An Unsigned Text Message May Become a Personal Guarantee—Believe It or Not
As Published in the Daily Business Review
In an unpublished decision issued on Oct. 13, the 11th Circuit Court of Appeals in Atlanta held that an unsigned text message from an individual can constitute a personal guarantee of a debt of a corporation without violating Florida’s statute of frauds and in compliance with Florida’s Electronic Signature Act.
In the case of Brewfab v. Russo, (Case No. 22-11003), the court held, in what may be a case of first impression, that even what may be construed as somewhat ambiguous wording in a text message can be contractually binding on the sender, and holding the sender liable for the debts of an incorporated entity.
George Russo, a principal of 3 Delta, Inc. participated in a conference call with representatives of the plaintiff’s owner to discuss outstanding invoices and work stoppage. After the conference call, Russo sent the following text message to one of the owners of the plaintiff—”As per our conversation on Jan 30th 2020 I george Russo from 3 Delta do promise to pay brew fab in full all outstanding bills as of this date and all agreed upon work done for 3 delta future forward. I thank you for your patience.”
When 3 Delta did not pay the financial obligations to the plaintiff as promised, the plaintiff sued 3 Delta as well as Russo based upon his text message personal guarantee. The district court granted the plaintiff’s motion for summary judgment as against Russo on the personal guaranty, and the 11th Circuit Court of Appeals affirmed the granting of the summary judgment.
Of significance, the 11th Circuit found that even though the language in the text message from Russo was ambiguous, the ambiguity related to the lack of indication as to the meaning of “outstanding bills,” but the text message was not ambiguous as to Russo’s unconditional promise to pay. Thus, the court held that there was no ambiguity in the unconditional promise to pay, and in reviewing the four corners of that part of the text message agreement, the obligation was held to be unambiguous.
Russo also raised the defense that it was unclear as to whether the text message was sent in his personal capacity or as a representative of 3 Delta. The court found that the language “I george Russo from 3 Delta” merely indicated that Russo as an individual was affiliated with 3 Delta, and that it does not identify Russo as a corporate officer signing the guarantee in a representative capacity.
On appeal, Russo argued that the guarantee agreement did not satisfy the statute of frauds because he did not sign the guaranty agreement and the guaranty agreement was missing the essential term of consideration. The court held that Florida’s Electronic Signature Act (F.S. Section 668.004) defines an “electronic signature” as “any letters, characters, or symbols, manifested by electronic or other means, executed or adopted by a party with an intent to authenticate a writing.” Utilizing this definition, the court held that the language of the text message met the definition of an electronic signature.
With respect to the argument raised as to the absence of consideration, the court held that Russo’s promise was a unilateral contract that covered future indebtedness for future work. As such, Russo’s text message became a binding guaranty agreement when the plaintiff continued to do business with 3 Delta and shipped additional new equipment.
The holding in this case should be a wake-up call for businesspeople and entrepreneurs who regularly (sometimes offhandedly) engage in the conduct of business by text messages, many times without regard to the niceties of formal agreements or precise language. Offhanded comments in a text message in order to create comfort in a counterparty to an agreement may come to haunt the sender of the text message should there be subsequent litigation as a result of a contractual default.
This case further points out the need for legal counsel to fully obtain and carefully review all electronic messages from the opposing parties in order to determine if any text message that may have been sent during the course of dealings constitutes a binding agreement and the nature of a personal guarantee or otherwise.
Lastly, attorneys should take extra care in counseling and advising clients, especially those that may be less sophisticated in the niceties of documenting business transactions, to not offhandedly utilize text messaging without understanding the consequences of what may be said.