How To Enforce An Oral Real Estate Contract

2 years ago

The Statue of Frauds, enacted in similar form in every state, prohibits the enforcement of a sale of real estate supported only by an oral contract. Many people don’t realize that there are many transactions that can indeed be legally binding based on an oral contract, but the sale of real estate isn’t one of them.

Or is it?

If you screwed up on this one (didn’t sign a contract at all, or lost your only copy), a good lawyer might be able to help you get around the Statute of Frauds. The purpose of the Statute of Frauds is, as the name indicates, to prevent fraud. The idea is that since it’s unlikely that anyone would sell something as important as real estate without even bothering with a written contract, then an oral contract doesn’t provide enough evidence for the court to conclude that a sale was intended, no matter what the plaintiff might say. So if there is some other evidence that an actual agreement to sell real estate did exist, then you might be able to enforce the sale (known as “specific performance”) or collect damages (based on something called “estoppel”) for the failure of the sale. If one of the parties to the alleged real estate sales contract performed a sufficient part of the alleged terms, that might be enough to convince a court that there really was a contract and to enforce it.

Ah, but that word “sufficient” is a tricky one – after all, how much is enough? Courts don’t always agree on this one, but some of the factors tat they will likely consider are payment of the purchase price, delivery of possession to the buyer, and any improvements made by the buyer to the property.

Keep in mind that if you can prove that you paid the seller of real estate $25,000 and the court decides that that’s not enough to establish the existence of a real estate sales contract, they’re not likely to just tell you to go away – assuming that the seller cannot establish that you gave him a large cash donation or that he gave you something in return for your money, you’ll likely get your money back. It’s just that they won’t force the seller to transfer the real estate to you (and you won’t be required to pay the remainder of the purchase price). As well, if the market value of the house is more than what you agreed to pay for it, they won’t make the seller pay the difference, as they likely would if they found that a real estate contract did indeed exist and decided to grant you damages instead of specific performance.

DISCLAIMER: The following is intended for reference only and not as legal advice.

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