Parma contended that the faxed document MRLS sent was properly subscribed under N.Y. Gen. Oblig. Law § 5-701(a)(2) (McKinney 1989) because MRLS Construction's fax machine was programmed to automatically-imprint the company name, company telephone number, time, and date. This imprint appeared on the receiver's copy only. MRLS contended that the automatic imprint did not meet the New York Statute of Frauds' subscription requirement asserting that the fax was merely a proposal for a guaranty.
Both sides moved for and were denied summary judgment. After reargument, the trial court granted plaintiff's summary judgment motion on its third cause of action (alleging guaranty of payment). The court held that the automatically imprinted information demonstrated defendant's intent to be bound by the guaranty and met the subscription requirement under New York law. The court severed plaintiff's third cause of action and entered judgment against MRLS. The Appellate Division affirmed. The Court of Appeals granted defendant leave to appeal.
Other than Mesibov, few cases deal with the contractually binding force of a pre-stamped name as a signature. In Pearlberg v. Levisohn, 182 N.Y.S. 615 (N.Y. App. Term. 1920) (holding that the header on an order form was a sufficient subscription because the form contained all the terms necessary to create a contract, such as price and quantity), the court determined the adequacy of the signature in context of the entire writing. The terms in the order form provided the evidence necessary to conclude that the printed name authenticated the writing. But see Eugene L. Lezinsky Co. v. Hoffman, 181 N.Y.S. 732 (N.Y. App. Term. 1920) (holding that the intent to engage in a contractual relationship could not be imputed to the defendant solely on the basis of plaintiff affixing his handwritten signature and purchase terms on a pad bearing the defendant's prestamped name).
Regardless, Parma Tile is limited to an analysis of the fax header, while Mesibov and Pearlberg raise the possibility of inferring an intent to authenticate a writing under other circumstances, for example, specification of price and quantity. Parma Tile did not analyze the language of the guarantee or address the existence of any markings or symbols to extrapolate the requisite intent to meet the Statute of Frauds. This lack of analysis may indicate that either such evidence did not exist or the deliberate placement of a prestamped signature on a fax transmittal must be determined as a threshold matter, before the court can discern an intent to authenticate.
The English Parliament passed the original Statute of Frauds in 1677 to ensure that certain contracts met specified minimum formal requirements. See Arthur Linton Corbin, Corbin on Contracts, § 275 (2d ed. 1950). In that era, the parties to a contract met and bargained face-to-face. Although New York's current version of the Statute of Frauds is very close to the original version in scope and application, see N.Y. Gen. Oblig. Law § 5-701(a) (McKinney 1989), the nature of many modern transactions is very different. In Parma Tile, the parties exchanged messages via facsimile. In many other modern transactions, the parties also do not have the opportunity to meet in person but rather rely on various technologies and conventions to document the scope of their respective obligations. Although Parma Tile apparently limited its holding to answering a relatively narrow question concerning the Statute of Frauds' subscription requirements in facsimile transmissions, whether the purported subscriptions or other acts of modern transactions will satisfy the Statute of Frauds is an open question.
First, the applicability of Parma Tile to certain financial transactions is not clear. In 1994, New York amended its Statute of Frauds to allow for the explicit enforceability of certain qualified financial contracts even though there is no formal writing that would otherwise meet the formal requirements of the State's historic Statute of Frauds. See N.Y. Gen. Oblig. Law § 5-701(b)(1) (McKinney Supp. 1996). Under New York's new law, any evidence of a confirmation in writing (e.g., written receipt), electronic communication (e.g., tape recording of a telephone call), or other writing can be sufficient to prove the existence of a contract satisfying the State's revised Statute of Frauds. N.Y. Gen. Oblig. Law § 5- 701(b)(3) (McKinney Supp. 1996). The amendment provided parties in many "swaps" transactions (a form of financial derivative) with certainty about the enforceability of their contracts even though many such swaps are for a duration of more than a year (i.e., would otherwise violate N.Y. Gen. Oblig. Law § 5-701(a)(1))(McKinney 1989). Current industry practice is not to use a writing for performance of certain swaps with a duration of more than a year. The swaps industry does, however, keep logs of the orders that caused the swap to be executed, and firms typically send confirmations by facsimile, and the revised statute provides for enforceability of such contracts formed in accord with industry practice.
Second, even after Parma Tile, the level of intent required to show that a party to a contract intended to be bound is a question that the Court of Appeals has left unanswered. Many transactions solely involving electronic communication (e.g., purchase of goods over the Internet) and many transactions involving the purchase of computer software do not provide each party with the traditional opportunity to consent to contractual terms. See generally Mark A. Lemley, Intellectual Property and Shrinkwrap Licenses, 68 U.S.C. L. Rev. 1239-92 (1995); Deborah L. Wilkerson, Electronic Commerce Under the U.C.C. Section 2-201 Statute of Frauds: Are Electronic Messages Enforceable?, 41 Kan. L. Rev. 403 (1992). In such cases, it remains unclear whethert either the terms of a shrinkwrap license agreement or the sending of electronic confirmation will always provide a court with sufficient evidence of intent to bind the purported subscriber.
A variation on the facts at hand is found in National Coin Laundry, Inc. v. Solon Automated Servs., Inc., 933 F.2d 1009 (6th Cir. 1991). The Sixth Circuit held that the a "fax cover letter" bearing the indentification of the sender does not satisfy the subscription requirement. The cover letter was offered into evidence by plaintiff-appellant to show that the Statute of Frauds should not have been applied because the writings were equivalent to a written and signed contract.
The uncertainty regarding the use of fax machines is due to the unresolved legal issues. Attempts to sort out the complex issues resulting from the increasing reliance of electronic media will surely result in courts looking outside of their own jurisdiction for guidance in this emerging area of law. See generally Benjamin Wright, Fax pacts: Contracting via fax machines could leave the user on shaky legal ground, Network World, Feb. 5, 1990, at 69.