FACTS ABOUT FAX

Can facsimile ("FAX") machines be used to transmit offers and acceptances in real estate transactions? Will purchase contracts bearing only a "FAXed" signature be enforceable? These are only a few of the many questions which have arisen following the introduction of FAX machines in the modern real estate office.

Although FAX machines have been in existence for many years, their use has only recently become widespread. For this reason, there appears to be little or no law in North Carolina on the question of FAX machines. Therefore, the answers to questions about the enforceability of real estate purchase contracts transmitted by FAX machines must be derived from analogy to the law regarding the use of copies, carbons, telegrams, etc.

Any discussion regarding the "legality" of FAX machines must begin with an understanding of the enforceability of real estate purchase contracts in general. If all parties agree that they have a purchase contract and they go forward with a sale, then a sale may be accomplished even if their documents are inadequate under the law. It is only when a dispute arises between parties over the terms of the transaction that a problem occurs.

In order for a real estate purchase contract to be enforceable, the Statute of Frauds requires it to be in writing and signed "by the party to be charged therewith." Thus, if a seller and buyer have attempted to contract for the buyer's purchase of the seller's property and the buyer subsequently wants to back out of the deal, then the seller can force the buyer to go forward with the transaction only if there is a written purchase contract signed by the buyer. In addition, under North Carolina case law, a contract is not valid until an offer has been made and accepted in its exact terms, and acceptance of that offer has been communicated to the person making the offer.

In the context of most real estate transactions, it is not difficult to determine when an offer has been made. For example, in residential transactions, the selling agent normally assists the buyer in filling in the offer to purchase and contract form, and the buyer then signs the offer and submits it to the seller via the seller's agent. However, this process can be complicated by out-of-town buyers who desire to submit their offers with as much speed as possible; for example, by using a FAX machine. Likewise, a seller who is in receipt of an offer containing an original signature may desire to accept the offer as quickly as possible by signing the offer and "FAXing" a copy of the contract back to the buyer.

When the seller receives a written offer containing an original signature, he may accept that offer by signing it and communicating acceptance to the buyer. To create a binding contract, communication of acceptance may be by FAX, oral communication, mail or otherwise. But suppose that in this situation, the offer had been delivered to the seller via FAX machine? The seller's document does not contain an original signature. Can the seller nevertheless sign the "FAXed" offer and create a binding contract?

In virtually every transaction involving a "FAXed" offer, a document actually exists which contains the offeror's original signature. This, of course, is the document which is placed in the FAX machine of the offeror (or his agent) to be "FAXed" to the other party. If the party receiving the "FAXed" offer makes no changes to its material terms and signs the document printed by his FAX machine and does nothing further, is there then an enforceable contract? No. Although there are two original signatures (the offeror's on the document that he has in his possession, and the other party's on the FAX copy he received in his office), communication of the acceptance has not yet been accomplished by the offeree; therefore, there is no enforceable contract. But,once the offered signs his copy of the document and "F4Xes" it back to the offeror, or otherwise communicates acceptance either orally or in writing, then the acceptance has been communicated and an enforceable contract has been formed. [Note: There is, however; no law that specifically supports this view./ A1though there are two separate writings which form the basis of the contract, the contract is enforceable. A contract may consist of several interconnected writings, if the contract terms can be determined from those writings and they are signed as required.

Under certain circumstances, communication of acceptance of an offer to a real estate agent can also create an enforceable contract. Since most real estate agents in North Carolina are the agents of the seller, a seller's acceptance of a buyer's offer is not considered communicated until it is passed directly from the seller (or the seller's agent or subagent) to the buyer. But where a seller makes an offer (i.e., a counteroffer), communication of the buyer's acceptance of the offer occurs and a binding contract is created when the buyer's acceptance is communicated to the selling or listing agent (assuming that neither the listing nor selling agents are agents of the buyers). However, if the party receiving the offer makes a material change to the offer, initials it, and "FAXes" it back to the party

making the offer, then no valid contract would exist, because there can be no contract until both parties have agreed to its material terms.

Based upon the foregoing, it appears that a valid contract can arise when the offer and/or acceptance is transmitted via a FAX machine, so long as all of the requirements of law are met including a writing, signatures and communication of acceptance. Should a dispute arise, FAXed transmittals may be admissible in court, but they will not generally be the "best evidence" of a contract. Therefore, parties who use FAX machines to transmit offers and acceptances should be aware that there may be a greater risk of problems with the transaction. And parties to a transaction should also be aware that, by using a FAX machine, they may bind themselves to a purchase contract even though their "original" signature does not appear on the recipient's copy of the FAXed document. The following "rules of thumb" should guide agents in the use of FAX machines to transmit offers and acceptances:

1. When using FAX machines to transmit an offer and/or acceptance, remember to always FAX the entire contract each time, including any standard provisions. Also clearly identify the total number of pages and indicate the specific FAX transmittal that each page is a part of by recording on each page "page one of three" and so on, as well as the time and date of each transmission. In addition, a good real estate agent will always follow up the FAX copy with delivery of the original document via more traditional means, such as the mail or overnight delivery service.

2. Once a contract is finalized, a good agent will also obtain the actual signatures of both parties on the original document and on the necessary counterparts so that the agent and each party will have in his or her possession a contract with the original signatures of all parties on it should questions arise in the future.

3. Commission Rule A.0108 requires agents to retain certain records for a period of three years. To satisfy this requirement, the agent should keep very careful records of the methods of delivery of offers, acceptance, purchase contracts; and, where FAX machines are used, copies of the FAX transmittals.