As already stated, the parties to an agreed sale of real estate sometimes find it inexpedient to delay long enough to adjourn to some convenient place to draw a formal contract. In such case a money "deposit" is usually paid by the purchaser "to bind the bargain" and a "receipt" for the money is given. Sometimes these "receipts" contain the elements of a contract and serve the purposes of a more formal instrument and are enforceable as contracts by the purchaser.
We shall refer to the essentials of a contract presently, but here we shall only discuss the legal status of the parties where a "deposit" is paid and no writing is entered into, or where the writing entered into does not measure up to the dignity of a contract.
If the vendor of real property has accepted a deposit and has not signed such a "receipt" as might be construed to be a valid contract in writing, he may, when called upon to transfer the property, refuse to do so, provided he returns the deposit. He cannot, however, refuse to transfer the property and still keep the deposit.
On the other hand, if the purchaser when called upon to complete the transaction, does not then wish to purchase the real estate, he may refuse if he will but he cannot recover his deposit. He cannot be forced to complete his undertaking, but he forfeits the money he has already paid.
The reason for this advantage which the seller has over the buyer, springs out of the Statute of Frauds before referred to.3 This statute usually provides that every agreement for the sale of real estate must be in writing, signed by the vendor or his agent. This being true, the vendor is never bound by an unwritten agreement to sell, except in the rare cases where he permits the buyer to enter into possession of the property, which is usually referred to as part performance and takes the transaction beyond the point where it is affected by the Statute of Frauds. The subject of part performance is too intricate for discussion here. It is sufficient to say, however, that the authorities are in practical unanimity that "part payment" of the purchase price is not part performance, and does not of itself bind the vendor.
3 Sec. 348 supra; tee also Sec. 31-37 supra.
The general proposition may be restated briefly thus: Where a deposit has been made to bind an oral agreement for the sale of real property and the receipt does not amount to a valid contract, the purchaser, if he refuses to complete the agreement - the vendor being able and willing, - cannot recover his deposit. On the other hand, if the seller is not willing to carry out the agreement or is unable to do so, the purchaser cannot enforce specific performance but may recover his deposit.
If the seller tenders performance, the purchaser cannot raise the question of no written contract. He must either perform his part of the agreement or lose his deposit. The seller may, however, raise that question and decline to proceed with the agreement if he so desires, merely returning the purchaser's deposit. This is so because the Statute of Frauds almost everywhere provides that the contract must be signed by the vendor or his authorized agent, but no requirement is made as to the purchaser's signature.