California Legislature—2013–14 Regular Session

Assembly Bill No. 2136

Introduced by Assembly Member Daly

February 20, 2014

An act to amend Section 1624 of the Civil Code, relating to contracts.

LEGISLATIVE COUNSEL’S DIGEST

AB 2136, as introduced, 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.

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

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

SECTION 1.  

Section 1624 of the Civil Code is amended to
read:

1624.  

(a) The following 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:

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

(2) A special promise to answer for the debt, default, or
miscarriage of another, except in the cases provided for in Section
2794.

(3) 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 sought to be charged.

(4) 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 longer period than one year, or to procure, introduce,
or find a purchaser or seller of real estate or a lessee or lessor of
real estate where the lease is for a longer period than one year, for
compensation or a commission.

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

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

(7) A contract, promise, undertaking, or commitment to loan
money or to grant or extend credit, in an amount greater than one
hundred thousand dollars ($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
extending credit. For purposes of this section, a contract, promise,
undertaking or commitment to loan money secured solely by
residential property consisting of one to four dwelling units shall
be deemed to be for personal, family, or household purposes.

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

(1) 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 in paragraph (2) and begin delete (A) there end delete begin insert one of
the following apply: end insert

begin insert (A) end insert begin insert   end insert begin insert There end insert is, as provided in paragraph (3), sufficient evidence
to indicate that a contract has been made begin delete or (B) the end delete begin insert . end insert

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

begin insert

(d) 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 under this title to constitute a
contract to convey real property, in the absence of a written
confirmation that conforms to the requirements of subparagraph
(B) of paragraph (3) of subdivision (b).

end insert