Business Contracts Breach - Agreement by Email, Two Different US States

[Jack H20]

Jurisdiction

Louisiana

Hi - This matter pertains to reneging on an agreement to sell a particular Internet domain name to me for a certain price, which I considered to be important for my business. I'm an online business person in Pennsylvania, and the seller is in Louisiana.

1. Internet domain names can be extremely valuable. It is extremely common practice to make agreements to both buy and sell domain names by email. More "official" contract documents are often not used, almost certainly most of the time in fact.

2. I did not go to law school, but I did complete courses in both contract and commercial law in college. I am extremely mindful of the "offer-acceptance-consideration" elements of a binding contract. Even if the contract was written on a restaurant napkin or on the side of a cow.

3. It is common practice to approach or be approached by someone out of the blue in order to seek to buy a domain name from someone, or by someone wanting to buy one from you, if you are involved in such matters and hold domain names.

4. I emailed a certain business in the state of LA from my location in PA and offered $xx,xxx for a certain domain name, one they were only forwarding to their main site and not using for a website. This is a redacted copy of the brief conversation that occurred, right up until the moment I would assert created a binding and enforceable contract:

Me: "Hi, I was wondering if you were willing to sell the [ExampleDomain.com] domain for [$xx,xxx five figure sum]. I would also cover the escrow fee."

Company's Domain Admin (their Director of IT): "We would be interested in exploring options around selling [ExampleDomain.com]. Are you the broker and can you provide us more details on who is looking to buy?"

Me: "It's just me. I'm not a broker or even a [normal subject matter industry participant], but I do various kinds of referral marketing including in the field of [redacted] [...]. Referral marketing is hit or miss, a lot like going out fishing, so it's a question mark about being able to monetize. In all candor, someone just bought two .coms [redacted] last week which related to [redacted], which I was not interested in pursuing again right now, and so I just had them parked but got contacted out of the blue just as I contacted you. [Redacted] I suddenly realized I had always assumed your domain was something not for sale [redacted]. When I emailed you on Friday it was a last second scramble to see if I could buy yours instead of this other one I had been talking to someone about, and when I didn't hear back I pulled the trigger on buying this other one and spent most of it. If I had heard back from you on Friday, however, I would have focused on yours instead, but nonetheless this offer still stands. I still have some of the new free funds left even though it would've been a great deal less painful just on Friday."

In the company IT Director's next reply, it is at this point that I would say a binding and enforceable offer-acceptance contractual agreement was formed:

Company's Domain Admin: "Thanks for the reply. We are interested in selling you the domain but we want to make sure both parties in this transaction are protected. We think the most prudent action is to put the sale proceeds in an escrow account with the funds released to [The Company] once the transfer is complete. We could use a service like [name of common escrow service] to facilitate the transaction. Since you seem to do this often, what direction do you think we should go in to protect both parties?" (Bold added.)

Note: The Admin's whole statement there, taken in its entirety, demonstrates unequivocal acceptance of my offer with intent to complete "this transaction." The rest is just discussion about how best to proceed with escrow. Additionally, in signifying that this was the whole company's decision to sell me the domain and accept my offer, and not just his own, the domain Admin copied the company's CEO and Director of Marketing with this reply, the first time anyone was copied up till then.

After that reply I created a sale transaction on a commonly used and well regarded escrow service for such purposes which was "like [name of common escrow service]" although not the particular one he mentioned. I then went about moving money to a bank account from which I would make a wire payment to the escrow. I was emailing the domain Admin with various updates starting just before the weekend, on Saturday, and then Monday. I even did two test runs involving transfering a domain name to myself among two different accounts within the same registrar to see how well it would go with this particular registrar, updating him about that as well. This person had gone silent and stopped responding after the above and during all my updates, however. Finally on Tuesday after the intervening weekend, after I had moved funds and was ready and waiting to send a wire payment, I confronted him about that in email, and received the following terse reply from him:

"We have decided to use the Domain name again for Marketing and apologize for the inconvenience."

As far as I'm concerned, that statement is in breach of an enforceable agreement, and I wrote a reply objecting, mentioning how extremely consequential their action is to me, etc. the next day.

Which brings me to today (this all happened just days ago). This is what I'm thinking:

1. Since I'm in PA and they are in LA, I'd like to sue for breach of contract in federal court.

2. I read something about how the matter has to be for $75k or more for federal court. The actual sales price was well below $75k, but I want to sue for "specific performance" to receive the domain name as originally agreed, plus suing for perhaps $3 - $4 million in compensatory and punitive damages based on reasonably believed potential future losses without this particular domain. If I included a petition for damages exceeding $75k like that, does that cover the $ requirement for suing in federal court?

How does everything look? What are my best options? I guess I would want to consult an attorney to first see about sending a letter to see if they will just honor the original agreement and go through with the sale of course. Money is an issue though, and I'm not looking forward to the cost. I'm also hoping an attorney would take this on a contingency basis, though I guess if the other party does decide to comply and go through with the sale (which seems doubtful, however), that might not work.

Thanks in advance for your input, especially since I'm most definitely not an expert or that knowledgeable about how to proceed.

 

[Tax Counsel]

In the company IT Director's next reply, it is at this point that I would say a binding and enforceable offer-acceptance contractual agreement was formed:

Company's Domain Admin: "Thanks for the reply. We are interested in selling you the domain but we want to make sure both parties in this transaction are protected. We think the most prudent action is to put the sale proceeds in an escrow account with the funds released to [The Company] once the transfer is complete. We could use a service like [name of common escrow service] to facilitate the transaction. Since you seem to do this often, what direction do you think we should go in to protect both parties?" (Bold added.)

Note: The Admin's whole statement there, taken in its entirety, demonstrates unequivocal acceptance of my offer with intent to complete "this transaction."

I disagree. Nowhere in there is a definite statement that they have accepted any offer. They simply state they are interested and start discussing potential terms of the contract. Indeed, at best it might be considered a counter offer since the company did not accept your terms unaltered. When they start talking about what other terms to add to the deal you don't have a concluded contract yet. You are still negotiating. Only when one side has made a particular offer and the other side accepts that with no strings, no changes, etc do you have contract. In short, even if they say "I accept but with ________ changes" you don't have a contract yet because you don't have the two parties in total agreement on the deal at that point. So, just going by what you've said here, IMO you had no contract and are simply out of luck. However, you should take all the e-mails and any other evidence you have to a contract attorney since the exact details of all that occurred matter.

1. Since I'm in PA and they are in LA, I'd like to sue for breach of contract in federal court.

2. I read something about how the matter has to be for $75k or more for federal court. The actual sales price was well below $75k, but I want to sue for "specific performance" to receive the domain name as originally agreed, plus suing for perhaps $3 - $4 million in compensatory and punitive damages based on reasonably believed potential future losses without this particular domain. If I included a petition for damages exceeding $75k like that, does that cover the $ requirement for suing in federal court?

And why do you want to sue in federal court, exactly? Even if you do qualify to sue in federal court that does not always make that your best choice. Understand that in breach of contract cases you don't get punitive damages for a party simply changing his/her mind on going through with the deal. And consequential damages, which would be damages beyond the fair market value of the web site that is represented by your sales price (e.g. additional sales you might get from that domain name, etc) are typically only available if the other party is on notice that that specific consequence may occur if he breaches the contract. So I don't see you getting anything in the millions of dollars off this.

How does everything look? What are my best options? I guess I would want to consult an attorney to first see about sending a letter to see if they will just honor the original agreement and go through with the sale of course. Money is an issue though, and I'm not looking forward to the cost. I'm also hoping an attorney would take this on a contingency basis, though I guess if the other party does decide to comply and go through with the sale (which seems doubtful, however), that might not work.

Yes, seeing an attorney is your next step. If money is an issue, understand that often litigating in federal court is more costly and potentially more complex than litigating in most state courts. Which bring me back to the question of why you want to be in federal court. And either way, you'll end up litigating this in Louisiana.

If the realistic damages from this are only the value of the domain name and that is considerably less than $75,000 you'll end up in state court and regardless of the the court finding a lawyer to take a case on a contingent fee basis will be difficult, all the more so because if there is specific performance awarded that may be all you get and if there is no cash the lawyer could have a hard time getting the fee from you later. Lawyers aren't going to want to take that risk. Also, note that even with a contingent fee agreement usually you are still obligated to pay most of the out of pocket expenses, and those can add up. And you'll have costs in traveling to Louisiana for this. But generally most attorneys give you a free initial consultation so consulting one or two attorneys is a good idea. Like I said before, I don't have all the details here and that matters.

 

[adjusterjack]

Thanks in advance for your input, especially since I'm most definitely not an expert or that knowledgeable about how to proceed.

That's rather obvious despite the courses you took.

Company's Domain Admin: "Thanks for the reply. We are interested in selling you the domain but we want to make sure both parties in this transaction are protected. We think the most prudent action is to put the sale proceeds in an escrow account with the funds released to [The Company] once the transfer is complete. We could use a service like [name of common escrow service] to facilitate the transaction. Since you seem to do this often, what direction do you think we should go in to protect both parties?" (Bold added.)

"We are interested" - Not a contract.

"what direction do you think we should go in to protect both parties?" - Not a contract.

As far as I'm concerned, that statement is in breach of an enforceable agreement,

It wasn't an enforceable agreement.

It is extremely common practice to make agreements to both buy and sell domain names by email. More "official" contract documents are often not used, almost certainly most of the time in fact.

A "common" practice doesn't make it a good practice. Next time you want to buy or sell a domain name attach a real contract and ask that it be returned with a signature of the seller or buyer. You can probably find a usable contract on the internet or have a lawyer make one up for you.

 

[Jack H20]

I disagree. Nowhere in there is a definite statement that they have accepted any offer. They simply state they are interested and start discussing potential terms of the contract. Indeed, at best it might be considered a counter offer since the company did not accept your terms unaltered. When they start talking about what other terms to add to the deal you don't have a concluded contract yet. You are still negotiating. Only when one side has made a particular offer and the other side accepts that with no strings, no changes, etc do you have contract. In short, even if they say "I accept but with ________ changes" you don't have a contract yet because you don't have the two parties in total agreement on the deal at that point. So, just going by what you've said here, IMO you had no contract and are simply out of luck. However, you should take all the e-mails and any other evidence you have to a contract attorney since the exact details of all that occurred matter.



And why do you want to sue in federal court, exactly? Even if you do qualify to sue in federal court that does not always make that your best choice. Understand that in breach of contract cases you don't get punitive damages for a party simply changing his/her mind on going through with the deal. And consequential damages, which would be damages beyond the fair market value of the web site that is represented by your sales price (e.g. additional sales you might get from that domain name, etc) are typically only available if the other party is on notice that that specific consequence may occur if he breaches the contract. So I don't see you getting anything in the millions of dollars off this.



Yes, seeing an attorney is your next step. If money is an issue, understand that often litigating in federal court is more costly and potentially more complex than litigating in most state courts. Which bring me back to the question of why you want to be in federal court. And either way, you'll end up litigating this in Louisiana.

If the realistic damages from this are only the value of the domain name and that is considerably less than $75,000 you'll end up in state court and regardless of the the court finding a lawyer to take a case on a contingent fee basis will be difficult, all the more so because if there is specific performance awarded that may be all you get and if there is no cash the lawyer could have a hard time getting the fee from you later. Lawyers aren't going to want to take that risk. Also, note that even with a contingent fee agreement usually you are still obligated to pay most of the out of pocket expenses, and those can add up. And you'll have costs in traveling to Louisiana for this. But generally most attorneys give you a free initial consultation so consulting one or two attorneys is a good idea. Like I said before, I don't have all the details here and that matters.

Thanks for taking the time to read my post and add all your helpful comments here. This is exactly what I need to hear, and exactly what I want to hear, as long as people really mean it and are not just arguing for arguing's sake.

I had really felt that the whole of the other party's response could (and should) be construed as clear actionable acceptance, even though I was willing to agree that the point at "We are interested in selling you the domain" was still arguably ambiguous. I'm the one who brought up "escrow" in my very first contact, even though the guy mentions it there almost as if it was something new. And I felt that "the transaction" and "this transaction" should be construed as unequivocal intent to accept my offer and sell me the domain, with discussing how best to proceed with the escrow being tangential but not crucial with regard to a binding agreement.

I had this idea in my mind that it would be cheaper and easier and better to file in federal court rather than have to travel to Louisiana.

One of the reasons why I wanted to include damages is to incentivize an attorney to take it on a contingency, although I'm quite sincere about the damages and frankly think it could be more. However, my main initial desire was just to get them to complete the deal, but I definitely did not want to have to pay out of pocket if a "specific performance" action was all I was pursuing, and I had to pursue it till the end, come what may. I would think that could easily equal or exceed the original sale price, and then even if I won I would still have to pay the sale price I assume.

I don't want to pursue all that unless I have a very clearly strong case I'm almost certain to win. I don't even want to consult an attorney and pay the ~$500 or ~$1,000 or so I imagine it would probably cost for a consult and perhaps a scary lawyer letter to be sent to them. In shopping around in my area I did not see anything about a free initial consultation for this kind of law practice.

What I've shown you is pretty much it. After that 2nd to last response from the guy, it was all just me sending him emails and trying to nudge him into doing his part to complete the "transaction," till the day I received that one last reply from him about changing their mind.

 

[Jack H20]

That's rather obvious despite the courses you took.



"We are interested" - Not a contract.

"what direction do you think we should go in to protect both parties?" - Not a contract.



It wasn't an enforceable agreement.



A "common" practice doesn't make it a good practice. Next time you want to buy or sell a domain name attach a real contract and ask that it be returned with a signature of the seller or buyer. You can probably find a usable contract on the internet or have a lawyer make one up for you.

Thanks for your reply too, it came in as I was working on the one I just posted.

Yes, there are some contracts out there I could use, and perhaps if there is a next time I will do that. I was already very concerned about them possibly backing out, so I wanted to get it done as quickly and smoothly as possible and was concerned about any step or complication that might trigger the impulse to reconsider.

So nobody is inclined to agree about my assessment of the guy's statement as a whole, ay?

Okay, well so far it does sound like my worst concerns may be true after all, that I don't really have such a strong case, and this may simply be one that got away. Would have been a great major bit of good fortune I could really use now, however.

 

[adjusterjack]

At the risk of beating a dead horse:

I wanted to get it done as quickly and smoothly as possible and was concerned about any step or complication that might trigger the impulse to reconsider.

If you are dealing with people who get the impulse to reconsider just because you hand them a contract, you shouldn't be dealing with them at all.

I found several samples of domain name purchase/sale contract on line. My guess is that the use of contracts is common since the samples are so readily available.

 

[Jack H20]

At the risk of beating a dead horse:



If you are dealing with people who get the impulse to reconsider just because you hand them a contract, you shouldn't be dealing with them at all.

I found several samples of domain name purchase/sale contract on line. My guess is that the use of contracts is common since the samples are so readily available.

Re "impulse to reconsider": it's more complicated than that for this one. There was no way to know, and they are actually a long established "respectable" company, but I had a hunch it could happen. Maybe even more than a hunch (long story, delving into science and theology). I was getting what I considered a good price, better than I had hoped, even though a well known CEO in the digital services and domain registration industry told me I also made them "a very reasonable offer." I felt there was also risk that the slightest new input or "stimuli" could have triggered seller's remorse and a desire to back out, however.

Re "guess is that the use of contracts is common": only common in the sense that it certainly does happen, and I know of at least one famous domain investor who likes to use them, but I've been involved with this kind of thing for just shy of 20 years now and it's not apparently common in the normal sense of that word. People rarely even mention them. You would probably need at least 6 to 7 figures before it may start looking common in the normal sense. This is for deals not arranged by intermediaries. If you're buying via a third party platform then a formal agreement document may simply be part of the website, though not always then either.

 

[adjusterjack]

OK.