The contract you sign to buy a house in North Carolina is not a formality. In June 2022 the state Supreme Court made that clear in Reynolds-Douglass v. Terhark, holding that an Offer to Purchase and Contract is an evidence of indebtedness under N.C.G.S. § 6-21.2. The practical result: when a buyer breaches and the seller has to sue to recover the earnest money deposit, the prevailing party can enforce the contract’s attorney’s fee clause and recover reasonable fees.
What happened in Reynolds-Douglass v. Terhark?
The dispute behind the 2022 ruling began as a $250,000 home sale in Wake County. The buyer signed the standard Offer to Purchase and Contract with a $2,000 due diligence fee and a $2,500 additional earnest money deposit, then tried to renegotiate the price down by $5,500 three days later. When the seller refused, the buyer never paid either fee and the contract collapsed. The seller first won the due diligence fee in small claims court, then amended the case to recover the earnest money deposit and attorney’s fees. The final judgment was $18,343.92, of which $13,067.70 was attorney’s fees, and the buyer appealed to the state Supreme Court.
Why did the court call the contract an evidence of indebtedness?
North Carolina follows the American rule: each side pays its own attorney’s fees unless a statute authorizes an award. N.C.G.S. § 6-21.2 is one of those statutes, covering notes, conditional sale contracts, and other evidence of indebtedness. The buyer in this case argued that a home purchase contract was not such an instrument. The Court rejected that reading. An Offer to Purchase and Contract is a written instrument, signed by the parties, that on its face evidences a legally enforceable obligation to pay money, which is exactly the definition the Court adopted in Stillwell Enterprises v. Interstate Equipment in 1980. The Court also held that attorney’s fees for defending the judgment on appeal are recoverable.
What did the dissent argue?
The dissent saw the majority’s reading as a break from the state’s long-standing policy that attorney’s fees are not recoverable unless a statute expressly allows them. The dissenting justices would have capped fees at 15 percent of the outstanding balance under the statute’s formula, which here would produce $375 on the $2,500 earnest money deposit rather than the $13,067.70 awarded. They also read the statute as limited to commercial transactions. The majority held that the statute’s plain language does not carry that limit and that the contract’s own fee clause governed.
How does this play out in Pasquotank County?
Elizabeth City is a Coast Guard city. Air Station Elizabeth City and the base community put relocation buyers in the market constantly, and those buyers sign under compressed timelines: orders, reporting dates, house-hunting trips squeezed into a few weekends. That pressure makes it easy to sign before due diligence is done. The Pasquotank River waterfront, the university corridor, and the I-87 corridor all pull different buyer types, but the contract risk is the same for all of them: once the due diligence period ends, the earnest money is at risk, and under the 2022 ruling so are the seller’s attorney’s fees.
Where do Pasquotank County closings actually happen?
Pasquotank County is the District 1 judicial hub, and its county offices shape a closing from start to finish. The Register of Deeds in Elizabeth City records deeds and accepts e-recording through Simplifile and CSC, which speeds up the recording step. The Clerk of Superior Court handles estates, guardianships, foreclosure orders, and contract lawsuits, all at the courthouse on East Main Street. For buyers looking at USDA-eligible properties, the USDA Property Eligibility Map is the official tool for checking whether a home qualifies for 100 percent financing. And the Elizabeth City-Pasquotank economic development authority tracks the Port of Virginia’s Foreign Trade Zone 20 and the future I-87 corridor, both of which affect commercial property values.
A local example: Elizabeth City
Consider a Coast Guard family who signs a contract on a house near the river in Elizabeth City, pays a $2,000 due diligence fee and a $3,000 earnest money deposit, then gets orders that change the plan before closing. They walk away after the diligence period. The seller keeps the due diligence fee and, under the contract, the earnest money as liquidated damages. If the seller has to sue to collect the deposit, the 2022 Supreme Court ruling means the family can also owe reasonable attorney’s fees. The contract they signed on a rushed weekend is enforceable to the letter.
The bottom line
The lesson for buyers in this county is the same as the lesson from the 2022 ruling: the contract is enforceable, and the fees are real. Use the due diligence period for what it is for, and do not let it lapse with questions still unanswered. Once the period is gone, the earnest money is at risk, and so is the other side’s attorney’s fee exposure.
This article is educational, not legal advice. If a contract question comes up, talk to a North Carolina real estate attorney, and have the actual contract reviewed before you sign it.
