The North Carolina Supreme Court’s June 2022 decision in Reynolds-Douglass v. Terhark settled a question every buyer should answer before signing. The Court held that an Offer to Purchase and Contract is an evidence of indebtedness under N.C.G.S. § 6-21.2, which makes the attorney’s fee clause in the contract enforceable. A seller who prevails in a suit to recover the earnest money deposit can recover reasonable attorney’s fees.
What happened in Reynolds-Douglass v. Terhark?
The case started with a $250,000 contract in Wake County. The buyer signed the standard Offer to Purchase and Contract, agreeing to a $2,000 due diligence fee and a $2,500 additional earnest money deposit. Three days later she demanded a $5,500 price cut, never paid either fee, and the deal collapsed. The seller sued, won the due diligence fee in small claims, then amended to add the earnest money deposit and attorney’s fees. The trial court awarded $18,343.92 total, including $13,067.70 in attorney’s fees. The buyer appealed all the way to the state Supreme Court.
Why did the court call the contract an evidence of indebtedness?
North Carolina’s general rule is that each side pays its own attorney’s fees unless a statute says otherwise. N.C.G.S. § 6-21.2 creates an exception for notes, conditional sale contracts, and other evidence of indebtedness. The buyer argued a real estate purchase contract is not that kind of instrument. The Supreme Court disagreed, holding that 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. That is the test the Court set in a 1980 case, Stillwell Enterprises v. Interstate Equipment, and it applies here. The Court also confirmed the prevailing party can collect attorney’s fees for defending the judgment on appeal.
What did the dissent argue?
Two justices dissented. They argued the statute’s fee formula would cap attorney’s fees at 15 percent of the outstanding balance, which here would mean 15 percent of the $2,500 earnest money deposit, or $375, not the full $13,067.70 awarded. They also argued the statute was written for commercial transactions, not residential sales contracts. The majority rejected both points: nothing in the statute limits it to commercial deals, and the contract’s own language authorized reasonable attorney’s fees for the prevailing party.
How does this play out in Northampton County?
Northampton County is the north shore of Lake Gaston, and the lake is the premium identity of the market. Waterfront contracts here hinge on docks, boat slips, lake-access easements, and shoreline permitting, and a meaningful share of buyers come from out of state, from Virginia and beyond. The county is also the last stop on I-95 before Virginia, which brings commuter and dual-state buyers. Jackson, the county seat, anchors a historic courthouse square, and the deeper market includes farmland and hunting acreage.
Where do Northampton County closings actually happen?
Northampton County’s offices are the practical machinery of a closing. The Register of Deeds preserves real estate records going back to 1741 and offers free online access to recorded land records from 1991 to the present at northamptonrod.org. The tax rate is 0.825 per $100 of valuation, with 2026 bills due September 1. The Clerk of Superior Court in Jackson is the filing office for foreclosures and special proceedings that affect real estate titles. USDA Rural Development serves the county from its regional sub area office in northeastern North Carolina, and its FY 2026 income limits table lists Northampton with a moderate-income cap of $122,800 for one to four person households, the ceiling for zero-down USDA financing.
A local example: Jackson
A buyer from out of state signs a contract on a Lake Gaston waterfront home, pays a $2,000 due diligence fee and a $5,000 earnest money deposit, then discovers during diligence that the dock permit and the lake-access easement are not what the seller described. If 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 a suit is needed. The easement review that should have been done before signing becomes the most expensive part of the deal.
The bottom line
Read the contract before you sign it, and know which fees are at risk if the deal falls through. The due diligence period is the time to do your inspections, your financing work, and your second-guessing. Once you let it expire and the contract is firm, walking away can cost you the deposit, the fees, and the other side’s legal bill on top.
If you are in a dispute over a contract, a North Carolina real estate attorney is the right person to talk to. This article explains what the court decided, not what any particular contract says, and every contract should be reviewed by a lawyer before you sign it.
