3.1 Alaska Contract Requirements
Key Takeaways
- Alaska's Statute of Frauds (AS 09.25.010) makes any contract for the sale of real property unenforceable unless it is in writing and subscribed by the party charged or their authorized agent.
- A valid contract needs five elements: offer, acceptance, consideration, legal capacity (age 18+, sound mind), and a lawful purpose — plus the writing required for real estate.
- Earnest money must be deposited into the broker's (not the salesperson's) trust account within the time the contract specifies, typically two to five business days.
- Part performance is the main exception to the Statute of Frauds — a buyer who pays, takes possession, and makes improvements may enforce an oral land contract.
- A 'time is of the essence' clause makes every deadline strict; missing one is a breach unless the parties sign a written extension.
The Statute of Frauds (AS 09.25.010)
Alaska's Statute of Frauds lives in AS 09.25.010 of the Code of Civil Procedure. It provides that certain agreements are unenforceable unless the agreement "or some note or memorandum of it is in writing and subscribed by the party charged or by an agent of that party." For real estate, this covers any contract for the sale of real property and any lease longer than one year.
Key Point: An oral promise to sell a cabin near Talkeetna is generally unenforceable in Alaska. If the seller backs out, the buyer cannot sue to force the sale on a handshake deal — the writing requirement is the buyer's protection and the seller's escape.
The "party charged" is the person you are trying to hold to the contract. So if a buyer sues a seller, the seller's signature is what matters. The memorandum need not be a polished contract; Alaska courts have enforced informal notes that identify the parties, the property, the price, and show intent.
Exceptions to the Writing Requirement (AS 09.25.020)
A few situations let an oral land contract survive:
| Exception | How it works |
|---|---|
| Part performance | Buyer pays purchase money, takes possession, AND makes improvements — courts enforce to prevent fraud |
| Full performance accepted | One side fully performs and the other accepts in accordance with the contract |
| Judicial admission | The party being sued admits in court that the agreement was made |
| Reformable error | A written memo exists but contains a correctable clerical error |
Exam Tip: When the exam describes a buyer who paid earnest money, moved in, and re-roofed the house under an oral deal, the answer is part performance — the contract becomes enforceable despite no writing.
The Five Essential Elements
Every enforceable real estate contract in Alaska must contain these elements. Missing one makes the contract void or voidable.
| Element | What it requires | Common trap |
|---|---|---|
| Offer | Definite, communicated terms (property, price, parties) | Vague "I might sell" is not an offer |
| Acceptance | Mirror-image, unqualified "yes" | A counteroffer rejects the original offer and starts over |
| Consideration | Something of value (price, promise, earnest money) | Earnest money is evidence of consideration, not the only form |
| Legal capacity | Age 18+, sound mind, not under duress | A minor's contract is voidable by the minor |
| Lawful purpose | Legal object and legal means | A deal to subdivide in violation of zoning is void |
A counteroffer is the classic tested point: when the seller changes any term, the original offer is dead and the buyer is now the offeree on the seller's new terms. The buyer may accept, counter again, or walk away with no contract.
Earnest Money and the Trust Account
Earnest money is a good-faith deposit that evidences the buyer's serious intent. Under the Alaska Real Estate Commission's regulations (12 AAC 64), client funds are not the licensee's money and must be protected.
| Requirement | Rule |
|---|---|
| Who may hold it | The broker, in a designated trust (escrow) account — never the salesperson personally |
| Where it goes | A federally insured Alaska trust account, separate from the broker's operating funds |
| Deposit timing | By the deadline in the contract — commonly two to five business days after acceptance |
| Commingling | Prohibited — mixing client funds with broker funds is a license-discipline violation |
| Conversion | Using client trust funds for the broker's own purposes is grounds for license revocation |
Worked example: A buyer writes a $5,000 earnest-money check on Monday. The contract says funds are due "within 3 business days of acceptance." The seller accepts Tuesday. The broker must deposit the check into the trust account no later than the close of business Friday. Holding the check in a desk drawer past that date is a violation even if the deal eventually closes.
Disbursement when a deal fails
| Situation | Where earnest money goes |
|---|---|
| Buyer defaults (no valid contingency) | May be forfeited to the seller per contract |
| Seller defaults | Returned to the buyer |
| A contingency genuinely fails | Returned to the buyer |
| Both sides sign a mutual cancellation | Per the written cancellation terms |
| Dispute with no agreement | Broker holds funds; releases only on written mutual instruction, a court order, or interpleader |
The broker may not simply pick a winner in a dispute. The safest move is to hold the deposit until the parties agree in writing or a court decides.
Contingencies
A contingency is a condition that must be satisfied or the contract may be cancelled without penalty. The three most-tested are below.
- Financing contingency — buyer cancels if the loan is not obtained by the deadline; commonly 30–45 days, may require a lender denial letter.
- Inspection contingency — buyer inspects (often 7–14 days) and may accept, negotiate repairs, or cancel. In Alaska, watch for permafrost, frost-heave foundation damage, and seasonal road access.
- Appraisal contingency — if the property appraises below the price, the buyer may renegotiate, pay the gap, or cancel.
Breach, Termination, and "Time Is of the Essence"
A contract ends by performance (both sides finish), mutual rescission, a failed contingency, breach, impossibility, or rescission for misrepresentation. A "time is of the essence" clause turns every date into a hard deadline — miss it and you have breached, regardless of good faith. Extensions must be in writing and signed.
Under Alaska's Statute of Frauds (AS 09.25.010), which statement is TRUE about real estate contracts?
A buyer paid earnest money, moved into the property, and installed a new metal roof, all under an oral agreement to purchase. The seller now refuses to sell. What is the buyer's strongest argument?
An Alaska broker receives a $5,000 earnest-money check on a deal that the seller accepts. Where must the funds be placed, and who is responsible?