For agreements and contracts of any financial or other significance, a written agreement is advisable, even if not legally required. This is because it is more difficult to later argue about the terms of the “deal” if the agreement is not in writing to begin with.
Nevertheless, the law does require that any ownership, right or possession of real estate that is longer than three years in duration must be in writing. This legal requirement is based upon the fact that every piece of real estate is inherently unique and largely irreplaceable. This law is commonly called the statute of frauds.
For example, I may enter into an agreement to purchase a 2015 Ford pickup truck. If the truck seller defaults and never gives me the truck, there likely exists another pickup truck of the same year and model in the same or better condition than the truck I had agreed to buy. That ability to find a replacement can make a dispute about the truck purchase less adversarial in contrast with a contract to purchase a certain piece of real estate, which is inherently one-of-a-kind and irreplaceable.
The statute of frauds seeks to at least add some clarity to the most aggressive disputes where there is not a readily available substitute for the item at the center of the dispute.
Ironically, even though the statute of frauds requires that many real estate contracts be in writing, the literal terms of those written contracts sometimes do not mean what the words state. There is one particular doctrine of real estate contract interpretation of which every writer and reader of real estate contracts should be aware.
If a real estate contract includes deadlines and dates, those deadlines and dates are not literally enforceable unless the contract states that the dates are literally enforceable.
For instance, people may enter into a written contract for the sale of real estate. That contract may state that the closing date will be May 1.
However, May 1 may eventually come and go without the seller signing the deed. Believe it or not, the seller’s tardiness is legally allowable, because dates in a real estate agreement are to be interpreted as “good faith dates around the actual, written date”. This is again based upon the uniqueness of real estate and the desire for the overall intent of the parties to be carried out without hyper-technical non-compliance causing disputes.
Parties to a real estate contract can make the contract dates mean literally what the dates state if the contract states that the dates “actually mean what is written”.
A real estate contract that makes the dates literally enforceable will use a certain sentence: Time is of the essence. Stating that time is of the essence overrides the law’s default that dates do not matter.
If a real estate contract recites that time is of the essence, it does not mean that the parties are in a particular hurry, but it means that the dates in the agreement literally mean what they say.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.