Texting Tangles: Why the Supreme Court Ruled a Text-Message Settlement Unenforceable
The Alabama Supreme Court recently reversed a circuit court ruling that had enforced a settlement agreement negotiated entirely via text message, underscoring critical lessons about contract formation, especially in the age of electronic communication.
In iWTNS, Inc. v. MotionMobs, LLC (SC-2024-0591), the Court ruled that the text exchange did not constitute a binding settlement because one party’s reply was a counteroffer containing indefinite material terms, meaning there was never a “meeting of the minds.”
Background: The Underlying Dispute
This dispute began when Bradley Lewis, founder and president of iWTNS, Inc., and owner of Leveraged, LLC, contracted with MotionMobs, LLC, to build a mobile-phone application intended to connect users with legal counsel during police encounters.
The relationship deteriorated, leading MotionMobs to sue the defendants in September 2022 for breach of contract. MotionMobs contended the defendants failed to pay $169,700 across five outstanding invoices for development services. MotionMobs also raised claims relating to a $145,000 check, drawn on Leveraged LLC’s account and signed by Lewis, that allegedly bounced due to insufficient funds. Conversely, the defendants argued that MotionMobs had delayed production, delivered an unfinished product, and overcharged for its services.
The Failed Text Settlement
During the litigation, Lewis and MotionMobs’ CEO, Jennifer Fisher, engaged in a text message conversation on June 29, 2023, attempting to settle the case.
Lewis’s Offer (The Proposed Settlement):
“I’m able to commit to paying Motion Mobs 30k per month for 5 months. If you all are ok with this, please let me know asap. I can have the agreement drafted up and have the first payment to you within the next 7 days. My objective is to pay you all off ahead of the 5 months, but working with what I have now, this is the best I can do. Please advise on how to move forward.”
Fisher’s Response (The Counteroffer):
Bradley – “ MotionMobs will agree to settle this matter in exchange for $150,000 to be paid in five equal monthly installments over the course of five months in exchange for a mutually agreeable release. The first payment of $30,000 will be due 7 days after the parties agree. The agreement will need to contain agreeable acceleration and default judgment clauses.”
MotionMobs argued this exchange created a binding settlement agreement. The Jefferson Circuit Court initially agreed, finding that Lewis offered $150,000 and Fisher accepted, ordering the parties to execute a written agreement.
The Supreme Court’s Reversal
On appeal, the Supreme Court determined that the text-message exchange was not a binding settlement agreement.
The Court’s analysis rested on fundamental principles of contract law:
- Acceptance Must Be Identical: A settlement is a contract requiring an offer and an identical acceptance. If a party responds with additional or changed terms, that response constitutes a counteroffer, which implicitly rejects and terminates the original offer.
- A Counteroffer Was Made: While Fisher agreed to the $150,000 payment structure, she added new, material terms: “a mutually agreeable release” and “agreeable acceleration and default judgment clauses. Because these were new conditions not included in Lewis’s initial offer, Fisher’s response was ruled a counteroffer.
- Indefinite Terms Are Unenforceable: A valid contract requires that the parties agree to material terms. Crucially, Fisher’s counteroffer was deemed too indefinite because it contained terms that the parties had only “agreed to later agree” upon. Courts cannot enforce agreements when material terms, such as the specifics of a release or the mechanism of acceleration and default judgment, are missing or too vague.
Lewis’s final text, stating he would “get this drafted,” was interpreted not as an acceptance, but as an intent to attempt to formalize the still-undefined “mutually agreeable” clauses in Fisher’s counteroffer. Since Lewis never accepted the indefinite counteroffer, no contract was formed, and the circuit court erred in enforcing the agreement.
Key Takeaways for Clients
The Supreme Court’s decision provides critical guidance on how informal electronic communications are judged under contract law, particularly when attempting to settle litigation.
- Precision is Paramount in Negotiations: A settlement agreement, even if negotiated through text or email, is treated as a contract. To be enforceable, the acceptance must be an unequivocal, identical mirror image of the offer. If you add any new condition—no matter how small, such as requiring a specific type of clause or release—you have rejected the original offer and issued a counteroffer. This is a frequent pitfall in informal digital communication.
- Avoid Agreements to “Later Agree”: The fatal flaw in this case was the use of indefinite language like “mutually agreeable release” and “agreeable acceleration and default judgment clauses”. Agreements that require future negotiation of material terms are unenforceable because they demonstrate the parties have not yet achieved a true “meeting of the minds.” If a material term is left vague (e.g., the time of performance, the price, the specific stipulations), the contract may be too indefinite to enforce.
- Define All Material Terms Upfront: If your settlement includes complex provisions—such as acceleration clauses (outlining when the full amount becomes due upon default) or release conditions (specifying exactly which claims are dropped and when)—these details must be clearly articulated and agreed upon within the settlement communication. The Court pointed out that the parties’ subsequent, formal written settlement (the August agreement), which detailed the release and acceleration clauses over multiple pages, proved how much detail was missing from the brief text exchange. If those material terms aren’t defined, courts cannot step in to write the contract for the parties.
In short, informal methods like texting can create binding contracts. Still, the language used must be as complete and definite as a formal written document to avoid being categorized as a rejected offer or an unenforceable agreement to negotiate in the future.
Jim Pattillo is a member of Christian Small, LLP’s Product Liability Practice Group. He is leading litigation counsel for insurance, product, and commercial clients and is based in the firm’s Birmingham, Alabama office. Mr. Pattillo represents numerous commercial and personal insurers in matters involving bad faith, extra-contractual exposure, coverage litigation, and a variety of declaratory judgment actions. He also works closely with large SIU investigations on fraud-related matters. Mr. Pattillo focuses exclusively on litigation and trial work. He has a twenty-year trial record in the courtroom that is extensive and successful, including numerous seven and eight-figure exposures with results routinely exceeding client expectations.
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