Key Takeaways
- North Dakota follows the Statute of Frauds requiring real estate contracts to be in writing
- Valid contracts require offer, acceptance, consideration, legal capacity, and lawful purpose
- Earnest money should be deposited according to contract terms or within 24 hours
- The North Dakota Association of Realtors provides standard contract forms
- Contingencies (financing, inspection, appraisal) must be clearly specified in the contract
North Dakota Contract Requirements
North Dakota real estate contracts must meet specific legal requirements to be valid and enforceable.
Statute of Frauds
Under North Dakota's Statute of Frauds (NDCC 9-06-04), contracts for the sale of real property must be:
- In writing
- Signed by the party to be charged (or their authorized agent)
Key Point: Oral agreements to sell real estate are generally unenforceable in North Dakota.
Essential Elements of a Valid Contract
| Element | Description |
|---|---|
| Offer | Clear proposal with definite terms |
| Acceptance | Unequivocal agreement to the offer's terms |
| Consideration | Something of value exchanged (usually money) |
| Legal capacity | Parties must be competent to contract |
| Lawful purpose | Contract cannot be for illegal purposes |
| In writing | Required for real estate contracts |
| Definite terms | Property description, price, parties identified |
Common Contract Forms
North Dakota real estate professionals typically use forms provided by the North Dakota Association of Realtors:
| Form | Use |
|---|---|
| Purchase Agreement | Standard residential purchase contract |
| Commercial Contract | Business property transactions |
| Lease Agreement | Rental property |
| Listing Agreement | Seller representation |
| Buyer Agency Agreement | Buyer representation |
Earnest Money
Earnest money (also called a good faith deposit) shows the buyer's serious intent:
Handling Requirements
| Requirement | Details |
|---|---|
| Deposit timeline | Per contract terms or within 24 hours of receipt |
| Where deposited | Broker's trust account OR title company |
| Who holds | Broker or designated title company |
| Disbursement | Per contract terms or mutual agreement |
Important: If the broker holds earnest money, it must be deposited in the broker's trust account within 24 hours unless the contract specifies otherwise.
Common Contract Contingencies
Contingencies allow parties to exit the contract if certain conditions aren't met:
Financing Contingency
| Element | Details |
|---|---|
| Purpose | Buyer can cancel if financing not obtained |
| Deadline | Must apply for loan within specified days |
| Documentation | May require denial letter from lender |
| Consequences | Earnest money returned if financing fails |
Inspection Contingency
| Element | Details |
|---|---|
| Purpose | Buyer can inspect property and negotiate repairs |
| Timeline | Inspection period specified in contract |
| Options | Accept as-is, negotiate repairs, or cancel |
| Professional | Recommend licensed inspector |
Appraisal Contingency
| Element | Details |
|---|---|
| Purpose | Protects buyer if property appraises below price |
| Options | Seller reduce price, buyer pay difference, or cancel |
| Lender requirement | Most lenders require appraisal |
Sale of Buyer's Property Contingency
| Element | Details |
|---|---|
| Purpose | Buyer must sell existing property first |
| Risk to seller | Property may be off market while waiting |
| Kick-out clause | Seller may accept backup offers |
Termination of Contracts
Contracts may be terminated by:
| Method | Description |
|---|---|
| Performance | Both parties fulfill obligations |
| Mutual agreement | Both parties agree to cancel |
| Contingency not met | Condition specified in contract fails |
| Breach | One party fails to perform |
| Impossibility | Performance becomes impossible |
| Expiration | Contract deadline passes |
Time is of the Essence
Many North Dakota real estate contracts include a "time is of the essence" clause:
- Deadlines are strict and legally binding
- Missing a deadline may constitute breach
- Extensions require written agreement from all parties
Exam Tip: Understand the difference between an executory contract (not yet fully performed) and an executed contract (fully performed).
Counter Offers
| Principle | Effect |
|---|---|
| Counter offer | Rejects original offer and creates new offer |
| Original offer | Terminated upon counter offer |
| Multiple counters | Each counter terminates previous offers |
| Acceptance | Must be communicated to be effective |
Under North Dakota's Statute of Frauds, which statement is TRUE about real estate contracts?
When must earnest money be deposited in North Dakota if not otherwise specified in the contract?