Text Messages Can Be Valid Signatures in Business Disputes

The bulk of civil litigation in business law is not conducted by what are referred to as “sophisticated parties,” described by the Court as being aware of the risks of foreign legal systems, understanding the meaning of legal terms, familiar with negotiations, able to draft clear exclusion and limitation clauses, and well-advised by counsel.

Instead, many of these disputes are far more informal in nature, and often for smaller amounts that properly put these disputes within the monetary jurisdiction of the small claims court.

The nature of the communication in this contexts reflects this informality, and there is no shortage of text message evidence (including emojis) adduced in court rooms. How courts interpret these communications are still largely contextual, and continues to evolve.

A recent Ontario Divisional Court decision in 1475182 Ontario Inc. o/a Edges Contracting v. Ghotbi confirms that a text message can constitute a signature in a contract, and thereby commence the limitations period for an action.

The action was tried in small claims, where the defendant argued at trial that the limitations had expired due to a text on June 2, 2016,

Mr. Lupo: Hello. We can be there in an hour to inspect what was already looked at and passed by the city. We will stop in only if you are in the office and have a cheque as discussed numerous times. This payment is months past due and we have completed plenty of extras without receiving a penny. Will you be there with our payment?

Dr.Ghotbi: The balance will be paid once everything is completed as per your agreement. No payment will be made until everything is clear.  I’m going to hire a third-party inspector and their fees will be deducted from your payments too.
[emphasis added]

The foregoing text was interpreted as acknowledging the debt arising from the construction contract, thereby commencing the 2-year limitations under Limitations Act. The claim was commenced on May 30, 2018, just days before the 2-year limitations period would have expired. The trial judge agreed this was within limitations, the the Divisional Court upheld this decision on the basis that the text met the criteria under the Act,

Acknowledgments

Same

(10) Subsections (1), (2), (3), (6) and (7) do not apply unless the acknowledgment is in writing and signed by the person making it or the person’s agent.

[emphasis added]

Although the trial judge concluded this requirement was met, the Divisional Court came to to this conclusion in a different matter. Despite not being signed in the traditional sense, the court emphasized that the statutory provision does not require any particular type of signature,

48] The world is changing. Everyone knows that. We live in a digital world now, much more than was the case when the Act came into force in 2002. It is incumbent upon the court to consider not just traditional means of affixing one’s signature to a document, but other, more modern means, including digital signatures.

The court highlighted that small claims is a busy venue with a large volume of cases, which are disposed of as expeditiously as possible. There was no question of authenticity of the text message, and the defendant used his personal cell phone to send the text.

The Ontario Court of Appeal has previously interpreted this provision in Middleton v. Aboutown Enterprises Inc. as requiring clear and unequivocal language acknowledging the debt claimed. Whether text messages are conducive to this type of language is subject to debate, the convenience of it as a communication too ensures that it will continue to arise in contractual disputes.

The defendant’s claim that an earlier date, the last payment made to the plaintiff, was therefore dismissed, even though this date would have had the effect of ensuring the claim was statute barred under limitations.

Small business owners and all individuals engaged in business transactions should be discouraged by counsel from using text messages for business communications, especially if there is any type of dispute. If text messages are operationally necessary, it is usually prudent to follow any exchange with a well-written email, explaining any of the nuance or particulars that may not be properly captured in a brief text exchange.

And by all means, avoid the emojis in business dealings entirely.

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