The Arizona Statute of Frauds and Oral Real Estate Contracts

Arizona is not the biggest state in the Union, but it has many vast open spaces. Within these vast open spaces, we have built cities, towns and neighborhoods. Within these areas, people live and play, do business, and just about everything in between. Without even realizing it, people, everyday, enter into contracts, written and unwritten. Most contracts The Statute of Frauds in Arizona helps protect the public, and the judicial system from fraud and perjury.

Why Do We Need a Statute of Frauds Anyway?

The first Statute of Frauds was enacted by the Parliament of England in 1677 to protect their court system from fraud and perjury. The American legal system largely followed English law early on and so as States came into existence, the legislatures enacted their own Statute of Frauds.

Many people today still rely on “handshake deals” when entering into real estate contracts. Why? Because they believe their word is their bond. However, as late-1600’s England established, these oral contracts are a problem. The problem is that these oral contracts often lead to costly litigation that burdens the judicial system with having to sort out the issue of whether there is actually a contract or not.

Making Sure That Every Real Estate Contract is in Writing Just Makes Good Business Sense

Having a written real estate contract is also just good business sense. It establishes a paper trail that is beneficial for all involved. Written real estate contracts better outline the rights and responsibilities of each party. Having a writing establishes deadlines and how the contract will be enforced in the event of a breach.

The Arizona Statute of Frauds

Arizona, just like every other state, has a “Statute of Frauds”. As outlined above, this is a statute that has been enacted to try and stop fraudulent activity in all manner of contracts, especially real estate sales contracts. Why? Because Honest John’s word was not always Honest John’s bond. The Arizona Statute of Frauds section pertinent to real estate provides that:

No action shall be brought in any court in the following cases unless the promise or agreement upon which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged or by some person by him thereunto lawfully authorized:
6. Upon an agreement for leasing for a longer period than one year, or for the sale of real property or an interest therein. Such agreement, if made by an agent of the party sought to be charged, is invalid unless the authority of the agent is in writing, subscribed by the party sought to be charged.
A.R.S. § 44-101(6)

How is the Arizona Statute of Frauds Applied?

A plain reading of the Statute helps us to understand that no action (or lawsuit) on an alleged real estate contract can be brought in any court unless the person who is being sued has signed the contract. In Arizona, this has been construed to mean that only one person needs to actually sign the contract in order for the contract to be enforced, at least in a So, say Bob the Buyer orally agrees to purchase Sam the Seller’s house. Sam sends Bob a written contract for the sale of the home to Bob. Sam has already signed the contract, but Bob neglects to sign. Who can enforce the contract in Arizona? Can Sam? No. Can Bob? Yes, even though he neglected to sign, he can enforce the contract against Sam because he signed the contract. This is especially true if Bob has perfomed his duties under the contract, i.e. tendered the purchase price, etc.. In Arizona, if Bob has partly performed, and his performance is unequivocally referable to the Contract, then it can be enforced by the Court. (Owens v. M. E. Schepp, 182 P.3d 664, 667-668 (2008).

There are other situations where a court may find an oral real estate contract enforceable despite the Statute of Frauds. If you have an oral real estate contract issue in Arizona, call an experienced real estate attorney and let them know about your particular situation.