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Signature Requirements in an Arizona Real Estate Commission Agreement

A September 2012 court opinion reaffirms the necessity for both parties to sign, and it raises new questions about what constitutes an "electronic signature"

Stephen Aron Benson  

Steve Benson

 

The Arizona Court of Appeals’ recent decision in Young vs. Rose was interesting, not only because many people know Mr. & Mrs. Rose, but also because of the legal issues involved.

Pending further trial proceedings, the ruling allowed the Roses to avoid – for now – having to pay a real estate sales commission pursuant to a brokerage agreement that was signed by the Roses but not by the broker or its agent. In this case, the agreement in question was an exclusive buyer’s representation agreement, and the Roses ultimately engaged another agent to represent them in the purchase of a house.

Signatures of Both Parties

The first big issue in the case involved signing a commission agreement. Most people involved in residential and commercial real estate are aware that Arizona law requires the signatures of both parties to a commission agreement, and that, absent signatures on the agreement, it is difficult if not impossible to pursue the payment of a commission.

There are some circumstances where a shortcut may seem to make sense, particularly when there has been a relationship or a course of dealing among the parties. Not so fast, says the Court of Appeals. It seems that the statute will be enforced almost regardless of the circumstances. The odd part about this particular case is that the non-signer was the real estate professional, not the client (who did sign). So, to our real estate brokerage clients, we again emphasize the importance of having all parties sign the representation/commission agreement.

Electronic Signature

The other major legal issue in the case involved the “electronic signature” issue. Arizona adopted the Uniform Electronic Transactions Act in 2000, recognizing that more and more business transactions are conducted on the internet and/or via email. Consequently, many of the old-time niceties (such as the preparation of a contract that both sides actually sign) now seem almost quaint.

Against that background, the court was faced with deciding whether an email in which the broker thanked the Roses, and which contained a standard signature block with the agent’s photograph at the bottom, was an electronic signature. Under the Arizona Electronic Transactions Act, an electronic signature is any “sound, symbol or process” that is associated with a document and that is “executed or adopted by an individual with the intent to sign” the document.

The court noted that the broker had to show not only that she intended to sign the document with her electronic signature, but also that all parties agreed to conduct the transaction electronically. The court sidestepped the issue, sending the case back to the trial court to decide, first, whether the parties agreed to conduct the transaction electronically and, second, whether the broker intended her “thank you” email to be a binding signature.