Legally Speaking

In Wisconsin, real estate purchase contracts (offers to purchase) must be in the form of a written document. Chapter 706 of the Wisconsin Statutes states that transactions covered by it (including real estate offers) shall not be valid unless certain requirements are met. The law that does this is part of what is called the "Statute of Frauds," an English law which was enacted in 1677 declaring certain contracts judicially unenforceable if they were not committed to writing and signed by the party seeking to enforce them.

Chapter 706 requires that the contract must be evidenced by a conveyance which is defined as a written instrument. Therefore, an offer must be in writing to be enforceable. There is an exception, however, when there is an oral contract which may become enforceable if there is partial performance of it, as in a situation where the buyer pays some money to the seller and takes possession of the property. The doctrine of the "Statute of Frauds" is ordinarily used to prevent a seller from fraudulently backing out of a deal that was entered into in good faith by parties who know nothing about real estate law.

The conveyance required by Chapter 706 may not be just any written document. It must adequately reflect the agreement of the parties and must be complete enough so that a reader can understand the deal. It must show who the parties are (seller and buyer) and what the role of each is, what property is affected, what the price in terms of payment is, what interest is conveyed, and generally how the transaction is to be completed. Chapter 706 further requires that all parties must sign an offer. That means that all of the owners of the property must sign the offer to make it enforceable.

If a contract is prepared which is inadequate under the Statute of Frauds and therefore not valid, neither the buyer nor the seller can enforce the contract. However, if there has been some performance, the contract may be enforceable under the doctrine of "partial performance" as noted above. Not every act of "partial performance" will be enough to save a contract otherwise void under the Statute of Frauds. A court will require clear and convincing proof that there was a contract and what the terms were. Even if the oral contract is proved, the part performance will not suffice unless it can be said to be exclusively referable to the contract. In addition, the part performance must have caused a change of position by the parties seeking to enforce the contract such that a court will regard the party trying to void the contract as "estopped" (that is, prevented by his own conduct) from relying on the Statute of Frauds.

In summary, it is important for sellers and buyers of real estate to reduce their agreements to a written document which complies with the requirements of Chapter 706 of the Wisconsin Statutes which is known as the "Statute of Frauds". The law now requires that an enforceable contract must be in the form of a written document. The days when a simple handshake following a brief discussion between a seller and buyer of the terms of a sale of property are long gone.

This column is based on general principles of Wisconsin law, is for informational purposes only, and is not intended to provide legal advice. Each legal matter must be judged on the merits of its unique circumstances. If you have a legal problem, consult an attorney.

James R. Smith is an attorney at Pinkert Law Firm LLP with offices in Sturgeon Bay and Sister Bay. 920.743.6505 or 920.854.2616.