Emojis such as the “thumbs up” and emoticons comprised of text characters are common in the world of texting, social media, email, and other forms of what can be very informal methods of electronic communications. However, you may be surprised to learn that emojis and emoticons can constitute electronic signatures under the Uniform Electronic Transactions Act (UETA)1 and the Electronic Signatures in Global and National Commerce Act (E-Sign).2 Lawyers and clients alike should never presume that the informality of a method of communication or the fact that it occurs electronically will render as non-binding an exchange of promises between parties.
ELECTRONIC CONTRACTING IS UBIQUITOUS
People increasingly interact with one another via digital networks, and those interactions include engaging in binding contracts. Be it business to business (B2B) or consumer to business (C2B), e-commerce transactions comprise an increasingly large segment of the U.S. economy. Many contracts are proposed, finalized, and executed exclusively in digital formats using keystrokes and mouse clicks. The following statistics suggest that the increase in electronic contract formation shows no sign of abating:
- Since 2001, online sales have grown by 300% while department store sales have dropped by 50%.3
- 67% of millennials prefer online shopping to in-store shopping.4
- By 2040, it is estimated that 95% of all purchases will occur via e-commerce.5
- 65% of B2B companies were fully transacting online in 2022.6
- Online sales on B2B ecommerce sites, log-in por
- ls, and marketplaces in 2021 increased 17.8% to $1.63 trillion.7
- 46% of B2B buyers use social media to learn about available solutions.8
FOUNDATIONS OF ELECTRONIC CONTRACT FORMATION
The principles of contract formation were well established under common law and the Restatement (2nd) of Contracts for many years. The “formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration.”9 Contract formation can be subject to special rules such as the requirement of writing under the statute of frauds.10 By way of example under UCC 2-201, “a contract for the sale of goods for a price of $500 or more is not enforceable … unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought.”11
Given the growing use of online contracting, efforts at both the state and federal level were made to try to ensure that contracts were not invalid simply because the writing is in an electric form, or the signature is conveyed through electronic means rather than an actual pen being used to sign a physical piece of paper.
The Uniform Electronic Transactions Act was published by the Michigan Commission on Uniform Laws in 1999 and enacted into state law the following year.12 Under the UETA, a “record or signature shall not be denied legal effect or enforceability solely because it is in electronic form.”13 Therefore, arguing that no contract was formed because a writing or signature is electronic is not a viable defense. The attribution function of an electronic signature is also addressed under UETA:
(1) An electronic record or electronic signature is attributable to a person if it is the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.
(2) The effect of an electronic record or electronic signature attributed to a person under subsection (1) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including any agreements of the parties, and otherwise as provided by law [emphasis added].14
The UETA requirements are very much open-ended and contextual, flexible to how parties interact and communicate electronically, but the use of emojis and emoticons are not specifically addressed. Emoticons, which are text-based versions of emojis — like :) to indicate a smiling face — existed when UETA passed. Emojis, however, did not become prominent in the U.S. until smartphones were introduced in the late 2000s.
The federal Electronic Signatures in Global and National Commerce Act was enacted in 2000 to preserve the viability of electronic “writings”15 and “signatures”16 and reinforces UETA in many respects. Other nations have passed laws similar to E-Sign and UETA such as Canada’s Electronic Information and Documents Act (EIDA).17
CANADIAN COURT HOLDS EMOJI CONSTITUTES CONTRACTUAL ACCEPTANCE
A Saskatchewan court in 2023 generated headlines worldwide when it ruled that a thumbs-up emoji in a text message could serve as an electronic signature to form a binding contract between a farmer and a grain cooperative.18 In South West Terminal Ltd v. Achter Land, a farmer claimed a breach of contract based on the cooperative’s failure to deliver promised flax seeds.19 The farmer prepared a written contract that he had signed,20 took a photo of the signed contract, and texted the photo to the cooperative with a message asking to “Please confirm flax contract.“21 The cooperative replied from the same number with a thumbs-up emoji.22
The defendant argued that he was “generally unaware of what a [thumbs-up] emoji means and in particular what [the plaintiff] meant to convey.”23 In litigating the dispute, the parties engaged in “a far-flung search for the equivalent of the Rosetta Stone in cases from Israel, New York State, and some tribunals in Canada, etc. to unearth what a [thumbs-up] emoji means.”24 The defendant argued that he sent the emoji to:
simply confirm that I received the Flax contract. It was not a confirmation that I agreed with the terms of the Flax Contract … I did not have time to review the Flax Contract and merely wanted to indicate that I did receive his text message.25
The court found the argument to be “self-serving”26 as the defendant “from that point on never contacted” the plaintiff about the contract.27
The defendant also argued that “an actual signature is essential because it confirms the person’s identity, and a signature conveys a message — in this case acceptance.”28 The long contracting history between the parties — “approximately fifteen to twenty contracts” between the parties that had previously executed while communicating through the same cell phone numbers used to send and receive the emoji signature — was also noted by the court.29
Ultimately, the Saskatchewan court expressly held that the “thumbs-up emoji is an action in electronic form that can be used to express acceptance as contemplated under” EIDA, a statute functionally similar to both Michigan’s UETA law and the federal E-Sign law.30 The court emphasized that the case was determined “in accordance with an objective theory of contract formation” looked at “how each party’s conduct would appear to a reasonable person in the position of the other party.”31
ANGELAKOS v. INST. FOR BLDG. TECH. & SAFETY
In Angelakos v. Institute for Building Technology and Safety,32 a 2019 federal case from the Eastern District of New York, the plaintiffs were employees of the defendant who sued based on claims of sexual discrimination and retaliation.33 Through their respective attorneys, the parties engaged in court-directed mediation during which a series of emails were exchanged.34 The emails involved various acceptances, confirmations, and clarifications.35
At one point, a settlement check had been mailed and a draft of a “formal settlement agreement” had been promised when one of the plaintiffs communicated that the settlement offer was no longer acceptable.36 The defendants argued that the totality of email exchanges through counsel meant that the parties “entered into a valid and enforceable settlement agreement.”37 In litigating the matter, the defendants argued under Section 4 of the Restatement (2nd) of Contracts that the formation of a contract “may be stated in words either oral or written, or may be inferred wholly or partly from conduct.”38 The defendants argued that “[c]ounsel seemed comfortable negotiating via email, sometimes using informal language such as an emoticon or a one-word ‘Thanks’ reply, suggesting that the agreements might be simple and not require full written agreement to be binding.”39
The court held that no binding contract had been formed, adding that the finding was not based on the use of emoticons to convey acceptance, but rather the complexity of the settlement and a finding that the parties required a formal writing.40
CONCLUSION
One can see why journalists would highlight a story about courts finding that emojis constitute valid signatures under contract law. However, practitioners should not be surprised by such events, which are very much in line with relevant statutory language as well as long-standing contractual principles. Parties using technology in informal ways to exchange promises and communicate assent will not be able to escape the implications of their communications on the basis of such novelty or informality. Clients prone to unusually informal communication practices would be well-advised to understand that such novelty and informality will not negate the finding that a binding contract has been entered into. What ultimately matters is the context of the interactions, the history of the parties, and what an objectively reasonable party would assume is transpiring.