In June 2022 the North Carolina Supreme Court clarified a question at the heart of every residential contract. Reynolds-Douglass v. Terhark held that an Offer to Purchase and Contract is an evidence of indebtedness under N.C.G.S. § 6-21.2, which means the contract’s attorney’s fee clause is enforceable. A seller who prevails in a suit to recover the earnest money deposit can also 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 Hyde County?
Hyde County is one of the smallest counties in North Carolina by population, around 4,600 residents, and it is two markets in one: the mainland around Swan Quarter and Lake Mattamuskeet, and Ocracoke Island, reachable only by ferry or plane. The NCDOT-run Swan Quarter to Ocracoke ferry is the lifeline for island property, and it shapes closing logistics, inspection timelines, and appraiser access. Most deals are cash-heavy sales of agricultural, hunting, and waterfront land. Remote access, coastal flood zones, and storm history are not abstract concerns here; they are the everyday context of every contract.
Where do Hyde County closings actually happen?
Hyde County’s small offices run a big responsibility. The Register of Deeds in Swan Quarter is the official custodian of the county’s real estate records, searchable online through hyderod.net. The Tax Department handles tax certifications under N.C.G.S. 105-361, the document a closing attorney needs before a deed is recorded, and the Tax Administrator advertises tax liens under N.C.G.S. 105-369 when property taxes go unpaid. North Carolina’s eCourts system went live in all 100 counties, including Hyde, in October 2025, so contract case records are searchable online.
A local example: Swan Quarter
A buyer signs a contract on a waterfront parcel near Swan Quarter, pays a $1,000 due diligence fee and a $2,000 earnest money deposit, then finds during diligence that the septic and access requirements make the property far more expensive than planned. 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 to collect the deposit. In a market where the ferry schedule can delay an appraiser for days, diligence timing is everything.
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.
