deal”? The jury will decide.
Speaking of spooky …