Introduction: Have you ever wondered about the importance of understanding the various types of contracts and terms in real estate transactions? Well, one aspect that holds considerable complexity is the Statute of Frauds. While it may not be a part of a written real estate contract, it does govern specific contract types. Hence, a solid grasp of the Statute of Frauds becomes vital in determining the viability of a contract in case of disputes.
What is the Statute of Frauds?
In essence, the Statute of Frauds is a legal principle that states certain contracts must be in writing and signed by the involved parties to be considered enforceable. Though small details within the Statute of Frauds may vary from state to state, real estate contracts, such as purchase agreements, leases, or mortgage contracts, fall under its purview.
To put it simply, if a contract is not in writing or is purely verbal, there may be no legal recourse in case of disputes within real estate transactions.
Other key elements of the Statute of Frauds include:
- Contracts that cannot be performed within one year of its formation.
- Security agreements, which involve assuming responsibility for another person's debts or obligations.
- Promises made for marriage, such as prenuptial agreements.
- Sales contracts involving goods valued at $500 or more.
Additionally, there are exceptions to the Statute of Frauds that can transform an oral contract into an enforceable one. This is known as partial performance, and it asserts that if one party has taken possession of a property and paid a portion of the agreed price, and if the property cannot be restored to its previous state before the contract, the court may order the contract to be upheld.
Another exception is "promissory estoppel," which states that if the promisee has taken action for the promisor's benefit, the promisor cannot deny the existence of the contract.
The Significance of the Statute of Frauds in Real Estate Disputes
When a contract, specifically a real estate contract, violates its terms, it falls under the purview of the Statute of Frauds. As both parties have signed the contract for its enforceability, they are legally obligated to fulfill its conditions. Failure to do so may result in legal consequences.
Violations of the Statute of Frauds often occur in real estate when the contract breaches from either the buyer or the seller's side. For instance, the seller may decide not to sell the property anymore. The buyer, in most cases, is better protected by the terms and conditions of the real estate contract and may also violate the contract in specific circumstances.
Real estate disputes may arise simply because the contract initially seemed fair but was later realized to be impractical. Often, legal intervention by an attorney is required to resolve such disputes or, when necessary, to bring the matter to court. However, the ultimate purpose of a written contract is to prevent litigation and unnecessary damages.
Issues related to unlawful behavior or fraud from either the buyer or the seller can also occur. These may include real estate fraud or mortgage fraud. Such cases bring about difficulties and complexities, particularly when one party uses identity theft to deliberately deceive the other.
In most cases, the Statute of Frauds does not render a real estate contract void. However, certain criminal and fraudulent acts can make a contract unenforceable. A party may also use fraud as a reason to withdraw from a contract without penalty. However, such actions must satisfy the requirements of the law. As mentioned above, if partial performance can be proven, or if promissory estoppel is observed due to unfair contract terms, the contract remains within the realm of enforceability under the Statute of Frauds.
Additional Protection from Fraudulent or Unlawful Actions
While it is impossible to anticipate every potential real estate dispute or prevent every fraudulent act from one party, a significant portion of risks can be minimized by utilizing the Automated Clearing House (ACH) electronic payment transfer system.
Paymints.io is a secure, fully electronic payment solution that adheres to all regulations. Designed specifically to support the real estate industry and reduce the likelihood of fraud incidents, Paymints.io offers a safer alternative to wire transfers or checks. These transactions provide enhanced security and a comprehensive digital solution for earnest money deposits, escrow account transfers, or closing cost payments.
Paymints.io also employs the strongest bank-grade encryption protocols, providing real-time tracking of all money transactions and advanced personal protection. Real estate professionals can avoid certain risks associated with wire transfers, making the process more convenient for both themselves and their clients by using an ACH transfer platform.
To learn more about legal issues and other relevant information pertaining to the real estate industry, consider asking questions on online forums and accessing industry blogs. You will find numerous resources that explain the complex aspects of various contracts used in real estate, as well as information about upcoming trends and technologies.
To find out more about using Paymints.io for a safer and more secure alternative to wire transfers, as well as a highly convenient solution for both real estate professionals and homebuyers, schedule a free demo today!
