When buying and selling real estate, in nearly every transaction, a written contract is prepared for all parties involved to sign. One reason for this is obvious – to make certain that all parties can clearly see, and are in agreement with, all the terms and conditions of the transaction. This avoids any misunderstandings as to such important terms as the sales price, the description of the property being sold, the closing date, and any contingencies. However, another important reason to have a signed written agreement is to comply with New Jersey’s statutory requirements for enforcement of such agreements for the transfer of an interest in real estate.
New Jersey has enacted a law setting forth certain requirements essential for the enforceability of agreements to transfer an interest in real estate. Those requirements have been codified in N.J.S.A. 25:1-13, the N.J. Statute of Frauds, which states that an agreement to transfer an interest in real estate shall not be enforceable unless:
a. A description of the real estate sufficient to identify it, the nature of the interest to be transferred, the existence of the agreement, the identity of the transferor and transferee are established in a writing signed by or on behalf of the party against whom enforcement is sought; or
b. A description of the real estate sufficient to identify it, the nature of the interest to be transferred, the existence of the agreement and the identity of the transferor and the transferee are proved by clear and convincing evidence.
In most instances, parties to a real estate transaction comply with Subsection (a) above. A standard written contract identifies the buyer and the seller, describes the property being sold, the type of title being transferred, and is then signed by all parties. In addition to compliance with the statutory requirements, these agreements also set forth many other terms, conditions and contingencies between the buyer and the seller so that each party will understand their obligations under the sales contract.
Even with the existence of Subsection (b) above, which provides a statutory basis for enforcing certain agreements for the transfer of real estate without a signed document, the New Jersey courts have not always found an agreement to be enforceable when the alleged agreement is oral. This appears particularly so when the negotiations between parties indicate that the parties intend to be bound only by a formal written contract. See Prant v. Sterling, 332 N.J. Super. 369 (Ch. Div. 1999), affirmed 332 N.J. Super. 292 (App. Div. 2000) and Morton v. 4 Orchard Land Trust, 362 N.J. Super. 190, (App. Div. 2003), affirmed 180 N.J. 118 (2004).
Thus, it is important to put any agreement for the transfer of real estate in writing with all significant terms included and to have it signed by all parties to the transaction to help insure the agreement’s enforceability.