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Agents Should Advise Caution When Using Electronic Signature Platforms

Today’s world is a fast-paced one, whether you’re answering a text message or buying a new car. Time is counted in seconds instead of minutes or hours, and it’s presumed that faster is better. However, speed sometimes means you are sacrificing accuracy or careful deliberation, and that can cost you.

In this real-world scenario, faster is not always better when reviewing and signing a real estate contract, whether you are the agent, buyer, or seller.

SITUATION

A real estate agent representing home sellers forwarded her clients a contract for their electronic signature using DocuSign or a similar program. The contract had already been signed by the prospective buyers. Using a mobile phone, the sellers quickly reviewed and signed the contract. Just after entering their electronic signature, the sellers realized the contract did not contain certain key terms that they believed had been agreed upon during negotiations. The sellers immediately notified their agent and requested to back out of the contract.

PROBLEM

The buyers refused to cancel the contract, claiming that the sellers had entered into a binding agreement. The buyers ultimately filed suit seeking enforcement of the contract and/or damages resulting from a delay in the sale of the property.

MISTAKE

Unfortunately, the real estate agent did not advise the sellers to take extra caution when reviewing and executing the contract. The agent neglected to explain that the contract would be immediately delivered to the other party and would be enforceable upon completing the electronic signature.

RESULT

The sellers are now involved in a potentially costly lawsuit. If a court determines the sellers have breached a valid and enforceable contract, the sellers will be ordered to sell the home and pay the entirety of the buyers’ attorney fees from the litigation. The sellers will likely pursue claims against their real estate agent for what they contend was her failure to include key terms in the contract and to properly advise them about the contract and the electronic signature process.

PREVENTION

If the real estate agent had provided a clear warning to the sellers about the electronic signature process, the litigation may have been avoided.

When using electronic signatures, agents should consider sending a separate email to their client with warnings such as:

• Review this contract very carefully on a secure device.
• This contract is likely instantly binding, the moment all parties sign.
• Once an electronic signature is completed and submitted, you likely will not be able to cancel the contract absent a breach of contract or the other party’s consent.
• Upon signing, electronic audit trail information will be created that could be used in the event of a dispute of the validity of this electronic signature.

With a clearly stated warning, clients will better understand the implications of using the electronic signature process and will hopefully slow down to carefully review the contract before signing.

Instant gratification may be an expectation across many sectors of the economy, but it’s not necessarily the best choice when the stakes are high. The benefits of being careful should not be underrated.