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The Statute of Frauds:

A Real Estate Contract

Must Be In Writing!

NOTE:  This article is intended to be a brief summary of law only, parts of which may or MAY NOT be applicable to your situation and/or your local jurisdiction(s).  Any information you glean from this article DOES NOT constitute legal advice and should be supplemented with the advice of an attorney licensed to practice law in your locality.

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Under American law and the laws of other English common law countries, the traditional rule is that a contract can be formed by way of a written document (i.e., a written contract) or non written words or actions. In other words, generally speaking, a contract does not need to be in writing in order to be legally binding upon the persons involved. However, certain types of contracts, because of their importance to society, their monetary value and/or their tendency to attract fraud, must be written in order to be fully viable under the law. In the U.S., each state has a code of laws governing which types of contracts must be put to paper. Collectively, these codes constitute what is popularly known as the Statute of Frauds. Real estate sales contracts (i.e., those contracts attempting to transfer an interest in land, a house, a condominium, etc.) are a type of contract that is listed in every state’s Statute of Frauds and thus must always be in writing in order to be fully enforceable as a contract.

Although a real estate contract must be in writing, the document involved need not be either detailed or comprehensive. Nor does the document even need to be called a “contract.” A binding agreement to sell a piece of real property could, for example, simply be part of an escrow agreement, or the agreement could be jotted down by hand as a simple memorandum. As long as the document expressing the agreement contains the following elements, it will generally constitute a valid, binding contract:

1.)    Description of the Property. Note that the “description” required in order for a real estate sales contract to stay clear of the Statute of Frauds is not what is commonly referred to as a legal description. Rather, the description required need only be one that provides a “good lead” as to the identity of the property that is the subject of a contract.  Thus, in describing, for example, a given parcel of land or the location of a certain building, it is common to make use of courses/angles, metes/bounds, references to plats/surveys, and/or street and street numbers, where applicable.

2.)    Identification of Buyer and Seller.   Similar to the property’s description, the full legal name of the Buyer and Seller involved in a real estate transaction need not be stated on the purchase agreement in order to form a binding contract. However, to the extent that a party is not described with sufficient accuracy (e.g., the only identifying information given for the buyer is “John Williams,” thousands of John Williams live in the Seller’s community and Seller personally deals with several different John Williams on a weekly basis), there could be trouble down the line. This is why, in addition to ascertaining and using each party’s full legal name (e.g., that recorded on their driver’s license), other information clearly distinguishing the respective parties from other persons with the same name - such as each party’s current address - should be clearly stated.

3.)    Purchase Price and Manner of Payment. A precise dollar amount need not be stated as long as there exists a readily ascertainable, objective means of determining the price to be paid for the real estate. Thus, for example, “[t]he purchase price is $250,000, to be paid in full at closing,” would clearly meet the Statute of Frauds requirement, as would, “Buyer agrees to pay to Seller a purchase price 20% higher than that paid for the house by Seller when Seller purchased the same property.” However, language such as, “Buyer and Seller agree to determine a purchase price for the property at a later date” would not likely be sufficient under any Statute of Frauds.

4.)    Signature of Party to be Charged.  Finally, and this is perhaps most important, each party to be bound by the contract should attest to their agreement by signing the contract.  Absent the signature of a given party, and absent what is called “partial performance” by that party (e.g., handing over possession of the property, partial/full payment for the property), that party is not generally bound!

See Also:

Doctrine of
Equitable Conversion

Common Law Vs.
Civil Law

Real Estate Sales
Transaction Overview

Preliminary Matters

v

The Role
of the Attorney

v

Hiring a Real Estate

Agent/Broker

Real Estate Seller’s Agent

Real Estate Buyer’s Agent

Real Estate Broker

v

Negotiating the
Real Estate Contract

‘For Sale By Owner’

Deciding Key Terms

v

Pre-Closing Matters
Inspections

Mortgage Issues

v

The Closing

The Deed

Affidavit of Title
ALTA Statement

 

 

 

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