The North Carolina Supreme Court made one thing clear in June 2022: the attorney’s fee clause in a purchase contract means something. In Reynolds-Douglass v. Terhark, the Court held that an Offer to Purchase and Contract is an evidence of indebtedness under N.C.G.S. § 6-21.2. When a buyer breaches and the seller prevails in a suit to recover the earnest money deposit, the seller can recover reasonable attorney’s fees under the contract.
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 Martin County?
Martin County’s market runs on the Roanoke River and the agricultural economy. Williamston, the county seat, is a designated Main Street community, and the Senator Bob Martin Eastern Agricultural Center anchors an equestrian and farm economy where horse-property buyers run long due diligence on barns, soil, drainage, and fencing. Riverfront parcels along the Roanoke and farmland tracts around the county each carry their own diligence questions. A countywide reappraisal took effect January 1, 2025, which means assessed values now reflect fresh true value under N.C.G.S. 105-283, a factor in every tax proration.
Where do Martin County closings actually happen?
Martin County’s offices publish the practical details of a closing. The Register of Deeds requires instruments typed or printed legibly in black on white paper, with a $25 fee for nonstandard documents under G.S. 161-101(a)(19). The Tax Assessor’s office runs the reappraisal cycle, with the next countywide reappraisal scheduled for January 1, 2033, and the county’s online GIS lets anyone look up a parcel by owner, parcel number, or address. Tax bills can be searched and paid online, so buyers can confirm tax status before closing.
A local example: Williamston
A buyer signs a contract on a horse farm near Williamston, pays a $2,000 due diligence fee and a $3,000 earnest money deposit, then finds during diligence that the barn needs foundation work that blows the budget. The buyer walks after the diligence period. The seller keeps the fee and the deposit, and under the 2022 ruling can recover reasonable attorney’s fees if the deposit has to be collected by suit. The barn inspection that should have been scheduled on day one of diligence becomes the most expensive part of the deal.
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.
