News & Info

From Merry Old England to Washington:
Washington's Statute of Frauds is the Strictest in the Nation-the Devil's in the Details

Jay A. Goldstein, OMB General Counsel
and Jason Zittel, Law Clerk

A recent court of appeals opinion offers surprising commentary on the statute of frauds and an object lesson for all of us involved in real estate transactions. This was the case in a recent purchase and sale agreement gone sour for a $ one million + house in Bellevue.

England enacted the statute of frauds in 1677 to protect against fraud in contracts; the statute required that certain contracts be in writing. Washington's statute of frauds requires written contracts for the sale of real property. Although the writing requirement would seem to be an easy hurdle to clear, case law has added certain interpretations that can trip up even seasoned real estate professionals.

In the case at bar, both parties were represented by real estate agents. The parties signed a written purchase and sale agreement, and the buyers deposited $50,000 earnest money into escrow. When the buyers tried to back out, and the seller refused to return the earnest money, the fight was on.

The buyers pointed out that the purchase and sale agreement lacked a legal description, and therefore the agreement was void. Give me my money back, they said. Indeed the agreement lacked a legal. But prior to closing, the seller had provided the preliminary commitment for title, which included the legal. It was in the agents' files, but not affixed to the contract.

The Court noted that Washington's statute of frauds is "the strictest in the nation."  The courts must be able to locate the property without resorting to oral testimony. And the Court held the contract unenforceable. This would seem to end the matter.  However, courts sometimes create rules to prevent unjust results from such technicalities.  This is one of those cases. 

The Court stated that even where a contract for sale of land is unenforceable due to the statute of frauds, the purchaser may not retain the earnest money if the vendor is ready, willing, and able to perform.  So the Court held the contract invalid, but the seller still gets to keep the earnest money! The Court cautioned that "a purchaser should not be allowed to use his own breach to escape his contractual obligations--in effect, to have an election not to perform what he has agreed to do."

This case offers several instructive elements: First, it's okay to say in the contract that the agents will supply the legal. But the legals then need to be attached somehow to the contract.  Just putting a copy of the legal in the file is not good enough. Second, the purchase and sale agreement contained a provision for award of attorney fees to the prevailing party.  The Court of Appeals concluded that a determination of who was the prevailing party was premature and sent the case back to the trial court for that determination. So who prevailed, and who should get attorney fees? The buyers won on rescission of the contract, but the seller gets to keep the earnest money.

Home Realty Lynnwood, Inc., v. Walsh,      Wa.App.     , 189 P.3d 253 ( Div I 2008).