E-mails may be legally binding in real estate transactions, if contract terms were offered, a New York court has ruled.

A five-judge New York state appellate court ruled that e-mail correspondence should have the same legal status as a written agreement, if used to reach an agreement over a real estate deal. The ruling, issued last October, went largely unnoticed until an appeal was filed last week with the New York State Court of Appeals, the state's highest court.

Though the case in question deals with a commercial real estate transaction, the ruling, if upheld, would apply to residential real estate deals as well, according to the New York Times, which first reported the story.

It's not clear if the ruling would also apply to mortgage contracts, although the essence of the ruling - that e-mail offers and agreements carry the same weight as those on paper - would appear to apply to a wide range of transactions.

"Given the vast growth in the last decade and a half in the number of people and entities regularly using e-mail, we would conclude that the terms "writing" and "subscribed" should now be construed to include, respectively, records of electronic communications and electronic signatures," the appellate court stated in its decision.

The case, Naldi vs. Grunberg, involves an Italian national who made an offer of $50 million to buy two Manhattan apartment buildings. The owner responded with an email in which he accepted the offer, pending completion of a contract, and offered Robert Naldi - the buyer - the right of first refusal if a better offer came along.

The properties were subsequently sold to another buyer for $52 million and Naldi sued, claiming his right of first refusal was violated.

The status of e-mail agreements hinges in large part upon whether an agreement has been reached; several attorneys told the Times the ruling could be circumvented by attaching a disclaimer to e-mails saying no deal is final until a contract is signed.

In fact, Naldi actually lost his claim, because he failed to reply to the e-mail extending him right of first refusal, which the courts said would indicated his acceptance. He's now appealing that verdict, although the courts did affirm the validity of e-mails as legally binding, which was part of his claim.

Because it involves a case in state courts, the ruling, if upheld, will be binding only in New York State, although courts in other states may consider its merits in making their own rulings.

Published on May 18, 2009