Amended in Assembly March 24, 2014

California Legislature—2013–14 Regular Session

Assembly BillNo. 2136


Introduced by Assembly Member Daly

February 20, 2014


An act to amendbegin insert Section 10148 of the Business and Professions Code, and to amendend insert Section 1624 of the Civil Code, relating to contracts.

LEGISLATIVE COUNSEL’S DIGEST

AB 2136, as amended, Daly. Contracts: statute of frauds.

Existing law prescribes the manner in which contracts may be created. Under existing law, certain contracts are invalid unless the contract, or some note or memorandum of the contract, is in writing and subscribed by the party to be charged. Under existing law, an agreement or contract that is valid in other respects and is otherwise enforceable is not invalid for lack of a note, memorandum, or other writing and is enforceable by way of action or defense, provided that the agreement or contract is a qualified financial contract, as defined, and there is sufficient evidence to indicate that a contract has been made, including, among other alternatives, a written confirmation or the parties have agreed by some other means to be bound by the terms of the qualified financial contract from the time they reached agreement on those terms.

This bill would provide that an electronic message of an ephemeral nature that is not designed to be retained or to create a permanent record, such as a text message or instant message, is insufficient to constitute a contract to convey real property, in the absence of a written confirmation that conforms to a specified requirement of existing law.

begin insert

Existing law requires a licensed real estate broker to retain for 3 years copies of all listings, deposit receipts, canceled checks, trust records, and other documents executed by him or her or obtained by him or her in connection with any transactions for which a real estate broker license is required.

end insert
begin insert

This bill would specify that the above requirement should not be construed to require retention of electronic messages of an ephemeral nature, as described in the bill.

end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 10148 of the end insertbegin insertBusiness and Professions
2Code
end insert
begin insert is amended to read:end insert

3

10148.  

(a) A licensed real estate broker shall retain for three
4years copies of all listings, deposit receipts, canceled checks, trust
5records, and other documents executed by him or her or obtained
6by him or her in connection with any transactions for which a real
7estate broker license is required. The retention period shall run
8from the date of the closing of the transaction or from the date of
9the listing if the transaction is not consummated. After notice, the
10books, accounts, and records shall be made available for
11examination, inspection, and copying by the commissioner or his
12or her designated representative during regular business hours;
13and shall, upon the appearance of sufficient cause, be subject to
14audit without further notice, except that the audit shall not be
15harassing in nature.begin insert This subdivision shall not be construed to
16require a licensed real estate broker to retain electronic messages
17of an ephemeral nature, as describedend insert
begin insert in subdivision (d) of Section
181624 of the Civil Code.end insert

19(b) The commissioner shall charge a real estate broker for the
20cost of any audit, if the commissioner has found, in a final desist
21and refrain order issued under Section 10086 or in a final decision
22following a disciplinary hearing held in accordance with Chapter
235 (commencing with Section 11500) of Part 1 of Division 3 of
24Title 2 of the Government Code that the broker has violated Section
2510145 or a regulation or rule of the commissioner interpreting
26Section 10145.

27(c) If a broker fails to pay for the cost of an audit as described
28in subdivision (b) within 60 days of mailing a notice of billing,
29the commissioner may suspend or revoke the broker’s license or
P3    1deny renewal of the broker’s license. The suspension or denial
2shall remain in effect until the cost is paid or until the broker’s
3right to renew a license has expired.

4(d) The commissioner may maintain an action for the recovery
5of the cost of an audit in any court of competent jurisdiction. In
6determining the cost incurred by the commissioner for an audit,
7the commissioner may use the estimated average hourly cost for
8all persons performing audits of real estate brokers.

9(e) The bureau may suspend or revoke the license of any real
10estate broker, real estate salesperson, or corporation licensed as a
11real estate broker, if the real estate broker, real estate salesperson,
12or any director, officer, employee, or agent of the corporation
13licensed as a real estate broker knowingly destroys, alters, conceals,
14mutilates, or falsifies any of the books, papers, writings, documents,
15or tangible objects that are required to be maintained by this section
16or that have been sought in connection with an investigation, audit,
17or examination of a real estate licensee by the commissioner.

18

begin deleteSECTION 1.end delete
19begin insertSEC. 2.end insert  

Section 1624 of the Civil Code is amended to read:

20

1624.  

(a) The following contracts are invalid, unless they, or
21some note or memorandum thereof, are in writing and subscribed
22by the party to be charged or by the party’s agent:

23(1) An agreement that by its terms is not to be performed within
24 a year from the making thereof.

25(2) A special promise to answer for the debt, default, or
26miscarriage of another, except in the cases provided for in Section
272794.

28(3) An agreement for the leasing for a longer period than one
29year, or for the sale of real property, or of an interest therein; such
30an agreement, if made by an agent of the party sought to be
31charged, is invalid, unless the authority of the agent is in writing,
32subscribed by the party sought to be charged.

33(4) An agreement authorizing or employing an agent, broker,
34or any other person to purchase or sell real estate, or to lease real
35estate for a longer period than one year, or to procure, introduce,
36or find a purchaser or seller of real estate or a lessee or lessor of
37real estate where the lease is for a longer period than one year, for
38compensation or a commission.

39(5) An agreement that by its terms is not to be performed during
40the lifetime of the promisor.

P4    1(6) An agreement by a purchaser of real property to pay an
2indebtedness secured by a mortgage or deed of trust upon the
3property purchased, unless assumption of the indebtedness by the
4purchaser is specifically provided for in the conveyance of the
5 property.

6(7) A contract, promise, undertaking, or commitment to loan
7money or to grant or extend credit, in an amount greater than one
8hundred thousand dollars ($100,000), not primarily for personal,
9family, or household purposes, made by a person engaged in the
10business of lending or arranging for the lending of money or
11extending credit. For purposes of this section, a contract, promise,
12undertakingbegin insert,end insert or commitment to loan money secured solely by
13residential property consisting of one to four dwelling units shall
14be deemed to be for personal, family, or household purposes.

15(b) Notwithstanding paragraph (1) of subdivision (a):

16(1) An agreement or contract that is valid in other respects and
17is otherwise enforceable is not invalid for lack of a note,
18memorandum, or other writing and is enforceable by way of action
19or defense, provided that the agreement or contract is a qualified
20financial contract as defined in paragraph (2) and one of the
21following apply:

22(A) There is, as provided in paragraph (3), sufficient evidence
23to indicate that a contract has been made.

24(B) The parties thereto by means of a prior or subsequent written
25contract, have agreed to be bound by the terms of the qualified
26financial contract from the time they reached agreement (by
27telephone, by exchange of electronic messages, or otherwise) on
28those terms.

29(2) For purposes of this subdivision, a “qualified financial
30contract” means an agreement as to which each party thereto is
31other than a natural person and that is any of the following:

32(A) For the purchase and sale of foreign exchange, foreign
33currency, bullion, coinbegin insert,end insert or precious metals on a forward, spot,
34next-day value or other basis.

35(B) A contract (other than a contract for the purchase of a
36commodity for future delivery on, or subject to the rules of, a
37contract market or board of trade) for the purchase, sale, or transfer
38of any commodity or any similar good, article, service, right, or
39interest that is presently or in the future becomes the subject of a
40dealing in the forward contract trade, or any product or byproduct
P5    1thereof, with a maturity date more than two days after the date the
2contract is entered into.

3(C) For the purchase and sale of currency, or interbank deposits
4denominated in United States dollars.

5(D) For a currency option, currency swap, or cross-currency
6rate swap.

7(E) For a commodity swap or a commodity option (other than
8an option contract traded on, or subject to the rules ofbegin insert,end insert a contract
9market or board of trade).

10(F) For a rate swap, basis swap, forward rate transaction, or an
11interest rate option.

12(G) For a security-index swap or option, or a security or
13securities price swap or option.

14(H) An agreement that involves any other similar transaction
15relating to a price or index (including, without limitation, any
16transaction or agreement involving any combination of the
17foregoing, any cap, floor, collar, or similar transaction with respect
18to a rate, commodity price, commodity index, security or securities
19price, security index, other price index, or loan price).

20(I) An option with respect to any of the foregoing.

21(3) There is sufficient evidence that a contract has been made
22in any of the following circumstances:

23(A) There is evidence of an electronic communication
24(including, without limitation, the recording of a telephone call or
25the tangible written text produced by computer retrieval),
26admissible in evidence under the laws of this state, sufficient to
27indicate that in the communication a contract was made between
28the parties.

29(B) A confirmation in writing sufficient to indicate that a
30contract has been made between the parties and sufficient against
31the sender is received by the party against whom enforcement is
32sought no later than the fifth business day after the contract is made
33(or any other period of time that the parties may agree in writing)
34and the sender does not receive, on or before the third business
35day after receipt (or the other period of time that the parties may
36agree in writing), written objection to a material term of the
37confirmation. For purposes of this subparagraph, a confirmation
38or an objection thereto is received at the time there has been an
39actual receipt by an individual responsible for the transaction or,
40if earlier, at the time there has been constructive receipt, which is
P6    1the time actual receipt by that individual would have occurred if
2the receiving party, as an organization, had exercised reasonable
3diligence. For the purposes of this subparagraph, a “business day”
4is a day on which both parties are open and transacting business
5of the kind involved in that qualified financial contract that is the
6subject of confirmation.

7(C) The party against whom enforcement is sought admits in
8its pleading, testimony, or otherwise in court that a contract was
9made.

10(D) There is a note, memorandum, or other writing sufficient
11to indicate that a contract has been made, signed by the party
12against whom enforcement is sought or by its authorized agent or
13broker.

14For purposes of this paragraph, evidence of an electronic
15communication indicating the making in that communication of a
16contract, or a confirmation, admission, note, memorandum, or
17writing is not insufficient because it omits or incorrectly states one
18or more material terms agreed upon, as long as the evidence
19provides a reasonable basis for concluding that a contract was
20made.

21(4) For purposes of this subdivision, the tangible written text
22produced by telex, telefacsimile, computer retrieval, or other
23process by which electronic signals are transmitted by telephone
24or otherwise shall constitute a writing, and any symbol executed
25or adopted by a party with the present intention to authenticate a
26writing shall constitute a signing. The confirmation and notice of
27objection referred to in subparagraph (B) of paragraph (3) may be
28communicated by means of telex, telefacsimile, computer, or other
29similar process by which electronic signals are transmitted by
30telephone or otherwise, provided that a party claiming to have
31communicated in that manner shall, unless the parties have
32otherwise agreed in writing, have the burden of establishing actual
33or constructive receipt by the other party as set forth in
34subparagraph (B) of paragraph (3).

35(c) This section does not apply to leases subject to Division 10
36(commencing with Section 10101) of the Commercial Code.

37(d) An electronic message of an ephemeral nature that is not
38designed to be retained or to create a permanent record, including,
39but not limited to, a text message or instant message format
40communication, is insufficient under this title to constitute a
P7    1 contract to convey real property, in the absence of a written
2confirmation that conforms to the requirements of subparagraph
3(B) of paragraph (3) of subdivision (b).



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