Might Your Bank’s Emails To Customers Be Enforceable Contracts Against the Bank?

08.29.17

Wisconsin enacted a law in 2015 eliminating verbal contract claims against banks. In the 1980’s and 1990’s, several lender liability lawsuits were brought against banks that resulted in large dollar judgments against those banks. Many of those lawsuits were based on alleged verbal contracts to lend money, to refinance loans or to forbear from exercising remedies. This new law is intended to eliminate those verbal contract claims against banks in Wisconsin. The new law is 2015 Wisconsin Act 120 and it created Section 241.02 of the Wisconsin Statutes, effective December 18, 2015. 

Under this new law, a legal action may not be brought against a bank in connection with any offer, promise, agreement or commitment to lend, to renew or modify any loan or to make any other financial accommodation unless the offer, promise, agreement or commitment (1) is in writing, (2) sets forth relevant terms and conditions, (3) is signed with an authorized signature by the bank, and (4) is delivered to the other party. This law is a great protection for banks against claims for alleged breach of verbal contracts.

The immediate question for this short article is whether this new protection under Wisconsin law will apply when a bank sends a detailed email to a customer or potential customer regarding a proposal. Might such an email delivered by the bank to a customer or potential customer be a signed written contract under the new law and therefore enforceable against the bank? After all, the email is a writing, contains relevant terms and conditions and contains the name of the person at the bank authorized to send the email for the bank. Under these circumstances might the bank lose the legal protection from verbal contract claims provided by this new law? 

A recent Texas court decision confirms this can be a real issue (Khoury v. Tomlinson (Tex. App. 2017). In the Khoury case, Khoury sent an email to Tomlinson regarding agreements they had made in a prior discussion, and Tomlinson replied by email under his name that ​“we are in agreement.” According to the court, under Texas law, which is similar in many ways to Wisconsin’s electronic transactions and records statute section 137.11 — .26, Wisconsin Statutes, an email with the name in the ​“from” field on the email satisfies the requirements for a signature under Texas’ Uniform Electronic Transactions Act. A Wisconsin court might reach the same conclusion regarding an email communication between parties. 

We suggest banks take steps to minimize the risk that such an argument might successfully be made against the bank in Wisconsin regarding certain of its emails. Assuming the detailed email is not intended by the bank to be an enforceable contract, one step the bank could take to minimize the likelihood of success for such an argument against the bank would be to clearly state in the email that the email is not intended to be a binding agreement between the parties. My suggested language for such a provision in certain of the bank’s business emails to customers or potential customers is as follows: 

“This email does not constitute and does not give rise to a legally binding or enforceable obligation on the part of the Bank or you to engage in the proposed transaction, and the Bank and you will have no rights or obligations of any kind whatsoever relating to the proposed transaction as a result of this email. This email is intended to be preliminary and a summary for discussion purposes only and not a binding commitment to lend. No binding agreement regarding the proposed transaction shall be deemed to exist between the Bank and you unless and until a final definitive agreement has been executed and delivered.”

I suggest the bank review and revise this language as appropriate to fit its particular circumstances and consult with its legal counsel regarding the appropriate disclaimer language for the bank.

Finally, it is important to note that this new legal protection for banks does not apply to consumer credit transactions of $25,000 or less that are subject to the Wisconsin Consumer Act, and does not apply to the issuance or use of credit cards. Furthermore, customers or potential customers may continue to bring claims against banks alleging fraudulent misrepresentation or misrepresentation notwithstanding this new law.

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