By: Lee Grossman
Facebook: Plenty of deals in North Dakota get sealed with a handshake instead of a signature. Read about when those deals actually hold up in court.
Twitter: #verbalcontract #handshakedeal #statuteoffrauds #ndlaw #fargobusiness
Two old friends, Mark and Robert, met at the Cenex coffee counter on a Tuesday morning. Robert needed pasture for his cattle. Mark had eighty acres sitting idle. After a few cups and some grumbling about the Bison, the two men shook on a summer lease. No paperwork. No lawyer. Just a deal between neighbors.
Six months later, Robert is now running 40 head on Mark’s land and has conveniently forgotten what he owes for rent. Welcome to the wonderful world of verbal contracts.
The good news: North Dakota generally enforces oral agreements. The bad news: “generally” is doing a lot of heavy lifting in that sentence.
The Statute of Frauds
North Dakota’s statute of frauds at N.D.C.C. § 9-06-04 lists certain agreements that must be in writing or they cannot be enforced. These include:
- Agreements that cannot be performed within one year
- A promise to answer for the debt of another
- A sale of real estate, or a lease longer than one year
- A loan of $25,000 or more
- Sales of goods priced at $500 or more, under N.D.C.C. § 41-02-08
A one-summer pasture lease between Mark and Robert is a fine verbal agreement. A three-year deal, however, needs to be in writing. The legal wrangling now comes down to how many summers did Mark and Robert actually agree to?
If your handshake falls into one of the statute of frauds categories, North Dakota still leaves a few legal loopholes. Part performance can rescue an oral real estate deal when the buyer takes possession, pays part of the price, and makes improvements. Promissory estoppel can also save a deal when one party reasonably relied on a promise and got burned. These doctrines are narrow, though. Do not bet the farm on them.
The Contract Elements
A handshake still has to look like an actual contract. North Dakota requires:
- Capable parties, meaning adults of sound mind
- Mutual consent, the famous meeting of the minds, free from fraud, duress, or mistake
- A lawful object
- Consideration, meaning something of value changes hands
- An offer and an acceptance
Mark and Robert check every box for a one-year lease. The contract exists. The harder question is what to do about it.
The Real Problem: Proving It
Even when your verbal deal is legally enforceable, the fight always comes down to one question: what exactly did the two of you agree to? Without a signed writing, Mark is left dragging in text messages, witnesses from the coffee counter, the deposit check Robert wrote in April, and whatever Venmo notes the two exchanged. Mark carries the burden of proof, and a judge has to pick a story. Even a napkin with both signatures beats a perfect memory and would have saved a lot of headaches and hard feelings.
The Lesson
Put it in writing. Always. Even a short email confirming the terms after a handshake can save you a five-figure legal fight. Handshakes are great. Handshakes plus an email are better.
If you need to get a deal on paper, or you need to enforce one that was not, contact the Business Law team or Commercial Litigation team at SW&L by calling 701.297.2890.
