BILL ANALYSIS Ó
AB 2136
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Date of Hearing: May 6, 2014
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 2136 (Daly) - As Amended: March 24, 2014
PROPOSED CONSENT
SUBJECT : Contracts: Statute of Frauds
KEY ISSUE : Should existing law specify that short-lived
electronic messages, such as tweets and text messages, are not
sufficient to constitute a contract to convey real property
under the Statute of Frauds, unless the message is confirmed in
writing?
SYNOPSIS
This non-controversial bill specifies that an electronic message
of an ephemeral (short-lived) nature, such as text message or
instant message, is not sufficient to constitute a written
contract for purposes of conveying real estate. In addition,
this bill would specify that such ephemeral electronic messages
are not among the "other documents" that a licensed realtor must
retain for three years, unless the messages have been properly
memorialized in writing. Under the existing Statute of Frauds
(Civil Code Section 1624) certain classes of contracts,
including those that convey real estate, must be in writing. An
oral agreement to convey property, otherwise valid, is only
enforceable if reduced to writing in a manner set forth in the
statute. Sponsored by the California Association of Realtors
(CAR), this bill responds to the increasing tendency of realtors
and clients to use text messages, instant messaging, or social
media postings to communicate about things that once were
communicated orally, either by telephone or face-to-face. The
bill would not say that such communications would never be
material, but only that, like oral communications, they would
need to be memorialized in writing and subscribed by the
appropriate party before they could constitute an enforceable
part of the contract. For similar reasons, such messages would
not be among the "other documents" that licensed realtors must
maintain for a period of three years, unless the messages are
confirmed in writing in a manner prescribed by existing law.
There is no opposition to this bill.
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SUMMARY : Provides that an electronic message of an ephemeral
(short-lived) nature, as specified, is insufficient to
constitute a contract to convey real property, and a real estate
broker is not required to retain such messages, except as
specified. Specifically, this bill :
1)Specifies that an existing statute that requires a licensed
real estate broker to retain, for three years, copies of all
listings, deposit receipts, canceled checks, trust records, or
other documents executed or obtained in connection with a real
estate transaction shall not be construed to require a
licensed real estate broker to retain electronic messages of
an ephemeral nature, as described.
2)Provides that an electronic message of an ephemeral nature
that is not designed to be retained or to create a permanent
record, including, but not limited to, a text message or
instant message format communication, is insufficient to
constitute a contract to convey real property in the absence
of a written confirmation sufficient to indicate that a
contract has been made between the parties, and communicated
as prescribed.
EXISTING LAW :
1)Provides, under California's Statute of Frauds, that the
following types of contracts are invalid unless they, or some
note or memorandum thereof, are in writing and subscribed by
the party to be charged or by the party's agent:
a) An agreement that by its terms is not to be performed
within a year from the making thereof.
b) A promise to answer for the debt, default, or
miscarriage of another, except as provided.
c) An agreement for the leasing for a longer period than
one year, or for the sale of real property, or of an
interest therein; such an agreement, if made by an agent of
the party sought to be charged, is invalid, unless the
authority of the agent is in writing, subscribed by the
party to be charged.
d) An agreement authorizing or employing an agent, broker,
or any other person to purchase or sell real estate, or to
lease real estate for a period longer than one year, or to
produce, introduce, or find a purchaser or seller of real
estate or a lessee or lessor of real estate where the lease
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is for a longer period than one year, for compensation or a
commission.
e) An agreement that by its terms is not to be performed
during the lifetime of the promisor.
f) An agreement by a purchaser of real property to pay an
indebtedness secured by a mortgage or a deed of trust upon
the property purchased, unless assumption of the
indebtedness by the purchaser is specifically provided by
the conveyance of the property.
g) A contract, promise, undertaking, or commitment to loan
money or to grant or extend credit, in an amount greater
than $100,000, not primarily for personal, family, or
household purposes, made by a person engaged in the
business of lending or arranging for the lending of money
or extension of credit. (Civil Code Section 1624 (a).)
2)Notwithstanding the above, an agreement 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,
provided, that the agreement is a qualified financial
contract, as defined, and if one of several specified
conditions apply, including if there is a confirmation in
writing sufficient to indicate that a contract has been made
between the parties and is received by the party against whom
enforcement is sought no later than the fifth business day, or
other time period agreed to by the parties, and the sender
does not receive a written objection within a specified period
of time. (Civil Code Section 1624(b).)
3)Requires a licensed real estate broker to retain, for three
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. (Business & Professions Code Section 10148.)
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : This bill seeks to amend California's existing
Statute of Frauds (Civil Code Section 1624) to take account of
the increasing propensity of real estate agents and their
clients to communicate through electronic messages, including
text messages, instant messaging, and social media postings.
This measure would specify that these electronic messages of an
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"ephemeral nature" - i.e. short-lived electronic messages that
are not designed to be retained or to create a permanent record
- are insufficient to constitute a contract to convey real
property, unless the messages have been reduced to writing in
conformity with existing requirements under the Statute of
Frauds. Similarly, the bill would also specify that such
documents, unless memorialized in writing, are not among the
documents that the California Real Estate Commissioner requires
to be retained for a period of three years.
Background : Under the common law a contract is simply an
enforceable promise, and that promise is generally enforceable
whether it is made orally or in writing. The first "Statute of
Frauds," enacted in England in 1677, has been adopted in whole
or substantial part by nearly all of the states of the United
States. In California, the Statute of Frauds is codified as
Civil Code Section 1624. As an exception to the common law rule
that an oral contract is every bit as enforceable as a written
contract, the Statute of Frauds provides that certain classes of
contracts are not enforceable unless there is some written note
or memorandum of the agreement that is signed by the party to be
charged (that is, the party against whom someone is trying to
enforce the contract). Its purpose, as the name suggests, is to
prevent frauds and perjuries in those contracts which involved
something of significant value or where memories of oral
agreements may have faded. In California, as in most other
jurisdictions, the typical types of contracts that fall under
the Statute of Frauds, and which therefore must be in writing,
are those where the promise will not be performed until a year
or more after the contract is executed; an agreement to assume
the debts or obligations of another; an agreement to make a loan
in excess of $100,000, if the person making the loan is in the
business of making loans; and, most relevant to this bill, any
agreement to sell real property (or to lease real property for
more than one year.)
However, like most general rules of law, California's Statute of
Frauds contains an exemption. It provides that notwithstanding
the general rule that certain contracts must be in writing, an
agreement or contract that is valid and enforceable in all other
respects is not necessarily invalid for want of a note,
memorandum, or other writing. (Civil Code Section 1624 (b)(1).)
For example, certain oral contracts that might otherwise be
invalidated by the Statute of Frauds might become enforceable if
there are other writings sufficient to indicate that a contract
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was made, or if an oral agreement is later memorialized in
writing, is received by the person against whom the contract
will be enforced within a specified period of time, and that
person does not return a written objection within a specified
period of time. The sponsor notes that oral communications
between licensed realtors and clients - and between realtors who
represent the parties to a real estate transaction - may become
part of the written contract if appropriately reduced to
writing. For example, outside of the written conveyance
documents, parties may orally agree that a chandelier, or some
other valuable fixture, will be removed from (or stay with) the
home after the sale. To be enforceable, that oral agreement
must be reduced to writing in a manner prescribed by the
statute. However, according to an official publication of the
California Department of Real Estate, these communications are
increasingly conducted with tweets, text messages, and the like.
(Real Estate Bulletin, Vol. 73, No. 1, Spring 2013.) While
tweets and text messages are a form of "writing," it is not
entirely clear if such ephemeral electronic messages should
satisfy the writing requirement for a conveyance of real estate
under Statute of Frauds. The problem with existing law, it
appears, stems from the increasing use of "ephemeral" (or
short-lived) electronic messages, including text messages,
instant messaging, and social media postings as a means of
communication between realtors and clients - communications that
once occurred orally, either face-to-face or over the telephone.
The bill, therefore, makes two changes to existing law relative
to these kinds of electronic messages. First, the bill will
specify that electronic messages of an "ephemeral" nature - i.e.
messages that are not designed to be retained or create a
permanent record - are not sufficient to constitute a contract
under the Statute of Frauds, unless they have been reduced to
writing and subscribed by the parties in a manner prescribed in
existing law. Second, this bill would amend provisions of the
Business & Professions Code that require a licensed realtor to
maintain for three years copies of all "listings, deposit
receipts, canceled checks, trust records, and other documents"
[emphasis added] executed or obtained by the realtor in
connection with any real estate transaction. Such documents are
retained so that they may be made available for inspection by
the Real Estate Commissioner. The sponsor claims that, under
existing law, if "other documents" is broadly construed, a
realtor would be required to retain copies of all text messages,
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twitter messages, and social media postings, whether or not they
were sufficiently material to confirm in writing. This bill
would specify that the three-year retention requirement does not
apply to electronic messages of an ephemeral nature, unless the
messages are sufficiently material to have been confirmed in
writing. Otherwise, ephemeral electronic messages would be
treated substantially the same as an oral communication. They
would only meet the requirements of the Statute of Frauds, and
would only need to be retained by the realtor for three years,
if properly confirmed in writing.
ARGUMENTS IN SUPPORT : The California Association of Realtors
(CAR), the sponsor, argues that "AB 2136 will distinguish
short-lived electronic communications from transaction documents
which must be maintained in a real estate agent's files." CAR
contends that "short-lived" or "ephemeral" documents such as
text messages and tweets "are not intended to be preserved" and
they are not sufficient "to constitute a contract to convey real
property in the absence of a written confirmation that is in a
durable, retainable form." If such communications are material,
CAR contends, they "should be memorialized in a permanent form
in order to be considered a transaction document." For the same
reason, such messages should not be subject to the retention
requirement until they are reduced to a durable, written form.
The Orange County Association of Realtors supports this measure
for substantially the same reasons, adding that it will
appropriately "require an electronic document used in connection
with [a real estate] transaction to be in a durable, retainable
form before retention."
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors (sponsor)
Orange County Association of Realtors
Opposition
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
AB 2136
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