CHAPTER 9-01 General Provisions

9-01-01. Definitions.

In this title, unless the context or subject matter otherwise requires:

  1. A contract is an agreement to do or not to do a certain thing.
  2. An obligation is a legal duty by which a person is bound to do or not to do a certain thing.

Source:

Civ. C. 1877, §§ 798, 870; R.C. 1895, §§ 3762, 3835; R.C. 1899, §§ 3762, 3835; R.C. 1905, §§ 5207, 5280; C.L. 1913, §§ 5763, 5836; R.C. 1943, § 9-0101.

Derivation:

Cal. Civ. C., 1427, 1549.

Cross-References.

“Contract for carriage” defined, see § 8-01-01.

Notes to Decisions

Contract.

The contract in the case of a note secured by a mortgage included the agreement of the mortgagor to pay but did not include the procedure as to foreclosure in the event of default, so that a statutory change in the procedure for foreclosure did not impair the obligation of contract. First Nat'l Bank v. Paulson, 69 N.D. 512, 288 N.W. 465, 1939 N.D. LEXIS 180 (N.D. 1939).

Correspondence.

District court did not err by finding that a contract existed for legal services between the special prosecutor and the State because all communications prior to the commencement of the representation were between the State and the prosecutor, the governor sent the prosecutor an appointment letter and work on the removal of the sheriff began at the direction of the governor, and upon conclusion of its services the prosecutor sent the invoice to the governor. Traynor Law Firm v. State, 2020 ND 108, 943 N.W.2d 320, 2020 N.D. LEXIS 107 (N.D. 2020).

Obligation.

The payment of personal property taxes is an obligation within the meaning of this section. Lindstrom v. Spicher, 53 N.D. 195, 205 N.W. 231, 1925 N.D. LEXIS 64 (N.D. 1925).

The right to recover damages for deceit is not an obligation within the meaning of section 47-07-03, providing for assignability and survivorship of things in action. Grabow v. Bergeth, 59 N.D. 214, 229 N.W. 282, 1930 N.D. LEXIS 134 (N.D. 1930).

Collateral References.

Punitive damages for interference with contract or business relationship, 44 A.L.R.4th 1078.

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

Summary of significant decisions rendered by the North Dakota Supreme Court in 1989 relating to contracts, 65 N.D. L. Rev. 559 (1989).

9-01-02. Requisites of contract.

It is essential to the existence of a contract that there should be:

  1. Parties capable of contracting;
  2. The consent of the parties;
  3. A lawful object; and
  4. Sufficient cause or consideration.

Source:

Civ. C. 1877, § 871; R.C. 1895, § 3836; R.C. 1899, § 3836; R.C. 1905, § 5281; C.L. 1913, § 5837; R.C. 1943, § 9-0102.

Derivation:

Cal. Civ. C., 1550.

Cross-References.

Capacity of corporation to contract, see § 10-19.1-26, subds. 7.

Capacity of person without understanding to contract, see § 14-01-01.

Capacity of married person to contract, see § 14-07-05.

Capacity of minors to contract, see §§ 14-10-09, 14-10-10.

Contracts to sell and sales, Uniform Commercial Code, see ch. 41-02.

Notes to Decisions

Benefit from Consideration.

Defendant A was jointly liable for the balance due on a contract when the sales slip stated that the trencher was “sold to 80% defendant B & 20% Defendant A.” Vermeer Indus. v. Bachmeier, 486 N.W.2d 506, 1992 N.D. LEXIS 149 (N.D. 1992).

Deceit and Fraud.

There need not be a showing of damage to avoid a contract for fraud since the fraud prevents the consent of the parties from being free. Raymond v. Edelbrock, 15 N.D. 231, 107 N.W. 194, 1906 N.D. LEXIS 34 (N.D. 1906).

When one of the parties is induced to enter a contract by the deceit of another, his consent is not free and the contract is voidable. Guild v. More, 32 N.D. 432, 155 N.W. 44, 1915 N.D. LEXIS 58 (N.D. 1915).

There was no consent, therefore no contract, where a party who could not read signed a written contract under an erroneous belief, induced by the other party, as to its contents. Mathias v. State Farmers' Mut. Hail Ins. Co., 40 N.D. 240, 168 N.W. 664, 1918 N.D. LEXIS 79 (N.D. 1918).

Where the vice president of the bank fraudulently induced a debtor to enter into a $250,000 loan by making false statements, the debtor neither received the loan proceeds nor received the promised collateral for the obligation. Because the debtor’s consent was not freely gvien for purposes of N.D.C.C. § 9-01-02, he was entitled to rescind the loan. Am. Bank Ctr. v. Wiest, 2010 ND 251, 793 N.W.2d 172, 2010 N.D. LEXIS 255 (N.D. 2010).

District court properly granted a borrower summary judgment on a lender’s counterclaim for fraud in the inducement because the borrower did not have a fiduciary relationship with the lender; the borrower’s requirement that the lender enter into a lease agreement with a limited liability company as part of the ordinary underwriting process did not show a special circumstance giving rise to a fiduciary relationship between the borrower and the lender. Baker Boyer Nat'l Bank v. JPF Enters., LLC, 2019 ND 76, 924 N.W.2d 381, 2019 N.D. LEXIS 69 (N.D. 2019).

Definiteness.

Agreement was a valid contract for the sale of a decedent’s farmstead and farmland because all four requirements of the statute were met, and since the decedent was competent, both he and a lessor were capable of contracting; both parties drafted and signed the same agreement, demonstrating their consent to be bound by it, the agreement was unambiguous and reasonably definite and certain in its terms, and because the acreage was fixed at execution, the price too was fixed and was ascertainable. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

To be valid and enforceable, a contract must be reasonably definite and certain in its terms so that a court may require it to be performed. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Terms that completely described the type of business restriction, the duration of the restriction, and the geographic limitation of the restriction, left no doubt there were no other essential non-competition terms left for agreement between the parties, and objectively evidenced the parties’ mutual intent to create an enforceable non-competition agreement. Lire, Inc. v. Bob's Pizza Inn Restaurants, 541 N.W.2d 432, 1995 N.D. LEXIS 236 (N.D. 1995).

Where the plaintiff failed to show that provisions in an agreement were anything more than an agreement to agree about an incentive bonus program, a salary deferral program, and a severance package in the future, the agreement was too indefinite to be enforceable. Stout v. Fisher Indus., Inc., 1999 ND 218, 603 N.W.2d 52, 1999 N.D. LEXIS 239 (N.D. 1999).

District court properly granted summary judgment in favor of defendant National Collegiate Athletic Association (NCAA) in an Indian Tribe’s action challenging the NCAA’s interference with a university’s use of a name, logo, and imagery relating to the Tribe because (1) the Tribe had not established a prima facie 42 U.S.C.S. § 1981 discrimination case as it failed to show that the NCAA acted with discriminatory intent; (2) the Tribe had not established a tortious interference with a contract claim as it failed to show the existence of a contract under N.D.C.C. § 9-01-02 or N.D.C.C. § 27-19-09 in that there was no indication of mutual intent to create a legal obligation, let alone an obligation sufficiently definite and certain that a court could require its performance; and (3) the NCAA’s acts neither violate the laws of the land nor plainly violate its own constitution and bylaws. Spirit Lake Tribe of Indians v. NCAA, 715 F.3d 1089, 2013 U.S. App. LEXIS 10751 (8th Cir. N.D. 2013).

Essential Terms of Oral Agreement.

Essential terms of an oral contract to continue lending money in the future include the amount and duration of the loans, interest rates, and, where appropriate, the methods of repayment and collateral for the loans, if any. Taken alone, the absence of any one of these terms may not be of great significance; however, viewed collectively, their absence is fatal to the existence of a binding contract. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

On review of a summary judgment that had found an alleged oral contract to be barred by the statute of frauds, because the evidence had to be considered in the light most favorable to the party opposing the motion, both consent and an oral agreement between the parties satisfying the requirements of this section had to be assumed for purposes of the appeal. Bloomquist v. Goose River Bank, 2013 ND 154, 836 N.W.2d 450, 2013 N.D. LEXIS 157 (N.D. 2013).

Failure to Rescind for Fraud.

Where a party failed to rescind the contract but continued with it after learning of the misrepresentations of the other party, there was no longer such absence of free consent as to render the contract voidable. Beare v. Wright, 14 N.D. 26, 103 N.W. 632, 1905 N.D. LEXIS 36 (N.D. 1905).

Implied Contract.

Where a title company sought payment for title work done on an oil company’s behalf, it was not clearly erroneous to find that the parties entered into an implied contract, because (1) the title company kept the oil company informed on the progress of the work the title company was doing on the oil company’s behalf, (2) the oil company never notified the title company that it had not accepted the terms of the contract and never disputed the steady flow of invoices detailing the work the title company was doing, and (3) the oil company benefited from the title work. B. J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, 727 N.W.2d 270, 2007 N.D. LEXIS 13 (N.D. 2007).

District court did not clearly err when it found that there was no implied-in-fact contract between a son and his parents because the evidence supported its determination that any services the son performed over the more than twenty year time span were rendered gratuitously, and the son failed to present evidence to rebut the presumption that his services were gratuitous. Lund v. Lund, 2014 ND 133, 848 N.W.2d 266, 2014 N.D. LEXIS 121 (N.D. 2014).

District court did not err by finding that a contract existed for legal services between the special prosecutor and the State because all communications prior to the commencement of the representation were between the State and the prosecutor, the governor sent the prosecutor an appointment letter and work on the removal of the sheriff began at the direction of the governor, and upon conclusion of its services the prosecutor sent the invoice to the governor. Traynor Law Firm v. State, 2020 ND 108, 943 N.W.2d 320, 2020 N.D. LEXIS 107 (N.D. 2020).

Lease.

District court properly granted a lessee summary judgment and dismissed an assignee's claims that an oil and gas lease terminated due the land manager's letter because the letter did not constitute a written contract required to modify the lease since it did not contain the elements for a valid contract; the letter did not establish a written agreement to modify the lessee's rights, and the lessors did not sign or otherwise communicate acceptance of the purported offer. Valentina Williston, LLC v. Gadeco, LLC, 2016 ND 84, 878 N.W.2d 397, 2016 N.D. LEXIS 84 (N.D. 2016).

Mistake of Law.

Where a party to a contract agreed to make repayment under the belief that he had forfeited all his rights under the written contract, and such belief was induced by the other party, the mistake as to their legal rights was mutual and the consent of the parties was not free. Arnett v. Smith, 11 N.D. 55, 88 N.W. 1037, 1902 N.D. LEXIS 183 (N.D. 1902).

Novation.

For a novation to be valid, in addition to the requirement that the parties intend to extinguish the old obligation, there must also exist mutual assent and sufficient consideration. North Dakota Pub. Serv. Comm'n v. Valley Farmers Bean Ass'n, 365 N.W.2d 528, 1985 N.D. LEXIS 285 (N.D. 1985).

Partnership Dissolution.

In a partnership dispute, a trial court did not err by finding that a written and unsigned dissolution agreement was not a valid written contract; moreover, testimony of partial performance to take the writing outside of the statute of frauds was not credible. Knudson v. Kyllo, 2012 ND 155, 819 N.W.2d 511, 2012 N.D. LEXIS 155 (N.D. 2012).

Premarital Agreement Unenforceable.

Trial court did not err in holding a premarital agreement unenforceable because the parties were unable to give property consent as required by statute in light of the unfamiliar and inflexible terms of the agreement as well as its rapid formation and execution where very little planning went into the creation of the agreement. The parties decided to sign a premarital agreement at the urging of the wife’s mother, the lawyer who drafted the agreement did not receive any information regarding the parties’ property until the morning of the wedding, the husband was not advised to seek independent legal advice and there was no time for him to do so, and in the span of less than five hours, the parties were pressed to execute the entire premarital agreement from scratch, go through a wedding ceremony with a justice of the peace, eat lunch, and get to the bank before it closed. While that hectic schedule did not itself invalidate the agreement’s enforceability, it was a strong indicator of the haphazard manner in which the agreement was put together. Pember v. Shapiro, 2011 ND 31, 794 N.W.2d 435, 2011 N.D. LEXIS 31 (N.D. 2011).

Stipulations.

Stipulations are essentially contracts that deal with the subject matter of lawsuits, and are governed by the law of contracts. Galloway v. Galloway, 281 N.W.2d 804, 1979 N.D. LEXIS 279 (N.D. 1979).

Valid Contract.

Agreement was a valid contract for the sale of a decedent’s farmstead and farmland because all four requirements of N.D.C.C. § 9-01-02 were met, and since the decedent was competent, he and a lessor were capable of contracting; both parties drafted and signed the same agreement, demonstrating consent to be bound by it, the agreement was unambiguous and reasonably definite and certain in its terms, and because the acreage was fixed at execution, the price too was fixed and was ascertainable. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

9-01-03. Executed and executory contracts defined.

An executed contract is one, the object of which is performed fully. All other contracts are executory.

Source:

Civ. C. 1877, § 952; R.C. 1895, § 3919; R.C. 1899, § 3919; R.C. 1905, § 5365; C.L. 1913, § 5921; R.C. 1943, § 9-0103.

Derivation:

Cal. Civ. C., 1661.

Notes to Decisions

Sale of Goods.

A contract of sale remains executory until there is a transfer of the title of the subject matter. Gile v. Interstate Motor Car Co., 27 N.D. 108, 145 N.W. 732, 1914 N.D. LEXIS 32 (N.D. 1914).

A contract for the sale of goods remained executory when the goods were not delivered by the agreed time. Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359, 1915 N.D. LEXIS 118 (N.D. 1915).

Support Obligations.

An agreement between husband and wife whereby the husband conveyed realty in consideration for the wife’s undertaking to support the children remained executory since the wife’s obligation pertained to the future. Plott v. Kittelson, 58 N.D. 881, 228 N.W. 217, 1929 N.D. LEXIS 292 (N.D. 1929).

9-01-04. Joint and several contracts.

A promise is presumed to be joint and several when:

  1. All the parties thereto receive some benefit from the consideration, whether past or present;
  2. It is made in the singular number but executed by several persons.

Source:

Civ. C. 1877, §§ 950, 951; R.C. 1895, §§ 3917, 3918; R.C. 1899, §§ 3917, 3918; R.C. 1905, §§ 5363, 5364; C.L. 1913, §§ 5919, 5920; R.C. 1943, § 9-0104.

Derivation:

Cal. Civ. C., 1659, 1660.

Notes to Decisions

Benefit from Consideration.

Where a note did not by its terms impose a joint and several obligation and there was no showing that all the parties benefited from the contract, the court could not presume that there was a several obligation. Grovenor v. Signor, 10 N.D. 503, 88 N.W. 278, 1901 N.D. LEXIS 66 (N.D. 1901).

Suretyship.

This section did not create a several obligation on the part of a mere surety where the contract set forth only a joint obligation. Clark v. Sullivan, 2 N.D. 103, 49 N.W. 416, 1891 N.D. LEXIS 28 (N.D. 1891).

9-01-05. Origin and enforcement of obligations.

An obligation arises from:

  1. The contract of the parties; or
  2. The operation of law.

An obligation arising from operation of law may be enforced in the manner provided by law or by civil action or proceeding.

Source:

Civ. C. 1877, § 799; R.C. 1895, § 3763; R.C. 1899, § 3763; R.C. 1905, § 5208; C.L. 1913, § 5764; R.C. 1943, § 9-0105.

Derivation:

Cal. Civ. C., 1428.

Notes to Decisions

Alimony.

The duty of a divorced husband to pay alimony is an obligation arising from the operation of law, so may be enforced by civil action or proceeding. Weldy v. Weldy, 74 N.D. 165, 20 N.W.2d 583, 1945 N.D. LEXIS 65 (N.D. 1945).

Taxes.

The duty to pay personal property taxes is an obligation arising by operation of law. Lindstrom v. Spicher, 53 N.D. 195, 205 N.W. 231, 1925 N.D. LEXIS 64 (N.D. 1925).

9-01-06. Obligations classified.

An obligation imposed upon several persons, or a right created in favor of several persons, may be:

  1. Joint;
  2. Several; or
  3. Joint and several.

Source:

Civ. C. 1877, § 801; R.C. 1895, § 3765; R.C. 1899, § 3765; R.C. 1905, § 5210; C.L. 1913, § 5766; R.C. 1943, § 9-0106.

Derivation:

Cal. Civ. C., 1430.

9-01-07. Joint obligation — Presumption.

An obligation imposed upon several persons, or a right created in favor of several persons, is presumed to be joint and not several, except in the special cases mentioned in chapter 9-07. This presumption in the case of a right can be overcome only by express words to the contrary.

Source:

Civ. C. 1877, § 802; R.C. 1895, § 3766; R.C. 1899, § 3766; R.C. 1905, § 5211; C.L. 1913, § 5767; R.C. 1943, § 9-0107.

Derivation:

Cal. Civ. C., 1431.

Notes to Decisions

Presumption Against Several Obligation.

Where a note signed by several persons did not in terms create a several obligation, the court was bound to presume that the obligation was joint only. Grovenor v. Signor, 10 N.D. 503, 88 N.W. 278, 1901 N.D. LEXIS 66 (N.D. 1901).

An agreement by telephone subscribers to pay for the installation of telephones was presumed to create a joint but not several obligation. Clements v. Miller, 13 N.D. 176, 100 N.W. 239, 1904 N.D. LEXIS 27 (N.D. 1904).

9-01-08. Joint obligation — Contribution.

A party to a joint obligation or to a joint and several obligation who satisfies more than that party’s share of the claim against all obligors may require a proportionate contribution from all the parties joined with that party.

Source:

Civ. C. 1877, § 803; R.C. 1895, § 3767; R.C. 1899, § 3767; R.C. 1905, § 5212; C.L. 1913, § 5768; R.C. 1943, § 9-0108.

Derivation:

Cal. Civ. C., 1432.

Notes to Decisions

Determination of Proportionate Benefits.

With respect to a promissory note executed jointly by a mother and son, a trial court did not err in allowing the son’s inheritance to be offset by the entire amount that the mother’s estate paid in satisfaction of the note because the son had received 100 percent of the benefit from the note, as the son had received title and legal interest in a tractor and land purchased with the borrowed money; the fact that the mother had been allowed to reside on the land purchased with the money was not a “benefit” to the mother arising under the note. Egeland v. Egeland (In re Estate of Egeland), 2007 ND 184, 741 N.W.2d 724, 2007 N.D. LEXIS 186 (N.D. 2007).

Divorce Decree.

Trial court was within its discretion in refusing to modify divorce decree to set off liability on tax judgment on years which husband and wife were married incurred by husband after entrance of stipulated divorce providing for alimony and property settlement. Bosch v. Bosch, 197 N.W.2d 673, 1972 N.D. LEXIS 150 (N.D. 1972).

Guarantors.

A co-guarantor may purchase an assignment of a note and the guaranties, but the initial relationship as co-guarantors will operate as a matter of law to restrict the recovery and will govern the rights of the co-guarantors. Albrecht v. Walter, 1997 ND 238, 572 N.W.2d 809, 1997 N.D. LEXIS 299 (N.D. 1997).

One who executes a full, joint and several guarantee may not compel his co-guarantors to pay their pro rata shares to a creditor who has obtained a judgment against him and, instead, must first pay more than his pro rata portion of the judgment himself and then seek contribution. Hombach v. BioDigestor Indus., 2001 U.S. Dist. LEXIS 18504 (D.N.D. Oct. 15, 2001).

Joint obligor did not show that there was any material issue of fact regarding the collection agency’s attempt to collect from the joint obligor the contribution amount that the co-joint obligor had assigned to the collection agency. Pursuant to N.D.C.C. § 9-01-08, the collection agency was entitled to recover that amount because the co-joint obligor as a guarantor on the loans made to the corporations run by him and the joint obligor, another guarantor, had the right to recover the amount that the co-joint obligor could have recovered, and the joint obligor did not show that the joint obligor had any viable defense. Collection Ctr., Inc. v. Bydal, 2011 ND 63, 795 N.W.2d 667, 2011 N.D. LEXIS 40 (N.D. 2011).

District court erred in denying an assignee’s application for a charging order against a second guarantor because the assignee could statutorily take an assignment of a bank against two guarantors, the assignee could then take an assignment of the judgment from the first guarantor to enforce his right of contribution from the second guarantor for the “unsatisfied amount of the judgment,” and the second guarantor did not present any evidence contesting the amount of his proportional share of the unsatisfied amount of the judgment, and any execution sought against the second guarantor was only for his proportionate share. Open Rd. Trucking, LLC v. Swanson, 2019 ND 295, 936 N.W.2d 72, 2019 N.D. LEXIS 301 (N.D. 2019).

Collateral References.

Spouse’s right to set off debt owed by other spouse against accrued spousal or child support payments, 11 A.L.R.5th 259.

9-01-09. Conditional obligation defined.

An obligation is conditional when the rights or duties of any party thereto depend upon the occurrence of an uncertain event.

Source:

Civ. C. 1877, § 804; R.C. 1895, § 3768; R.C. 1899, § 3768; R.C. 1905, § 5213; C.L. 1913, § 5769; R.C. 1943, § 9-0109.

Derivation:

Cal. Civ. C., 1434.

9-01-10. Conditions of obligation — Classification.

Conditions may be precedent, concurrent, or subsequent.

Source:

Civ. C. 1877, § 805; R.C. 1895, § 3769; R.C. 1899, § 3769; R.C. 1905, § 5214; C.L. 1913, § 5770; R.C. 1943, § 9-0110.

Derivation:

Cal. Civ. C., 1435.

9-01-11. Condition precedent defined.

A condition precedent is a condition which is to be performed before some right dependent thereon accrues or some act dependent thereon is performed.

Source:

Civ. C. 1877, § 806; R.C. 1895, § 3770; R.C. 1899, § 3770; R.C. 1905, § 5215; C.L. 1913, § 5771; R.C. 1943, § 9-0111.

Derivation:

Cal. Civ. C., 1436.

Notes to Decisions

Approval by Attorney As Condition.

Where the parties, in signing an agreement, agreed that it would be operative only if approved by the attorney of one of the parties, such approval was a condition precedent and the agreement was ineffective without it. Lilly v. Haynes Coop. Coal Mining Co., 50 N.D. 465, 196 N.W. 556, 1923 N.D. LEXIS 126 (N.D. 1923).

Approval by Stockholders.

Where minutes of directors’ meeting authorized officers to negotiate sale of real property subject to final approval of stockholders, and the contract of sale had not been submitted for approval of stockholders prior to action for specific performance, it was necessary for trial court to determine the legal effect of the condition precedent to the execution of the contract. Mattco, Inc. v. Mandan Radio Ass'n, 224 N.W.2d 822, 1974 N.D. LEXIS 147 (N.D. 1974).

Clear Title As Condition.

Where a contract for the sale of realty established a date for the delivery of an abstract showing good title and a later date for a partial payment by vendee, the delivery of the abstract was a condition precedent to the right to receive partial payment, so that the vendor could not, without having shown good title, cancel the contract because of the vendee’s failure to make the payment. Kennedy v. Dennstadt, 31 N.D. 422, 154 N.W. 271, 1915 N.D. LEXIS 201 (N.D. 1915).

Where a letter offer stated that it was subject to title review, the phrase “subject to” was sufficient to create a condition precedent under North Dakota law and thus, plaintiff's breach of contract claim failed, as the title opinion identified numerous ambiguities and inconsistencies regarding his claim of title and indicated that title review would not be satisfactory until he took the required curative measures. Armstrong v. Berco Res., LLC, 752 F.3d 716, 2014 U.S. App. LEXIS 9030 (8th Cir. N.D. 2014).

Where a letter offer stated that it was subject to title review, the phrase “subject to” was sufficient to create a condition precedent under North Dakota law and thus, plaintiff's breach of contract claim failed, as the title opinion identified numerous ambiguities and inconsistencies regarding his claim of title and indicated that title review would not be satisfactory until he took the required curative measures. Armstrong v. Berco Res., LLC, 752 F.3d 716, 2014 U.S. App. LEXIS 9030 (8th Cir. N.D. 2014).

Delivery of Goods As Condition.

Where time was of the essence in a contract for the sale of goods, delivery of the goods by the time required was necessary for the seller to have any right to payment. Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359, 1915 N.D. LEXIS 118 (N.D. 1915).

Failure of Condition Precedent.

District court erred in its determination that a contract for deed was unambiguous with regard to the parties’ obligations after the failure of a condition precedent. Because there were two reasonable interpretations of when the payment of the payment units was to be made following the failure of the condition precedent, the terms for continuation of the contract for deed were ambiguous. Bearce v. Yellowstone Energy Dev., LLC, 2019 ND 89, 924 N.W.2d 791, 2019 N.D. LEXIS 91 (N.D. 2019).

Obtaining of Credit As Condition.

Where the contract obligations of the parties are not to become effective or operative unless and until financing can be obtained, such contingency is a valid condition precedent. Quinn Distrib. Co. v. North Hill Bowl, 139 N.W.2d 860, 1966 N.D. LEXIS 195 (N.D. 1966).

Payment As Condition.

Where a member of a fraternal benefit society applied for a payment from the society and agreed that “said payment and this application shall constitute a withdrawal” from the society, but the member died before the payment was made, his membership remained in force since the payment was a condition precedent to withdrawal from membership. McEnany v. Modern Woodmen of Am., 54 N.D. 413, 209 N.W. 978, 1926 N.D. LEXIS 162 (N.D. 1926).

9-01-12. Conditions concurrent defined.

Conditions concurrent are those which are mutually dependent and are to be performed at the same time.

Source:

Civ. C. 1877, § 807; R.C. 1895, § 3771; R.C. 1899, § 3771; R.C. 1905, § 5216; C.L. 1913, § 5772; R.C. 1943, § 9-0112.

Derivation:

Cal. Civ. C., 1437.

9-01-13. Condition subsequent defined.

A condition subsequent is a condition referring to a future event, upon the happening of which the obligation becomes no longer binding upon the other party if that party chooses to apply that condition.

Source:

Civ. C. 1877, § 808; R.C. 1895, § 3772; R.C. 1899, § 3772; R.C. 1905, § 5217; C.L. 1913, § 5773; R.C. 1943, § 9-0113.

Derivation:

Cal. Civ. C., 1438.

9-01-14. Conditions unlawful or impossible.

A condition in a contract, the fulfillment of which is impossible or unlawful within the meaning of chapter 9-04 or which is repugnant to the nature of the interest created by the contract, is void.

Source:

Civ. C. 1877, § 811; R.C. 1895, § 3775; R.C. 1899, § 3775; R.C. 1905, § 5220; C.L. 1913, § 5776; R.C. 1943, § 9-0114.

Derivation:

Cal. Civ. C., 1441.

Collateral References.

Impossibility of performance: modern status of rule as to defense in action for breach of contract, 84 A.L.R.2d 12.

9-01-15. Forfeiture — Interpretation.

A condition involving a forfeiture must be interpreted strictly against the party for whose benefit it is created.

Source:

Civ. C. 1877, § 812; R.C. 1895, § 3776; R.C. 1899, § 3776; R.C. 1905, § 5221; C.L. 1913, § 5777; R.C. 1943, § 9-0115.

Derivation:

Cal. Civ. C., 1442.

9-01-16. Enforcement of obligations — Prerequisites.

Before any party to an obligation can require another party to perform any act under it, that party shall fulfill all conditions precedent thereto imposed upon that party and must be able, and shall offer, to fulfill all conditions concurrent so imposed upon that party on the like fulfillment by the other party, but if one party to the obligation gives notice to another before the latter is in default that that party will not perform the same upon that party’s part and does not retract such notice before the time at which performance upon that party’s part is due, such other party is entitled to enforce the obligation without previously performing or offering to perform any conditions upon the other party’s part in favor of the former party.

Source:

Civ. C. 1877, §§ 809, 810; R.C. 1895, §§ 3773, 3774; R.C. 1899, §§ 3773, 3774; R.C. 1905, §§ 5218, 5219; C.L. 1913, §§ 5774, 5775; R.C. 1943, § 9-0116.

Notes to Decisions

Anticipatory Breach.

Where buyer repudiates a contract for the sale of goods before the time for performance and persists in his repudiation, the seller cannot deliver and thereby render the buyer liable for the full purchase price plus freight. Hart-Parr Co. v. Finley, 31 N.D. 130, 153 N.W. 137 (1915), explained, 33 N.D. 568, 157 N.W. 124 (1916) and 42 N.D. 255, 172 N.W. 829 (1919).

The doctrine of breach of contract by anticipatory repudiation has been adopted in North Dakota. Glatt v. Bank of Kirkwood Plaza, 383 N.W.2d 473, 1986 N.D. LEXIS 424 (N.D. 1986).

Conditional Use Permit.

District court did not err by dismissing landowners’ breach of contract and actual fraud claims against a township because the conditional use permit that was issued to the landowners was not a contract. Arnegard v. Arnegard Twp., 2018 ND 80, 908 N.W.2d 737, 2018 N.D. LEXIS 85 (N.D. 2018).

Damages from Anticipatory Breach.

A party injured by another party’s anticipatory repudiation may elect to immediately sue for damages. Glatt v. Bank of Kirkwood Plaza, 383 N.W.2d 473, 1986 N.D. LEXIS 424 (N.D. 1986).

Failure of Condition Precedent.

District court erred in its determination that a contract for deed was unambiguous with regard to the parties’ obligations after the failure of a condition precedent. Because there were two reasonable interpretations of when the payment of the payment units was to be made following the failure of the condition precedent, the terms for continuation of the contract for deed were ambiguous. Bearce v. Yellowstone Energy Dev., LLC, 2019 ND 89, 924 N.W.2d 791, 2019 N.D. LEXIS 91 (N.D. 2019).

Failure of Performance.

A material failure of performance by one party to a contract, not justified by the conduct of the other, discharges the latter’s duty to give the agreed exchange. United States use of Home Indem. Co. v. American Employers' Ins. Co., 192 F. Supp. 873, 1961 U.S. Dist. LEXIS 4039 (D.N.D. 1961).

Trial court did not err in ruling that defendants did not breach a settlement agreement concerning the disposition of their father’s estate where plaintiffs did not assist, or might even have hindered, defendants’ attempt to quiet title of the involved real estate; defendants could secure financing to pay plaintiffs only if they could produce “clear title” to the real estate. Silbernagel v. Silbernagel, 2007 ND 124, 736 N.W.2d 441, 2007 N.D. LEXIS 115 (N.D. 2007).

Fire Damage Before Property Conveyed.

Where because of fire damage vendor was unable to comply with the condition precedent in purchase contract to convey the home in the same condition it was in when the contract was signed, vendor could not require that vendees pay earnest money until it had complied with the condition by repairing the home. Bishop Ryan High Sch. v. Lindberg, 370 N.W.2d 726, 1985 N.D. LEXIS 352 (N.D. 1985).

Proof of Title As Condition Precedent.

In a contract for the sale of real estate, an agreement by vendor to produce an abstract showing good and merchantable title is a condition precedent which he must perform before he can require the vendee to perform. Kennedy v. Dennstadt, 31 N.D. 422, 154 N.W. 271, 1915 N.D. LEXIS 201 (N.D. 1915).

Quality of Goods As Condition Precedent.

In a contract for the sale of goods, an offer to deliver goods meeting the specifications of the contract is a condition precedent to the right of the seller to require performance by the buyer. Skogness v. Seger, 35 N.D. 366, 160 N.W. 508, 1916 N.D. LEXIS 167 (N.D. 1916).

Retraction of Anticipatory Breach.

Because a party injured by another party’s anticipatory repudiation may elect to immediately sue for damages, a retraction of an anticipatory repudiation must be made before suit is brought to be effective. Glatt v. Bank of Kirkwood Plaza, 383 N.W.2d 473, 1986 N.D. LEXIS 424 (N.D. 1986).

A retraction of an anticipatory repudiation after the injured party sues for enforcement or damages comes too late. Glatt v. Bank of Kirkwood Plaza, 383 N.W.2d 473, 1986 N.D. LEXIS 424 (N.D. 1986).

Time of Delivery As Condition Precedent.

Where time is of the essence in a contract for the sale of goods, delivery by the time specified is a condition precedent and the seller cannot demand payment from the buyer unless he delivers on time. Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359, 1915 N.D. LEXIS 118 (N.D. 1915).

9-01-17. Option to perform alternative acts.

If an obligation requires the performance of one of two acts in the alternative, the party required to perform has the right of selection, unless it is provided otherwise by the terms of the obligation.

Source:

Civ. C. 1877, § 813; R.C. 1895, § 3777; R.C. 1899, § 3777; R.C. 1905, § 5222; C.L. 1913, § 5778; R.C. 1943, § 9-0117.

Derivation:

Cal. Civ. C., 1448.

9-01-18. Option — Limitation of time for performance.

If the party having the right of selection between alternative acts does not give notice of that party’s selection to the other party within the time, if any, fixed by the obligation for that purpose, or, if none is fixed, before the time at which the obligation ought to be performed, the right of selection passes to the other party.

Source:

Civ. C. 1877, § 814; R.C. 1895, § 3778; R.C. 1899, § 3778; R.C. 1905, § 5223; C.L. 1913, § 5779; R.C. 1943, § 9-0118.

Derivation:

Cal. Civ. C., 1449.

Notes to Decisions

Application of Checks Against Deposits.

Where a bank depositor drew checks on its account without designating the deposits against which the checks were to be applied, a guarantor of the deposits could insist that the checks paid be applied against the earliest deposits not previously repaid. Emmons County v. Kleppe, 61 N.D. 536, 238 N.W. 651, 1931 N.D. LEXIS 305 (N.D. 1931).

Guaranty of Collection.

An agreement by sellers of a bank to have all bills receivable “either renewed and secured or paid” was a guaranty of collection, not a guaranty of payment, and failure of the sellers to have bills renewed and secured did not empower the buyer to require payment by the sellers. Citizens State Bank v. Lockwood, 32 N.D. 381, 156 N.W. 47, 1915 N.D. LEXIS 84 (N.D. 1915).

Option to Sell.

Where a person agreed to purchase stock on a specified date if the stockholder offered it to him, a tender of the stock one month after the specified date was too late. Asplund v. Danielson, 56 N.D. 485, 217 N.W. 848, 1928 N.D. LEXIS 160 (N.D. 1928).

9-01-19. Option — Selection in entirety.

The party having the right of selection between alternative acts shall select one of them in its entirety and cannot select part of one and part of another without the consent of the other party.

Source:

Civ. C. 1877, § 815; R.C. 1895, § 3779; R.C. 1899, § 3779; R.C. 1905, § 5224; C.L. 1913, § 5780; R.C. 1943, § 9-0119.

Derivation:

Cal. Civ. C., 1450.

9-01-20. Option — Valid act prevails.

If one of the alternative acts required by an obligation is such as the law will not enforce, or if it becomes unlawful or impossible of performance, the obligation is to be interpreted as though the other stood alone.

Source:

Civ. C. 1877, § 816; R.C. 1895, § 3780; R.C. 1899, § 3780; R.C. 1905, § 5225; C.L. 1913, § 5781; R.C. 1943, § 9-0120.

Derivation:

Cal. Civ. C., 1451.

9-01-21. Property service contracts — Exemption.

  1. The marketing, selling, offering for sale, issuing, making, providing, or proposing to make and the administering of a property service contract or vehicle theft protection product warranty is not subject to the provisions of title 26.1.
  2. A property service contract is a contract or agreement for a separately stated consideration, for a specific duration, to provide for the repair, replacement, or maintenance or for the indemnification for the repair, replacement, or maintenance of new or used property if an operational or structural failure is due to a defect in materials, manufacturing, or normal wear and tear. Property covered under a property service contract may include motor vehicles; residential appliances; residential systems, including plumbing, electrical, heating, cooling, and ventilation; and other residential property. The contract may provide coverage for:
    1. Damage to property resulting from power surges;
    2. Accidental damage to property resulting from handling;
    3. Payment of indemnity for incidental damages, such as food spoilage, towing, and rental and emergency road service;
    4. The repair or replacement of tires and wheels on a motor vehicle damaged as a result of coming into contact with a road hazard;
    5. The removal of dents, dings, or creases on a motor vehicle which can be repaired using the process of paintless dent removal without affecting the existing paint finish and without sanding, bonding, painting, or replacing a vehicle body panel;
    6. The repair of small motor vehicle windshield chips or cracks which may include replacement of the windshield for chips or cracks that cannot be repaired;
    7. The replacement of a motor vehicle key or key fob if the key or key fob becomes inoperable, lost, or stolen; or
    8. In conjunction with a motor vehicle leased for use, the repair, replacement, or maintenance of property, or indemnification for repair, replacement, or maintenance, due to excess wear and use or damage to items, including tires, paint cracks or chips, missing interior or exterior parts, or excess mileage resulting in a lease-end charge, or any other charge for damage deemed excess wear and use by a lessor under a motor vehicle lease, provided the payment may not exceed the purchase price of the vehicle.
  3. Under a vehicle theft protection program warranty, incidental costs may be reimbursed in either a fixed amount specified in the warranty or by use of a formula itemizing specific incidental costs incurred by the warranty holder. Payments may not duplicate any benefits or expenses paid to the warranty holder by an insurer providing comprehensive coverage under a motor vehicle insurance policy covering the stolen motor vehicle. However, the payment of incidental costs at a pre-established, flat amount of seven thousand five hundred dollars or less does not duplicate any benefits or expenses payable under the comprehensive motor vehicle insurance policy.
  4. For the purpose of this section, unless the context otherwise requires:
    1. “Incidental costs” means expenses specified in a vehicle theft protection program warranty and incurred by the warranty holder due to the failure of a vehicle theft protection program to perform as provided in the contract.
    2. “Road hazard” means a hazard encountered while driving a motor vehicle which includes potholes, rocks, wood debris, metal parts, glass, plastic, curbs, or composite scraps.
    3. “Vehicle theft protection product” means a device or system installed on or applied to a motor vehicle, which is designed to prevent loss or damage to a motor vehicle from theft, and includes a vehicle theft protection program warranty.
    4. “Vehicle theft protection product warranty” means a written agreement by a warrantor which provides, if the vehicle theft protection product fails to prevent loss or damage to a motor vehicle from theft, the warrantor will pay to or on behalf of the warranty holder specified incidental costs resulting from the failure or the vehicle theft protection product to perform pursuant to the terms of the vehicle theft protection product warranty.

Source:

S.L. 2001, ch. 107, § 1; 2021, ch. 83, § 1, effective August 1, 2021.

9-01-22. Wind option agreement — Definition — Termination. [Renumbered]

Redesignated as section 17-04-01 under S.L. 2007, ch. 204, § 5.

CHAPTER 9-02 Parties

9-02-01. Persons capable of contracting.

All persons are capable of contracting except minors and persons of unsound mind.

Source:

Civ. C. 1877, § 872; R.C. 1895, § 3837; R.C. 1899, § 3837; R.C. 1905, § 5282; C.L. 1913, § 5838; R.C. 1943, § 9-0201.

Derivation:

Cal. Civ. C., 1556.

Cross-References.

Banks’ power to contract, see § 6-03-02.

Corporations, capacity to contract, see § 10-19.1-26, subs. 7.

County, power to contract, see § 11-10-01.

Husband and wife, contracts between, see §§ 14-07-06, 14-07-12 to 14-07-14.

Married person, right to contract, see § 14-07-05.

Minors, capacity to contract, see § 14-10-10.

Notes to Decisions

Competency Properly Found.

There was evidence supporting the district court’s finding that a decedent was competent to contract while in a nursing home because his children testified they did not notice a decline in his cognitive abilities while he was in the nursing home, and his attorney testified he had no reservations about the decedent’s mental capacity during his representation; a doctor acknowledged that neither the decedent’s BIMS nor CAST (nor any test) was determinative of one’s capacity to contract. Hartman v. Grager, 2021 ND 160, 964 N.W.2d 482, 2021 N.D. LEXIS 162 (N.D. 2021).

Convicts.

A convict, while in prison, cannot make contracts generally but only such as are necessary for the disposition of his property. Miller v. Turner, 64 N.D. 463, 253 N.W. 437, 1934 N.D. LEXIS 222 (N.D. 1934).

9-02-02. Minors and persons of unsound mind.

Minors and persons of unsound mind have only such capacity as is specified in statutes relating to such persons.

Source:

Civ. C. 1877, § 873; R.C. 1895, § 3838; R.C. 1899, § 3838; R.C. 1905, § 5283; C.L. 1913, § 5839; R.C. 1943, § 9-0202.

Derivation:

Cal. Civ. C., 1557.

Cross-References.

Disaffirmation of contract by minor, see §§ 14-10-11 to 14-10-13.

Person without understanding, contract rights, see § 14-01-01.

Insane person’s contracts, see § 14-01-03.

Minor’s contracts, see § 14-10-10.

Minor’s disability to delegate power and to contract relating to real property, see § 14-10-09.

Partial incapacity contracts, rescission, see § 14-01-02.

Notes to Decisions

Collateral Estoppel.

Notwithstanding the district court’s error in concluding that a 2001 deed conveying real property to two minor children was void, the issue was barred by collateral estoppel. All four tests of collateral estoppel issue preclusion were satisfied. Fettig v. Estate of Fettig, 2019 ND 261, 934 N.W.2d 547, 2019 N.D. LEXIS 254 (N.D. 2019).

9-02-03. Identity of parties essential to validity.

It is essential to the validity of the contract, not only that the parties should exist, but that it should be possible to identify them.

Source:

Civ. C. 1877, § 874; R.C. 1895, § 3839; R.C. 1899, § 3839; R.C. 1905, § 5284; C.L. 1913, § 5840; R.C. 1943, § 9-0203.

Derivation:

Cal. Civ. C., 1558.

9-02-04. Third-party beneficiary may enforce contract.

A contract made expressly for the benefit of a third person may be enforced by that person at any time before the parties thereto rescind it.

Source:

Civ. C. 1877, § 875; R.C. 1895, § 3840; R.C. 1899, § 3840; R.C. 1905, § 5285; C.L. 1913, § 5841; R.C. 1943, § 9-0204.

Derivation:

Cal. Civ. C., 1559.

Notes to Decisions

Assumption of Mortgage.

A grantee of real property who agrees to assume the payment of a mortgage thereon may be held liable for a deficiency upon foreclosure even though one of his predecessors in the chain of title did not assume payment but merely took subject to the mortgage. McDonald v. Finseth, 32 N.D. 400, 155 N.W. 863, 1915 N.D. LEXIS 79 (N.D. 1915).

Bank Deposits.

Where a bank depositor instructed the bank to make the deposit certificates payable to herself or a third party but the depositor retained possession of the certificates and control of the deposits during her lifetime, the bank’s agreement was manifestly for the depositor’s benefit and cannot be enforced by the third party after the depositor’s death. McGillivray v. First Nat'l Bank, 56 N.D. 152, 217 N.W. 150, 1927 N.D. LEXIS 85 (N.D. 1927).

Contract Between Prime Contractor and Subcontractor.

Where, under procedure established between a prime contractor and a subcontractor on a construction job, the former received all invoices and payments were to be made by it to the vendor and to the subcontractor for dual signatures, the agreement did not make a supplier which furnished property and performed labor for the subcontractor, a third-party beneficiary. United States use of Davison v. York Electric Constr. Co., 184 F. Supp. 520, 1960 U.S. Dist. LEXIS 4035 (D.N.D. 1960).

In a contract dispute regarding the construction of an oilseed processing plant and the supply of seed processing equipment, the project owner was an intended third-party beneficiary entitled to enforce the supplier’s express production guarantees in the contract between the general contractor and the supplier because, inter alia, the supplier promised that its equipment would meet production guarantees that the general contractor had warranted to the project owner. AgGrow Oils, L.L.C. v. Nat'l Union Fire Ins. Co., 420 F.3d 751, 2005 U.S. App. LEXIS 18015 (8th Cir. N.D. 2005).

Contract to Adopt Child.

Where a party has failed to carry out his agreement to adopt a child, the rights of the child on death of the party are a matter of contract law under this section, not of probate law, so may not be determined by a county court. Muhlhauser v. Becker, 74 N.D. 103, 20 N.W.2d 353, 1945 N.D. LEXIS 58 (N.D. 1945).

Contract to Make Will.

Beneficiary under a family agreement, whereby the beneficiary’s parents contracted to devise property by means of a joint and mutual will, was entitled to enforce the agreement as a third-party beneficiary of the contract. Kuhn v. Kuhn, 281 N.W.2d 230, 1979 N.D. LEXIS 270 (N.D. 1979).

Creditor As Beneficiary.

A judgment creditor could maintain an action against a bank on a contract between the bank and the judgment debtor whereby the bank agreed to pay off the mortgages and liens on the debtor’s land. Herrmann v. State Bank, 34 N.D. 313, 158 N.W. 986, 1916 N.D. LEXIS 37 (N.D. 1916).

Determining Who Is Third-Party Beneficiary.

A guideline for determining whether a party is a third-party beneficiary, as opposed to an incidental beneficiary, is whether the benefit to the third party was within the contemplation of the contracting parties. Moen v. Norwest Bank of Minot, 647 F. Supp. 1333, 1986 U.S. Dist. LEXIS 17904 (D.N.D. 1986).

A bank’s agreement with its customers, by which the bank extended credit to cover certain overdrafts, was for the primary benefit of the bank and its customers, and did not render the payees of checks third-party beneficiaries. Hellman v. Thiele, 413 N.W.2d 321, 1987 N.D. LEXIS 400 (N.D. 1987).

Enforcement by Parties to Contract.

This section does not prevent a party to the contract from enforcing it, for the benefit of the third party, as a trustee of an express trust. Steen v. Neva, 37 N.D. 40, 163 N.W. 272, 1917 N.D. LEXIS 71 (N.D. 1917).

Parties to contract could bring action to enforce the contract without joining a third-party beneficiary as plaintiff. Jones v. Grady, 62 N.D. 312, 243 N.W. 743, 1932 N.D. LEXIS 181 (N.D. 1932).

Good Faith of Insurer.

Only insureds or intended third-party beneficiaries are allowed to sue under the theory of breach of insurer’s duty to act in good faith. Volk v. Wisconsin Mortgage Assurance Co., 474 N.W.2d 40, 1991 N.D. LEXIS 146 (N.D. 1991).

Incidental Benefits.

A contract whereby a debtor agreed to pay interest on such amounts as her guarantor might advance in payment of her debts was only incidentally for the benefit of vendors to the debtor and, where the contract was not in terms of or intended as a letter of credit, a vendor could not maintain an action against the purported guarantor as a third-party beneficiary of the contract. Parlin v. Hall, 2 N.D. 473, 52 N.W. 405, 1892 N.D. LEXIS 36 (N.D. 1892).

An agreement between mortgagor and mortgagee, whereby the mortgagor will be allowed to redeem after the statutory period, benefits a junior mortgagee only incidentally and he may not enforce the agreement. Farmers State Bank v. Anton, 51 N.D. 202, 199 N.W. 582, 1924 N.D. LEXIS 161 (N.D. 1924).

A statutory provision in a highway contractor’s bond to the effect that the contractor would pay workmen’s compensation premiums to the compensation bureau was only incidentally for the benefit of the bureau, and the bureau could not enforce payment of the premiums by the surety on the bond. State v. Padgett, 54 N.D. 211, 209 N.W. 388, 1926 N.D. LEXIS 136 (N.D. 1926).

Real estate agent who was to receive commission from sale of real estate was only an incidental beneficiary of the contract of sale, so could not hold the purchaser liable for breach of the contract. Johnson v. Clark, 77 N.D. 14, 39 N.W.2d 431, 1949 N.D. LEXIS 51 (N.D. 1949).

Plaintiff was not a third-party beneficiary where there was no intent by the parties to the contract that plaintiff was to be expressly benefited thereby, and plaintiff’s benefit under the contract was merely an incidental benefit. O'Connell v. Entertainment Enters., 317 N.W.2d 385, 1982 N.D. LEXIS 209 (N.D. 1982).

Party who was an incidental beneficiary of the guaranty had no right to enforce the provisions of the guaranty. First Fed. Sav. & Loan Ass'n v. Compass Inv., 342 N.W.2d 214, 1983 N.D. LEXIS 441 (N.D. 1983).

A party only incidentally benefited by performance of a contract is not entitled to maintain an action to enforce it. Hellman v. Thiele, 413 N.W.2d 321, 1987 N.D. LEXIS 400 (N.D. 1987).

Where the evidence did not show that a contract was made “expressly for the benefit of” the plaintiff, the fact that plaintiff may have derived a benefit from the contract’s performance did not entitle him to sue to enforce that contract. Apache Corp. v. MDU Resources Group, Inc., 1999 ND 247, 603 N.W.2d 891, 1999 N.D. LEXIS 268 (N.D. 1999).

Insurance Contract.

Where a person applied for life insurance, paid the premium, and was led by the insurer’s agent to believe that the insurance was then in force, so that he did not seek other insurance, but where in fact the policy did not come into force because of the insurer’s unreasonable delay in processing the application, there was created such a relationship between the insurer and the intended insured that the intended beneficiary had a cause of action against the insurer after the intended insured’s death. Bekken v. Equitable Life Assurance Soc'y, 70 N.D. 122, 293 N.W. 200, 1940 N.D. LEXIS 154 (N.D. 1940).

Under fire insurance policy issued to corporation which operated a restaurant destroyed by a fire set by a mentally ill director/employee, neither the mortgagee bank nor the other corporate directors were entitled to third party beneficiary coverage. Kabob House v. Houston Gen. Ins. Co., 17 F. Supp. 2d 1090, 1997 U.S. Dist. LEXIS 22887 (D.N.D. 1997).

Invalid Contract.

This section does not apply when there was no valid contract because of want of consideration. McArthur v. Dryden, 6 N.D. 438, 71 N.W. 125, 1897 N.D. LEXIS 7 (N.D. 1897).

Liens Arising from Contract.

Though a third-party beneficiary to a contract for the sale of real estate may bring an action against the purchaser for the part of the purchase price that it was to receive, the third party may not foreclose the vendor’s lien for such purchase price. Bray v. Booker, 6 N.D. 526, 72 N.W. 933, 1897 N.D. LEXIS 32 (N.D. 1897).

Mention of Name in Agreement.

The mention of one’s name in an agreement does not give rise to a right to sue for enforcement of the agreement where that person is only incidentally benefited. Moen v. Norwest Bank of Minot, 647 F. Supp. 1333, 1986 U.S. Dist. LEXIS 17904 (D.N.D. 1986).

Modification of Contract.

An agreement between a bank and another party, whereby the debt of a third party to the bank would be discharged on the delivery of certain notes to the bank, was in effect modified when the bank issued and the other party accepted a receipt showing that the notes were received as collateral, not in discharge of the debt, and the third party could not enforce the original agreement. First Nat'l Bank v. Burdick, 51 N.D. 508, 200 N.W. 44, 1923 N.D. LEXIS 8 (N.D. 1923).

Modification of Contract and Rescission of Contract.

Third party was deprived of any right accorded him by contract made between two parties for his benefit where third party did not act to enforce rights until after rescission or modification of initial contract by the two primary parties. Kovash v. Transwestern, 197 N.W.2d 629, 1972 N.D. LEXIS 175 (N.D. 1972).

Public Contracts.

In a breach of contract action arising from a storm sewer improvement project, a no damages for delay clause controlled the parties’ contractual relationship and granted a third-party benefit to the city’s other contractors for delays caused by their neglect; therefore, under N.D.C.C. § 9-02-04, an engineering contractor was entitled to enforce that provision for delays caused by its neglect. Markwed Excavating, Inc. v. City of Mandan, 2010 ND 220, 791 N.W.2d 22, 2010 N.D. LEXIS 222 (N.D. 2010).

Rescission of Contract.

Where a third-party beneficiary has accepted the benefit of the contract and has acted thereon by sustaining the burden of litigation, a party who has stood by and permitted the third party’s actions cannot later rescind the contract. State Bank v. Schultze, 51 N.D. 66, 199 N.W. 138, 1924 N.D. LEXIS 136 (N.D. 1924).

Third-party beneficiaries may not enforce a contract that has been rescinded by the parties thereto while it was wholly executory and before action was brought to enforce it. Plott v. Kittelson, 58 N.D. 881, 228 N.W. 217, 1929 N.D. LEXIS 292 (N.D. 1929).

Party who has performed for the benefit of the third party cannot afterward rescind and recover the benefit from the third party, even though the contract was induced by fraud on the part of the other principal party to the contract, where the third party did not itself participate in the fraud. SHORES v. DAKOTA-MONTANA OIL CO., 61 N.D. 71, 237 N.W. 172, 1931 N.D. LEXIS 246 (N.D. 1931).

A contract for the care of a child may be terminated by the parties thereto by mutual consent and after such termination the child may not enforce the provisions therein for his benefit. KLEIN v. KLEIN, 69 N.D. 353, 286 N.W. 898, 1939 N.D. LEXIS 160 (N.D. 1939).

Collateral References.

Bonds: right of third person not named in bond or other contract conditioned for support of, or services to, another to recover thereon, 11 A.L.R.2d 1010.

Contract made in consideration of naming child as enforceable by child, 21 A.L.R.2d 1061.

Right of owner’s employee, injured by subcontractor, to recover against general contractor for breach of contract between latter and owner requiring contractor and subcontractors to carry insurance, 22 A.L.R.2d 647.

Reservation of right to terminate, rescind, or modify contract, as against third-party beneficiary, 44 A.L.R.2d 1270.

Tenant’s capacity to sue independent contractor, as a third-party beneficiary, for breach of contract between landlord and such contractor for repair or remodeling work, 46 A.L.R.2d 1210.

Liability, based on breach of contract, of one drawing invalid will to beneficiary named by him, 65 A.L.R.2d 1363, 1367.

Specific performance: power and standing of personal representative of deceased promisee to enforce a contract made for benefit of a third party, 76 A.L.R.2d 231.

Mutual rescission or release of contract as affecting rights of third-party beneficiary, 97 A.L.R.2d 1262.

Validity and construction of putative father’s promise to support or provide for illegitimate child, 20 A.L.R.3d 500.

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

CHAPTER 9-03 Consent

9-03-01. Requisites of consent.

The consent of the parties to a contract must be:

  1. Free;
  2. Mutual; and
  3. Communicated by each to the other.

Source:

Civ. C. 1877, § 876; R.C. 1895, § 3841; R.C. 1899, § 3841; R.C. 1905, § 5286; C.L. 1913, § 5842; R.C. 1943, § 9-0301.

Derivation:

Cal. Civ. C., 1565.

Notes to Decisions

Ambiguous Provision.

Argument that because a certain provision inserted in contract by plaintiff was ambiguous, and because defendants’ understanding of the ambiguous language was different from that of plaintiff, there was no “meeting of the minds” necessary to formulate an agreement between the two parties, was without merit. Johnson v. Mineral Estate, 371 N.W.2d 136, 1985 N.D. LEXIS 356 (N.D. 1985).

Economic Duress Doctrine.

In a case in which the trial court awarded plaintiffs damages and interest in their action against a water users district for breach of the lease-back provisions of an option agreement, the Supreme Court concluded that because North Dakota law does not recognize the economic duress doctrine, the trial court erred as a matter of law in relying on the doctrine to rescind the agreement. Finstad v. Ransom-Sargent Water Users, Inc., 2014 ND 146, 849 N.W.2d 165, 2014 N.D. LEXIS 147 (N.D. 2014).

Fraud.

Where the vice president of the bank fraudulently induced a debtor to enter into a $250,000 loan by making false statements, the debtor neither received the loan proceeds nor received the promised collateral for the obligation. Because the debtor’s consent was not freely given for purposes of N.D.C.C. § 9-03-01(1), he was entitled to rescind the loan. Am. Bank Ctr. v. Wiest, 2010 ND 251, 793 N.W.2d 172, 2010 N.D. LEXIS 255 (N.D. 2010).

District court properly granted a borrower summary judgment on a lender’s counterclaim for fraud in the inducement because the borrower did not have a fiduciary relationship with the lender; the borrower’s requirement that the lender enter into a lease agreement with a limited liability company as part of the ordinary underwriting process did not show a special circumstance giving rise to a fiduciary relationship between the borrower and the lender. Baker Boyer Nat'l Bank v. JPF Enters., LLC, 2019 ND 76, 924 N.W.2d 381, 2019 N.D. LEXIS 69 (N.D. 2019).

Free Consent.

Consent is not free when it is obtained by fraud, undue influence, or mistake. Mathias v. State Farmers' Mut. Hail Ins. Co., 40 N.D. 240, 168 N.W. 664, 1918 N.D. LEXIS 79 (N.D. 1918).

Lease.

District court properly granted a lessee summary judgment and dismissed an assignee's claims that an oil and gas lease terminated due the land manager's letter because the letter did not constitute a written contract required to modify the lease since it did not contain the elements for a valid contract; the letter did not establish a written agreement to modify the lessee's rights, and the lessors did not sign or otherwise communicate acceptance of the purported offer. Valentina Williston, LLC v. Gadeco, LLC, 2016 ND 84, 878 N.W.2d 397, 2016 N.D. LEXIS 84 (N.D. 2016).

Mistake of Fact.

If a contract is signed under a mistake of fact, there is no free or mutual consent thereto. Streeter v. Archer, 46 N.D. 251, 176 N.W. 826, 1920 N.D. LEXIS 2 (N.D. 1920).

Mutuality of Obligation.

Letter received by plaintiff from defendant corporation, which was alleged to be contract for sale of defendant’s equipment, was, at best, merely an offer since it lacked mutuality of obligation as required by this section. Stewart Equip. Co. v. Hilling Constr. Co., 175 N.W.2d 692, 1970 N.D. LEXIS 113 (N.D. 1970).

Sufficiency of Consent.

Agreement was a valid contract for the sale of a decedent’s farmstead and farmland because all four requirements of N.D.C.C. § 9-01-02 were met, and since the decedent was competent, he and a lessor were capable of contracting; both parties drafted and signed the same agreement, demonstrating consent to be bound by it, the agreement was unambiguous and reasonably definite and certain in its terms, and because the acreage was fixed at execution, the price too was fixed and was ascertainable. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

The consent of the parties to a contract must be free and mutual, and must be communicated by each to the other, and both parties must be bound or neither is bound. Shellburg v. Wilton Bank, 39 N.D. 530, 167 N.W. 721, 1917 N.D. LEXIS 151 (N.D. 1917).

Terms that completely described the type of business restriction, the duration of the restriction, and the geographic limitation of the restriction, left no doubt there were no other essential non-competition terms left for agreement between the parties, and objectively evidenced the parties mutual intent to create an enforceable non-competition agreement. Lire, Inc. v. Bob's Pizza Inn Restaurants, 541 N.W.2d 432, 1995 N.D. LEXIS 236 (N.D. 1995).

Where a title company sought payment for title work done on an oil company’s behalf, it was not clearly erroneous to find that the parties entered into an implied contract, because (1) the title company kept the oil company informed on the progress of the work the title company was doing on the oil company’s behalf, (2) the oil company never notified the title company that it had not accepted the terms of the contract and never disputed the steady flow of invoices detailing the work the title company was doing, and (3) the oil company benefited from the title work. B. J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, 727 N.W.2d 270, 2007 N.D. LEXIS 13 (N.D. 2007).

9-03-02. Absence of free consent — Effect.

A consent which is not free is not absolutely void, but may be rescinded by the parties in the manner prescribed by chapter 9-09.

Source:

Civ. C. 1877, § 877; R.C. 1895, § 3842; R.C. 1899, § 3842; R.C. 1905, § 5287; C.L. 1913, § 5843; R.C. 1943, § 9-0302.

Derivation:

Cal. Civ. C., 1566.

Notes to Decisions

Fraud in Compromise Settlement Agreement.

Although compromise settlement agreements are encouraged, they are voidable for fraud, like all contracts. Russell Land Co. v. Mandan Chrysler-Plymouth, Inc., 377 N.W.2d 549, 1985 N.D. LEXIS 428 (N.D. 1985).

In a case in which the trial court awarded plaintiffs damages and interest in their action against a water users district for breach of the lease-back provisions of an option agreement, the Supreme Court concluded that because North Dakota law does not recognize the economic duress doctrine, the trial court erred as a matter of law in relying on the doctrine to rescind the agreement. Finstad v. Ransom-Sargent Water Users, Inc., 2014 ND 146, 849 N.W.2d 165, 2014 N.D. LEXIS 147 (N.D. 2014).

9-03-03. What renders apparent consent not free.

An apparent consent is not real or free when obtained through:

  1. Duress;
  2. Menace;
  3. Fraud;
  4. Undue influence; or
  5. Mistake.

Source:

Civ. C. 1877, § 878; R.C. 1895, § 3843; R.C. 1899, § 3843; R.C. 1905, § 5288; C.L. 1913, § 5844; R.C. 1943, § 9-0303.

Derivation:

Cal. Civ. C., 1567.

Notes to Decisions

Doctrine of Economic Coercion or Business Compulsion.

Debtor could not escape operation of compromise and settlement contained in loan settlement agreement by arguing he was coerced into signing under duress because creditor would have foreclosed had he not signed since creditor had legal right not to renew or extend its loans although it ordinarily did so and had sufficient reason for not renewing or extending loans in case of this particular debtor. Production Credit Ass'n v. Geving, 218 N.W.2d 185, 1974 N.D. LEXIS 241 (N.D. 1974).

In a case in which the trial court awarded plaintiffs damages and interest in their action against a water users district for breach of the lease-back provisions of an option agreement, the Supreme Court concluded that because North Dakota law does not recognize the economic duress doctrine, the trial court erred as a matter of law in relying on the doctrine to rescind the agreement. Finstad v. Ransom-Sargent Water Users, Inc., 2014 ND 146, 849 N.W.2d 165, 2014 N.D. LEXIS 147 (N.D. 2014).

Fraud.

Knowingly to lead another into a mistake of law, and thereby to obtain the signature of such other to a promissory note, amounts to a fraud. Orth v. Procise, 38 N.D. 580, 165 N.W. 557, 1917 N.D. LEXIS 51 (N.D. 1917).

Although compromise settlement agreements are encouraged, they are voidable for fraud, like all contracts. Russell Land Co. v. Mandan Chrysler-Plymouth, Inc., 377 N.W.2d 549, 1985 N.D. LEXIS 428 (N.D. 1985).

Where the vice president of the bank fraudulently induced a debtor to enter into a $250,000 loan by making false statements, the debtor neither received the loan proceeds nor received the promised collateral for the obligation. Because the debtor’s consent was not freely given for purposes of N.D.C.C. § 9-03-03(3), he was entitled to rescind the loan. Am. Bank Ctr. v. Wiest, 2010 ND 251, 793 N.W.2d 172, 2010 N.D. LEXIS 255 (N.D. 2010).

District court properly granted a borrower summary judgment on a lender’s counterclaim for fraud in the inducement because the borrower did not have a fiduciary relationship with the lender; the borrower’s requirement that the lender enter into a lease agreement with a limited liability company as part of the ordinary underwriting process did not show a special circumstance giving rise to a fiduciary relationship between the borrower and the lender. Baker Boyer Nat'l Bank v. JPF Enters., LLC, 2019 ND 76, 924 N.W.2d 381, 2019 N.D. LEXIS 69 (N.D. 2019).

Intoxication.

In the absence of fraud on the part of the other contracting party, a person will not be relieved from a contract, otherwise valid, on the ground of intoxication alone, unless it is shown that the drunkenness was so excessive that the party was utterly deprived of his reason and understanding. Hauge v. Bye, 51 N.D. 848, 201 N.W. 159, 1924 N.D. LEXIS 81 (N.D. 1924).

Mistake.

A contract in form entered into by parties under a mutual mistake of law is not enforceable. Silander v. Gronna, 15 N.D. 552, 108 N.W. 544, 1906 N.D. LEXIS 66 (N.D. 1906).

A legal right of action to recover moneys paid under mistake arises out of the obligation imposed by law, and not out of contract. Chrysler Light & Power Co. v. Belfield, 58 N.D. 33, 224 N.W. 871, 1929 N.D. LEXIS 178 (N.D. 1929).

Undue Influence.

Consent obtained by undue influence, or by taking advantage of one’s weakness of mind, is not free. Shellburg v. Wilton Bank, 39 N.D. 530, 167 N.W. 721, 1917 N.D. LEXIS 151 (N.D. 1917).

Where an educated brother and sister-in-law of a mentally retarded person prevailed upon such mentally retarded person to make payments for which they themselves were liable, and the mentally retarded person did so in reliance upon a relationship of personal confidence existing between the parties, undue influence had been exercised by the more intelligent parties, and the consent given by the mentally retarded party was not free. Manikowske v. Manikowske, 136 N.W.2d 465, 1965 N.D. LEXIS 169 (N.D. 1965).

The trial court’s finding that there was no evidence that nephews sought or obtained any unfair advantage from their terminally ill uncle in negotiating a contract to purchase the uncle’s ranch and its assets was not clearly erroneous. Kuntz v. Kuntz, 1999 ND 114, 595 N.W.2d 292, 1999 N.D. LEXIS 94 (N.D. 1999).

Voluntary Payments.

This section does not apply to voluntary payments, but merely relates to the consent to an agreement. Jacobson v. Mohall Tel. Co., 34 N.D. 213, 157 N.W. 1033, 1916 N.D. LEXIS 20 (N.D. 1916).

9-03-04. When consent deemed voidable.

Consent is deemed to have been obtained through duress, menace, fraud, undue influence, or mistake only when it would not have been given except for one or more of them.

Source:

Civ. C. 1877, § 879; R.C. 1895, § 3844; R.C. 1899, § 3844; R.C. 1905, § 5289; C.L. 1913, § 5845; R.C. 1943, § 9-0304.

Derivation:

Cal. Civ. C., 1568.

Notes to Decisions

Fraud in Compromise Settlement Agreement.

Although compromise settlement agreements are encouraged, they are voidable for fraud, like all contracts. Russell Land Co. v. Mandan Chrysler-Plymouth, Inc., 377 N.W.2d 549, 1985 N.D. LEXIS 428 (N.D. 1985).

Intoxication.

In the absence of fraud on the part of the other contracting party, a person will not be relieved from a contract, otherwise valid, on the ground of intoxication alone, unless it is shown that the drunkenness was so excessive that the party was utterly deprived of his reason and understanding. Hauge v. Bye, 51 N.D. 848, 201 N.W. 159, 1924 N.D. LEXIS 81 (N.D. 1924).

9-03-05. Duress defined.

Duress consists in:

  1. Unlawful confinement of the person of a party to a contract, of the husband or wife of such party, or of an ancestor, descendant, or adopted child of such party, husband, or wife;
  2. Unlawful detention of the property of any such person; or
  3. Confinement of such person, lawful in form, but fraudulently obtained, or fraudulently made unjustly harassing or oppressive.

Source:

Civ. C. 1877, § 880; R.C. 1895, § 3845; R.C. 1899, § 3845; R.C. 1905, § 5290; C.L. 1913, § 5846; R.C. 1943, § 9-0305.

Derivation:

Cal. Civ. C., 1569.

Notes to Decisions

Economic Duress.

The doctrine of economic duress has not been expressly adopted in North Dakota as a defense to the enforcement of a contract. Mellon v. Norwest Bank, N.A., 493 N.W.2d 700, 1992 N.D. LEXIS 264 (N.D. 1992).

Judgment Paid Under Coercion.

The payment of a judgment under coercion or duress imposed by execution of legal process is not a waiver of the right to appeal. Signor v. Clark, 13 N.D. 35, 99 N.W. 68, 1904 N.D. LEXIS 19 (N.D. 1904).

Tax Paid Under Protest.

An illegal tax paid under protest to avoid the seizure of property is involuntary and may be recovered. St. Anthony & Dakota Elevator Co. v. Soucie, 9 N.D. 346, 83 N.W. 212, 1900 N.D. LEXIS 137 (N.D. 1900).

Collateral References.

Ratification of contract voidable for duress, 77 A.L.R.2d 426.

9-03-06. Menace defined.

Menace consists in a threat:

  1. Of unlawful confinement of the person of a party to a contract, of the husband or wife of such party, or of an ancestor, descendant, or adopted child of such party, husband, or wife, or of confinement of such person, lawful in form but fraudulently obtained, or fraudulently made unjustly harassing or oppressive;
  2. Of unlawful and violent injury to the person or property of any person specified in subsection 1 hereof; or
  3. Of injury to the character of any such person.

Source:

Civ. C. 1877, § 881; R.C. 1895, § 3846; R.C. 1899, § 3846; R.C. 1905, § 5291; C.L. 1913, § 5847; R.C. 1943, § 9-0306.

Derivation:

Cal. Civ. C., 1570.

9-03-07. Fraud classified.

Fraud is either actual or constructive.

Source:

Civ. C. 1877, § 882; R.C. 1895, § 3847; R.C. 1899, § 3847; R.C. 1905, § 5292; C.L. 1913, § 5848; R.C. 1943, § 9-0307.

Derivation:

Cal. Civ. C., 1571.

Notes to Decisions

Fraud in The Inducement.

District court properly granted a borrower summary judgment on a lender’s counterclaim for fraud in the inducement because the borrower did not have a fiduciary relationship with the lender; the borrower’s requirement that the lender enter into a lease agreement with a limited liability company as part of the ordinary underwriting process did not show a special circumstance giving rise to a fiduciary relationship between the borrower and the lender. Baker Boyer Nat'l Bank v. JPF Enters., LLC, 2019 ND 76, 924 N.W.2d 381, 2019 N.D. LEXIS 69 (N.D. 2019).

9-03-08. Actual fraud defined.

Actual fraud within the meaning of this title consists in any of the following acts committed by a party to the contract, or with the party’s connivance, with intent to deceive another party thereto or to induce the other party to enter into the contract:

  1. The suggestion as a fact of that which is not true by one who does not believe it to be true;
  2. The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true though that person believes it to be true;
  3. The suppression of that which is true by one having knowledge or belief of the fact;
  4. A promise made without any intention of performing it; or
  5. Any other act fitted to deceive.

Source:

Civ. C. 1877, § 883; R.C. 1895, § 3848; R.C. 1899, § 3848; R.C. 1905, § 5293; C.L. 1913, § 5849; R.C. 1943, § 9-0308.

Note.

This section was derived from the Field Civil Code, and was enacted by the Dakota Territory in 1866. See Bourgois v. Montana-Dakota Utilities Co., 466 N.W.2d 813 (1991).

Notes to Decisions

Burden of Proof.

Plaintiff has greater burden in tort action based on fraud than in contract action for rescission based on fraud; in tort, plaintiff must prove that assertion of fact was made by one who had no reasonable grounds for believing it to be true, whereas in contract plaintiff need only prove the assertion was made in manner not warranted by information of person making it. Nodak Oil Co. v. Mobil Oil Corp., 391 F. Supp. 276, 1975 U.S. Dist. LEXIS 13088 (D.N.D. 1975).

Conditional Use Permit.

District court did not err by dismissing landowners’ breach of contract and actual fraud claims against a township because the conditional use permit that was issued to the landowners was not a contract. Arnegard v. Arnegard Twp., 2018 ND 80, 908 N.W.2d 737, 2018 N.D. LEXIS 85 (N.D. 2018).

Corporate Knowledge.

Corporations know facts because those facts are in the minds of corporate officers or agents. To find that knowledge, one must look at the mind of the agent at the time of the transaction in regard to which notice or knowledge is sought to be imputed to the corporation. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Where a contractor sued a company for damages for payment of extra demolition work necessitated by the discovery of buried concrete at a construction site, summary judgment in favor of the contractor was appropriate on the claim of actual fraud as the evidence did not suggest that the company knew of the buried contract at the time of the contract in 1987, although it could be inferred from the evidence that the company knew of the buried contract in the 1970’s; however, summary judgment was inappropriate as to the claim for negligent misrepresentation under N.D.C.C. 9-03-08(2) as there were genuine issues of fact raised as to whether some of the concrete was discoverable and whether describing the project without including the buried concrete was warranted by the information available to the company. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Corporate Stock.

Where representations were made in a brochure prepared by the corporation that the Class A common stock in the corporation had sixty percent of the voting rights of the corporation and that the Class B stock had forty percent of the voting rights, and the corporation made these statements knowing that all the Class B stock had been subscribed to but that all the Class A stock had not, and the Class B stockholders were all among the management personnel and knew that they could prevent the Class A stockholders from acquiring the sixty percent vote ascribed to them in the statement, the supression of these facts constituted actual fraud. Adams v. Little Mo. Minerals Ass'n, 143 N.W.2d 659, 1966 N.D. LEXIS 179 (N.D. 1966).

Deceit.

Where a party sued to recover damages for fraudulent representations which induced him to exchange real property for corporate stock, the measure of recovery, after affirmation following discovery of the deceit, in the absence of a claim for special damages, was the difference in value between what was received and what would have been received had the representations been true. Beare v. Wright, 14 N.D. 26, 103 N.W. 632, 1905 N.D. LEXIS 36 (N.D. 1905).

The trial court’s finding that no damage ensued from the defendants’ “acts of deceit” or “attempts to defraud” required that the nominal damage award for those acts be reversed. Olson v. Fraase, 421 N.W.2d 820, 1988 N.D. LEXIS 89 (N.D. 1988).

Under this section, actual fraud requires either an intent to deceive or an intent to induce a party to contract. There must be an intent to deceive in those cases described in subsections one, three and four where the statute proscribes misrepresentations known or believed to be false. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Employer and building owner were granted summary judgment on a former employee’s fraud and deceit claims where she presented no evidence that two human resource employees knowingly made false statements to induce her into not filing a workers’ compensation claim for her dental injuries suffered as a result of several falls. Nagel v. Sykes Realty, Inc., 400 F. Supp. 2d 1198, 2005 U.S. Dist. LEXIS 28463 (D.N.D. 2005).

Definitions of Actual Fraud and Deceit.

The statutory definitions of actual fraud and deceit are similar. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Distinction Between Fraud and Deceit.

A fraud action brought under this chapter applies only to misrepresentations between parties to a contract, while deceit under the provisions of N.D.C.C. ch. 9-10, applies where there is no contract between the parties. Olson v. Fraase, 421 N.W.2d 820, 1988 N.D. LEXIS 89 (N.D. 1988).

Technically, fraud under this section applies only when there is a contract between the parties; deceit under N.D.C.C. § 9-10-02 applies when there is no contract between the parties, nevertheless, conduct can be both fraudulent and deceitful. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

The only significant distinction between the torts of fraud and deceit is whether the wrongdoer happens to be a party to a contract. The conduct prohibited under the separate statutory definitions of fraud and deceit is substantially identical and for purposes of the punitive damages statute, fraud and deceit are synonymous. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

A fraud action brought under this section applies to misrepresentations between parties to a contract, while deceit under N.D.C.C. § 9-10-02 applies where there is no contract between the parties. West v. Carlson, 454 N.W.2d 307, 1990 N.D. LEXIS 80 (N.D. 1990).

Technically, a fraud action brought under the provisions of this chapter, applies only to misrepresentations between parties to a contract, while deceit under the provisions of N.D.C.C. ch. 9-10, applies where there is no contract between the parties. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

A contract action for fraud brought under this section, applied only to misrepresentations between parties to a contract, while a tort action for deceit applied where there was no contract between the parties. State Bank v. Lindberg, 471 N.W.2d 470, 1991 N.D. LEXIS 107 (N.D. 1991).

Under North Dakota statutory definitions of “fraud” and “deceit,” the same conduct, a promise made without any intention of performing, can constitute both “deceit” and “fraud” although technically “fraud” applies to parties to a contract while “deceit” applies where there is no contract between the parties. Delzer v. United Bank, 527 N.W.2d 650, 1995 N.D. LEXIS 22 (N.D. 1995).

Expression of Opinion.

Mere expression of opinion by the seller as to the value of an apartment house is not misrepresentation. Sperle v. Weigel, 130 N.W.2d 315, 1964 N.D. LEXIS 134 (N.D. 1964).

Opinion on the subject of what plaintiff could earn as an insurance salesman was merely an expression of future possibilities and not actionable as fraud, because statements of value and predictions of future earnings or profits fall within the class of statements whose truth or falsity cannot be precisely determined. Kary v. Prudential Ins. Co. of Am., 541 N.W.2d 703, 1996 N.D. LEXIS 8 (N.D. 1996).

Where buyers purchased a property “as is” and contracted not to hold the seller liable for any non-disclosed or latent defects, and the buyers presented testimony of the seller’s alleged fraudulent statements regarding the profitability and condition of the property but presented no evidence showing the seller’s statements amounted to either fraud or deceit under N.D.C.C. §§ 9-03-08 or 9-10-02, the evidence presented at trial led to the conclusion that the seller’s statements did not rise to the level of fraud or deceit and the district court properly granted judgment as a matter of law. Statements of value and predictions of future earnings or profits fall within the class of statements whose truth or falsity cannot be precisely determined and which are not, therefore, actionable as misrepresentations of fact and statements of opinion, as, for example, expressions by the seller commending the thing he is selling, have been held not actionable even though they are false. Dahl v. Messmer, 2006 ND 166, 719 N.W.2d 341, 2006 N.D. LEXIS 169 (N.D. 2006).

Failure to Read.

The failure to read a document before signing does not excuse ignorance of its contents unless the party shows that he was prevented from reading it by fraud, artifice, or design by the other party or his authorized representative. Froholm v. Cox, 934 F.2d 959, 1991 U.S. App. LEXIS 10909 (8th Cir. N.D. 1991).

History of Section.

This section was first enacted by the Dakota Territory Legislative Assembly in 1866. The source for that enactment was the Field Civil Code. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Implied from Circumstances.

The element of fraud itself may be implied from the circumstances if those circumstances present a clear showing of deceptive conduct on the part of a debtor which indicates an intent on his part to cheat and deceive. In re Valeu, 57 B.R. 488, 1986 Bankr. LEXIS 6989 (Bankr. D.N.D. 1986).

Injury Produced.

False statements of a vendor of real estate in procuring the execution of a written contract for the purchase and sale thereof, which are neither attended nor followed by injury will not sustain an action for deceit. Sonnesyn v. Akin, 14 N.D. 248, 104 N.W. 1026, 1905 N.D. LEXIS 67 (N.D. 1905).

Fraud, in order to support either legal or equitable action, must have produced an injury. FEDERAL LAND BANK OF ST. PAUL v. KOSLOFSKY, 67 N.D. 322, 271 N.W. 907, 1937 N.D. LEXIS 85 (N.D. 1937).

Insufficient Information.

Unlike subsections one, three and four, subsection two requires no knowledge of or belief in falsity. Instead, it requires only a statement based on insufficient information. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Insufficient Proof.

Where a former employee alleged that she was deceived by her former employer because she was told that she was being placed on administrative leave when the employer actually planned to terminate her, the employee’s claim of deceit was dismissed because the record lacked sufficient evidence to support a finding that there was an intention to terminate the employee at the time she was first placed on administrative leave. Humann v. KEM Elec. Coop., Inc., 450 F. Supp. 2d 1006, 2006 U.S. Dist. LEXIS 63537 (D.N.D. 2006), aff'd, 497 F.3d 810, 2007 U.S. App. LEXIS 19136 (8th Cir. N.D. 2007).

In a foreclosure action, the bank’s assignee was properly granted summary judgment because the mortgagors’ judgment creditor waived its right to the alleged surplus from the sheriff’s sale by subordinating its judgment in an agreement with the bank, the creditor failed to prove that it was fraudulently induced into entering the agreement, the creditor’s constructive fraud claim failed because no qualifying duty existed between the bank and the creditor, and the bank’s agreement not to make a claim for reimbursement against the creditor for the sheriff’s fees and commissions constituted valid consideration for the agreement because a bona fide controversy existed regarding the fees and commissions. Anderson v. Zimbelman, 2014 ND 34, 842 N.W.2d 852, 2014 N.D. LEXIS 25 (N.D. 2014).

Debtors did not meet their burden of showing defendant lender induced by fraud debtor's parents' consent to transferring a deed to certain real property to debtors given that there was no evidence that there was a contract between the lender and the parents, nor was there evidence that the lender communicated directly with either of the parents about transferring the property. McDougall v. AgCountry Farm Credit Servs. (In re McDougall), 2017 Bankr. LEXIS 1905 (Bankr. D.N.D. July 10, 2017).

Intent to Defraud.

While actual fraud cannot exist unless an intent to deceive is present, intent to defraud is difficult to prove and can be proved circumstantially. Miller Enters. v. Dog N' Cat Pet Ctrs., 447 N.W.2d 639, 1989 N.D. LEXIS 208 (N.D. 1989).

Knowledge or Belief.

Under subdivisions (1) and (3) of this section, actual fraud includes an affirmative statement of a fact known to be false or the suppression of a fact known to be true. Thus, an essential element in a claim of actual fraud is defendant’s knowledge or belief. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Long Arm Jurisdiction.

Personal jurisdiction was properly exercised over a nonresident corporation because a company stated a prima facie fraud claim against the corporation of which a North Dakota resident was the focus, satisfying due process. Northstar Founders, LLC v. Hayden Capital USA, LLC, 2014 ND 200, 855 N.W.2d 614, 2014 N.D. LEXIS 204 (N.D. 2014).

Misrepresentation.

Fraud may also be characterized as misrepresentation where an action intended or expected by the perpetrator to result in forbearance or inaction causes such result. In re Valeu, 57 B.R. 488, 1986 Bankr. LEXIS 6989 (Bankr. D.N.D. 1986).

Trial court did not err in granting summary judgment in favor of the decedent’s second husband in a will contest because the decedent’s daughter failed to raise a genuine issue of material fact to support her claim of fraudulent misrepresentation under N.D.C.C. § 9-03-08, which alleged that her mother’s second “husband” induced the mother to marry him in order to inherit her estate even though he was not divorced from his first wife. While the lack of documentation of the husband’s divorce from his first wife may have raised an inference about the validity of the mother’s marriage, the lack of documentation was insufficient in itself to support either a reasonable inference that the husband engaged in fraudulent conduct or that the mother would not have devised to the husband the home the couple shared together for more than 20 years. Black v. Richmond (In re Estate of Richmond), 2005 ND 145, 701 N.W.2d 897, 2005 N.D. LEXIS 179 (N.D. 2005).

Where the vice president of the bank fraudulently induced a debtor to enter into a $250,000 loan by making false statements, the debtor neither received the loan proceeds nor received the promised collateral for the obligation. Because the debtor’s consent was not freely given for purposes of N.D.C.C. § 9-03-03(3), he was entitled to rescind the loan due to fraud under N.D.C.C. § 9-03-08. Am. Bank Ctr. v. Wiest, 2010 ND 251, 793 N.W.2d 172, 2010 N.D. LEXIS 255 (N.D. 2010).

District court erred in granting summary judgment to a mineral lessee because applying the parol evidence rule to prohibit consideration of the lessee’s alleged fraudulent conduct would allow it to perpetrate fraud and injustice where genuine issues of material fact remained as to whether the lessee made the alleged fraudulent misrepresentations and whether the mineral owners were thereby induced to enter into the leases with the lessee. Golden Eye Res., LLC v. Ganske, 2014 ND 179, 853 N.W.2d 544, 2014 N.D. LEXIS 181 (N.D. 2014).

Negligent Misrepresentation.

There is a statutory claim for relief based on negligent misrepresentation under subdivision (2) of this section. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

A statement made for the guidance of others which is not warranted by the information of the person making it is classified as negligent misrepresentation. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

A negligent misrepresentation claim in the state of North Dakota as between parties to a contract relates to a misrepresentation that allegedly induced one party to enter the contract or at least a misrepresentation in a contractual setting. Cooperative Power Ass'n v. Westinghouse Elec. Corp., 60 F.3d 1336, 1995 U.S. App. LEXIS 19967 (8th Cir. N.D. 1995).

The most reasonable interpretation of the bifurcated clause, “with intent to deceive another party thereto or to induce him to enter into the contract,” suggests that negligent misrepresentation attaches to the latter, intentional fraud to the former. Cooperative Power Ass'n v. Westinghouse Elec. Corp., 60 F.3d 1336, 1995 U.S. App. LEXIS 19967 (8th Cir. N.D. 1995).

Debtors did not meet their burden of showing defendant lender induced debtors' consent to granting a mortgage in transferred property by fraud because the lender representative's statements to debtors about a potential loan and refinancing agreement were predictions of a future event or his opinion about what might happen in the future, which did not constitute negligent misrepresentation. McDougall v. AgCountry Farm Credit Servs. (In re McDougall), 2017 Bankr. LEXIS 1905 (Bankr. D.N.D. July 10, 2017).

Corporation’s negligent misrepresentation claim against a party to an agreement to acquire oil and gas leases failed because the corporation did not allege any specific damage from the alleged misrepresentations; the corporation provided no evidence of any specific opportunities it forfeited or economic losses it incurred due to the alleged statements or omissions. Lonesome Dove Petroleum, Inc. v. Holt, 889 F.3d 510, 2018 U.S. App. LEXIS 11845 (8th Cir. N.D. 2018).

No Suppression of Truth.

Lessors presented no evidence that lessees suppressed or withheld any information from the plaintiffs. The lessors had the opportunity to and did read the leases and were given ample time to learn the terms of the leases before they executed them. The lessors did not engage in any misconduct in getting the plaintiffs to sign the leases and, the plaintiff lessors were familiar with oil and gas leases and were successful in obtaining separate leases for each quarter section of land. Froholm v. Cox, 934 F.2d 959, 1991 U.S. App. LEXIS 10909 (8th Cir. N.D. 1991).

Oil and Gas Lease.

An oil and gas lease may be rescinded for fraud perpetrated on lessors which induced execution of lease. Lanz v. Naddy, 82 N.W.2d 809, 1957 N.D. LEXIS 119 (N.D. 1957).

Party to the Contract.

Father of purchaser could be liable for fraud as a party to the contract where the father of the purchaser not only negotiated the terms of the agreement with the vendors, but paid $1,500 as earnest money and personally guaranteed purchaser’s (his son) $113,000 debt. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

Banker could be liable for fraud as a party to the contract where he financed the transaction, signed the consideration paragraph in the conveyance from the vendors to purchaser as purchaser’s agent, and handled closing and recording the documents to complete the deal, and also directly informed the vendor’s realtor, of his intention to finance purchaser’s down payment. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

Pleading Requirements.

In an averment of fraud, the circumstances constituting fraud must be stated in particularity. Miller Enters. v. Dog N' Cat Pet Ctrs., 447 N.W.2d 639, 1989 N.D. LEXIS 208 (N.D. 1989).

No particular form or language is required in alleging fraud, so long as the elements constituting fraud may be found from reading the whole pleading. However, when the plaintiff makes an allegation of fraud, the defendant must receive enough information to prepare a response and defense, and the plaintiff must apprise the defendant fairly of the charge. Miller Enters. v. Dog N' Cat Pet Ctrs., 447 N.W.2d 639, 1989 N.D. LEXIS 208 (N.D. 1989).

Proof of actual damage proximately caused by misrepresentation or nondisclosure is an essential element of a tort action for fraud and deceit, since courts cannot correct unconscientious acts which are followed by no loss or injury. Schneider v. Schaaf, 1999 ND 235, 603 N.W.2d 869, 1999 N.D. LEXIS 262 (N.D. 1999).

Language of the siblings’ petition, read as a whole, did not allege any facts with particularity which constituted fraud and the siblings were not entitled to claim fraud as a basis for voiding the personal representative’s deed; allegations of assumptions and understandings by a party to an agreement did not alone allege fraud by the other party to that agreement. Dionne v. Dionne (In re Estate of Dionne), 2009 ND 172, 772 N.W.2d 891, 2009 N.D. LEXIS 183 (N.D. 2009).

Positive Statement.

A positive statement as a fact upon a subject upon which a party had no positive knowledge, with intent to deceive, is a fraud. Knowlton v. Schultz, 6 N.D. 417, 71 N.W. 550, 1897 N.D. LEXIS 18 (N.D. 1897).

Premarital Agreements.

Unfulfilled oral promise could be evidence of the voluntariness of a premarital agreement, and parol or extrinsic evidence could be used to show agreement had no effect because of fraud, illegality or mistake, or because essential elements were not reduced to writing. Lutz v. Schneider (In re Estate of Lutz), 1997 ND 82, 563 N.W.2d 90, 1997 N.D. LEXIS 83 (N.D. 1997), dismissed, 1999 ND 121, 595 N.W.2d 590, 1999 N.D. LEXIS 113 (N.D. 1999).

Promise Without Intention of Performing.

A promise made with intent to deceive and without any intention to fulfill it is fraudulent. Tamlyn v. Peterson, 15 N.D. 488, 107 N.W. 1081, 1906 N.D. LEXIS 48 (N.D. 1906); Walters v. Rock, 18 N.D. 45, 115 N.W. 511, 1908 N.D. LEXIS 95 (N.D. 1908).

“A promise made without any intention of performing it” if made with the intent to induce another party to enter into a contract is actual fraud. Lanz v. Naddy, 82 N.W.2d 809, 1957 N.D. LEXIS 119 (N.D. 1957).

Even though fraud can be based upon a promise made without the intention to perform, under North Dakota law and the law generally, the burden is upon the party asserting fraud to establish the elements of fraud and among such elements is an intent to deceive. Hablas v. Armour & Co., 270 F.2d 71, 1959 U.S. App. LEXIS 4737 (8th Cir. N.D. 1959).

Evidence held to support the findings of the trial court that franchisor made promises of training and operating support to franchisee pet store owner without an intention of performing them, and judgment of the district court rescinding a franchise agreement for actual fraud could be affirmed. Miller Enters. v. Dog N' Cat Pet Ctrs., 447 N.W.2d 639, 1989 N.D. LEXIS 208 (N.D. 1989).

Purchase Without Notice.

Where fraud, at the inception of a contract and note, is established, the burden shifts to the endorsee to prove that he was a good faith purchaser, without notice, before maturity. Stevens v. Barnes, 43 N.D. 483, 175 N.W. 709, 1919 N.D. LEXIS 63 (N.D. 1919).

Real Estate Sale and Purchase.

Fraud may be predicated upon misrepresentations as to identity of a purchaser where vendor would not have entered into the contract had he known the identity of the purchaser. Stude v. Madzo, 217 N.W.2d 5, 1974 N.D. LEXIS 223, 1974 N.D. LEXIS 236 (N.D. 1974).

Reformation Based On Actual Fraud.

In a case in which a purchaser sued sellers for reformation of a warranty deed, reformation based on actual fraud did not apply to the purchaser’s claims, where the purchaser’s allegations related to fraudulent representations during negotiations and not fraudulent representations as to the contents of the written agreement. Heart River Partners v. Goetzfried, 2005 ND 149, 703 N.W.2d 330, 2005 N.D. LEXIS 186 (N.D. 2005).

Reliance on Statement of Fact.

A party to a contract, in the absence of knowledge putting him on inquiry, is justified in relying on statements of fact regarding the property involved. Moone v. Martin State Bank, 59 N.D. 352, 230 N.W. 11, 1930 N.D. LEXIS 149 (N.D. 1930).

Representations Without Intent to Deceive.

Where a party, believing them to be true, makes representations without intent to deceive and causing no damage, and such representations are warranted by information in possession of the party making them, the other party cannot rescind his contract. O'Hair v. Sutherland, 30 N.D. 103, 152 N.W. 123, 1915 N.D. LEXIS 104 (N.D. 1915).

Secret Trust.

Where upon a debtor’s conveyance of property by bill of sale a parol agreement reserved a trust in his favor not apparent in the bill of sale, the transaction was against public policy and fraudulent and void as to attaching creditors. Newell v. Wagness, 1 N.D. 62, 44 N.W. 1014 (1890), distinguished, Red River Valley Nat’l Bank v. North Star Boot & Shoe Co., 8 N.D. 432, 79 N.W. 880 (1899), Merchants’ State Bank v. Tufts, 14 N.D. 238, 103 N.W. 760, 116 Am. St. Rep. 682 (1905), Godman v. Olson, 38 N.D. 360, 165 N.W. 515 (1917) and Congress Candy Co. v. Farmer, 73 N.D. 174, 12 N.W.2d 796, 150 A.L.R. 1316 (1944), Merchants’ State Bank v. Tufts, 14 N.D. 238, 103 N.W. 760, 116 Am. St. Rep. 682 (1905), and Godman v. Olson, 38 N.D. 360, 165 N.W. 515, 1917 N.D. LEXIS 41 (N.D. 1917).

Standard of Proof.

Fraud is never presumed but must be proved by clear and convincing evidence. In re Valeu, 57 B.R. 488, 1986 Bankr. LEXIS 6989 (Bankr. D.N.D. 1986).

Summary Judgment.

Although actions involving state of mind, such as fraud, are not usually suited for disposition by summary judgment, if plaintiff fails to support his opposition to a motion with sufficient facts to show there is a genuine issue for trial and raise even a reasonable inference of the existence of an element essential to the claim, such as plaintiff’s reliance upon false or misleading representations, summary judgment is appropriate. Kary v. Prudential Ins. Co. of Am., 541 N.W.2d 703, 1996 N.D. LEXIS 8 (N.D. 1996).

The summary judgment dismissal of the plaintiffs’ fraud and deceit claim was affirmed where the plaintiffs presented no evidence showing a causal relationship between the activities involving lease extension agreements and their inability to actively farm their property. Schneider v. Schaaf, 1999 ND 235, 603 N.W.2d 869, 1999 N.D. LEXIS 262 (N.D. 1999).

When farmers brought claims of negligent misrepresentation and statutory fraud under this section against a grain seller regarding sale of feed pellets, dispute remained about whether insufficient evidence formed the basis of the grain seller’s statements regarding the quality of its pellets and its diagnosis of problems with the farmers’ herd; subdivision (2) of this section allowed for such claims. Doe v. Southwest Grain, 309 F. Supp. 2d 1119, 2004 U.S. Dist. LEXIS 2361 (D.N.D. 2004).

District court properly granted a borrower summary judgment on a lender’s counterclaim for fraud in the inducement because the borrower did not have a fiduciary relationship with the lender; the borrower’s requirement that the lender enter into a lease agreement with a limited liability company as part of the ordinary underwriting process did not show a special circumstance giving rise to a fiduciary relationship between the borrower and the lender. Baker Boyer Nat'l Bank v. JPF Enters., LLC, 2019 ND 76, 924 N.W.2d 381, 2019 N.D. LEXIS 69 (N.D. 2019).

Suppression of Truth.

Where the owner of corporate stock, having full knowledge of its character and condition, fails to disclose to another who conveys real property in exchange therefor, the company’s known insolvent condition, the grantor is entitled to a rescission of his deed. Liland v. Tweto, 19 N.D. 551, 125 N.W. 1032, 1910 N.D. LEXIS 41 (N.D. 1910).

Suppression of that which is true, by one having knowledge of fact and who is party to contract, with intent to deceive other party thereto or to induce him to enter into contract, constitutes “actual fraud”; inducement and reliance may be inferred from facts and attending circumstances of transaction although fraud must be proved by evidence that is clear, satisfactory and convincing. Verry v. Murphy, 163 N.W.2d 721, 1968 N.D. LEXIS 88 (N.D. 1968).

There can be fraud without the making of a positive false statement; suppression of a material fact, which a party is bound in good faith to disclose, is equivalent to a false representation. Diemert v. Johnson, 299 N.W.2d 546, 1980 N.D. LEXIS 304 (N.D. 1980).

Evidence and findings held to establish actual fraud by defendants who suppressed known material facts and made false assertions to induce the plaintiffs to exchange 400 acres in Cass County for smaller acreage in Gallatin County and assignment of defendants’ rights in a purchase agreement with a third party. West v. Carlson, 454 N.W.2d 307, 1990 N.D. LEXIS 80 (N.D. 1990).

Collateral References.

What constitutes “fraudulent” or “unconscionable” agreement or conduct within meaning of state consumer credit protection act, 42 A.L.R.4th 293.

Real-estate broker’s liability to purchaser for misrepresentation or nondisclosure of physical defects in property sold, 46 A.L.R.4th 546.

Criminal liability of pharmacy or pharmacist for welfare fraud in connection with supplying prescription drugs, 16 A.L.R.5th 390.

Fraud actions: right to recover for mental or emotional distress, 11 A.L.R.5th 88.

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

Product Defectiveness and Duty of Disclosure: Comment on Holcomb v. Zinke, 365 N.W.2d 507 (N.D. 1985), 62 N.D. L. Rev. 83 (1986).

Reconsidering the Reliance Rules: The Restatement of Contracts and Promissory Estoppel in North Dakota, 66 N.D. L. Rev. 317 (1990).

9-03-09. Constructive fraud defined.

Constructive fraud consists:

  1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault or anyone claiming under that person, by misleading another to the other’s prejudice or to the prejudice of anyone claiming under the other; or
  2. In any such act or omission as the law specially declares to be fraudulent without respect to actual fraud.

Source:

Civ. C. 1877, § 884; R.C. 1895, § 3849; R.C. 1899, § 3849; R.C. 1905, § 5294; C.L. 1913, § 5850; R.C. 1943, § 9-0309.

Derivation:

Cal. Civ. C., 1573.

Notes to Decisions

Arm’s Length Agreement.

The requisite fiduciary, confidential, or special relationship to establish constructive fraud does ordinarily exist when businesspersons deal with each other at arm’s length, and where a plaintiff did not offer any evidence to suggest that his agreement with defendant was not made at arm’s length or show that the fraud caused him actual damages, the trial court’s conclusion that plaintiff failed to establish constructive fraud would not be disturbed. Dahl v. ConAgra, Inc., 998 F.2d 619, 1993 U.S. App. LEXIS 17405 (8th Cir. N.D. 1993).

Bona Fide Sale of Goods.

A sale of goods to be considered bona fide with respect to creditors must be made without any trust, either express or implied. Newell v. Wagness, 1 N.D. 62, 44 N.W. 1014 (1890), distinguished, Red River Valley Nat’l Bank v. North Star Boot & Shoe Co., 8 N.D. 432, 79 N.W. 880 (1899), Merchants State Bank v. Tufts, 14 N.D. 238, 103 N.W. 760, 1905 N.D. LEXIS 45 (N.D. 1905), Godman v. Olson, 38 N.D. 360, 165 N.W. 515, 1917 N.D. LEXIS 41 (N.D. 1917) and Congress Candy Co. v. Farmer, 73 N.D. 174, 12 N.W.2d 796, 1944 N.D. LEXIS 52 (N.D. 1944).

Breach of Duty.

A breach of duty does not constitute constructive fraud unless coupled with the gaining of an advantage by the person in fault. Commercial Bank v. Adams County Abstract Co., 73 N.D. 645, 18 N.W.2d 15, 1945 N.D. LEXIS 81 (N.D. 1945).

Constructive Fraud Found.

Trustee clearly breached his fiduciary duty to act in the highest good faith by submitting a facially unenforceable claim for reimbursement going back over 111/2 years, and this breach created the basis of a presumption of constructive fraud. Thomas by & Through Schmidt v. Thomas (In re Estate of Thomas), 532 N.W.2d 676, 1995 N.D. LEXIS 106 (N.D. 1995).

Constructive Fraud Not Found.

In a case in which a purchaser sued sellers for reformation of a warranty deed, the trial court did not err in granting summary judgment to the sellers on the purchaser’s claims for reformation based on constructive fraud; because the sellers did not have an affirmative duty to disclose the existence of a tax assessment district to the purchaser, their failure to do so did not constitute constructive fraud. Heart River Partners v. Goetzfried, 2005 ND 149, 703 N.W.2d 330, 2005 N.D. LEXIS 186 (N.D. 2005).

District court properly granted a borrower summary judgment on a lender’s counterclaim for fraud in the inducement because the borrower did not have a fiduciary relationship with the lender; the borrower’s requirement that the lender enter into a lease agreement with a limited liability company as part of the ordinary underwriting process did not show a special circumstance giving rise to a fiduciary relationship between the borrower and the lender. Baker Boyer Nat'l Bank v. JPF Enters., LLC, 2019 ND 76, 924 N.W.2d 381, 2019 N.D. LEXIS 69 (N.D. 2019).

Definition.

Constructive fraud is any breach of duty which gains an advantage to the person at fault by misleading another to his or her prejudice. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Existence of Duty.

Whether or not a duty exists is a question of law. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

In a foreclosure action, the bank’s assignee was properly granted summary judgment because the mortgagors’ judgment creditor waived its right to the alleged surplus from the sheriff’s sale by subordinating its judgment in an agreement with the bank, the creditor failed to prove that it was fraudulently induced into entering the agreement, the creditor’s constructive fraud claim failed because no qualifying duty existed between the bank and the creditor, and the bank’s agreement not to make a claim for reimbursement against the creditor for the sheriff’s fees and commissions constituted valid consideration for the agreement because a bona fide controversy existed regarding the fees and commissions. Anderson v. Zimbelman, 2014 ND 34, 842 N.W.2d 852, 2014 N.D. LEXIS 25 (N.D. 2014).

Failure to Disclose Latent Defect.

Failure of the seller to disclose latent defects in the sewage, water, and heating systems constituted a breach of seller’s duty to disclose to the buyer known material facts that were not reasonably discoverable. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

In cases of passive concealment by the seller of defective real property, there is an exception to the rule of caveat emptor, which imposes a duty on the seller to disclose material facts that are known or should be known to the seller and would not be discoverable by the buyer’s exercise of ordinary care and diligence. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

No Presumption of Constructive Fraud.

The trial court correctly held that the foundational facts necessary for a presumption of constructive fraud were absent where the court found that a real estate brokerage firm, against whom purchaser of apartments claimed fraud by the brokerage firm in misrepresenting the apartments’ net operating income, supplied the purchaser with all the financial information from which it could have ascertained the exact net operating income of the apartments prior to the date of closing, and the court also found that the parties dealt with each other at arms-length. Land Office Co. v. Clapp-Thomssen Co., 442 N.W.2d 401, 1989 N.D. LEXIS 106 (N.D. 1989).

Price As Representation of Value.

The mere asking of a certain price for an apartment house was not a misrepresentation of its value. Sperle v. Weigel, 130 N.W.2d 315, 1964 N.D. LEXIS 134 (N.D. 1964).

Proof That Buyer Misled.

Proof that the sellers were paid a higher purchase price for their home than they would have received had they disclosed its true condition established that the sellers gained an advantage by their breach of duty by misleading the buyers to their prejudice. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Rescission.

Constructive fraud warrants rescission in the case of the sale of a home as an exception to the rule of caveat emptor. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Special Relationship.

Constructive fraud arises from the breach of a duty which is owed ordinarily because of a fiduciary or confidential or other special relationship between the parties. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

A fiduciary or confidential or other special relationship does not ordinarily exist when businesspersons deal with each other at arm’s length. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Sufficiency of Complaint.

Where the same business partners conducted four separate corporations in four separate cities which dealt in the same goods, and the complaint sought to render each of the corporations answerable for the torts of the others but did not allege use of one of the corporations as a cover for the others for an ulterior purpose, or that there was some unfair or fraudulent activity carried on by the corporations, or that the plaintiffs relied upon previous dealings with the corporations or individuals that led plaintiffs to believe they were dealing with one entity instead of separate corporate entities, or that the conduct of the four corporations was so intermingled and confused as to mislead the public, or that the four corporations were merely a front for the individuals named as defendants, no constructive fraud was alleged. Fire Ass'n v. Vantine Paint & Glass Co., 133 N.W.2d 426, 1965 N.D. LEXIS 170 (N.D. 1965).

Language of the siblings’ petition, read as a whole, did not allege any facts with particularity which constituted fraud and the siblings were not entitled to claim fraud as a basis for voiding the personal representative’s deed; allegations of assumptions and understandings by a party to an agreement did not alone allege fraud by the other party to that agreement. Dionne v. Dionne (In re Estate of Dionne), 2009 ND 172, 772 N.W.2d 891, 2009 N.D. LEXIS 183 (N.D. 2009).

District court did not abuse its discretion in denying a requester’s motion for leave to amend because the requester failed to plead sufficient facts with particularity to support a claim for deceit, including how he relied on allegedly false or misleading representations and what the specific misrepresentations were. Kuntz v. Bureau of Crim. Investigation, 2019 ND 46, 923 N.W.2d 513, 2019 N.D. LEXIS 53 (N.D. 2019).

Sufficiency of Proof.

A constructive fraud cannot be proved under an allegation of actual fraud. Pratt v. Huber Mfg. Co., 41 N.D. 301, 171 N.W. 246, 1918 N.D. LEXIS 167 (N.D. 1918).

Suppression of Material Fact.

Fraud may occur without the making of a false statement. The suppression of a material fact, which a party is bound in good faith to disclose, is equivalent to a false representation. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Collateral References.

What constitutes “fraudulent” or “unconscionable” agreement or conduct within meaning of state consumer credit protection act, 42 A.L.R.4th 293.

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

Product Defectiveness and Duty of Disclosure: Comment on Holcomb v. Zinke, 365 N.W.2d 507 (N.D. 1985), 62 N.D. L. Rev. 83 (1986).

9-03-10. Actual fraud is question of fact.

Actual fraud is always a question of fact.

Source:

Civ. C. 1877, § 885; R.C. 1895, § 3850; R.C. 1899, § 3850; R.C. 1905, § 5295; C.L. 1913, § 5851; R.C. 1943, § 9-0310.

Derivation:

Cal. Civ. C., 1574.

Notes to Decisions

Burden of Proof.

Verdict for defendants in action for fraud in issuance of debentures during bank reorganization, followed by redemption of debentures for cash, could be supported by finding that plaintiff did not show by a preponderance of the substantial evidence that there was actual fraud or that there was reliance on fraudulent representations or that actual damage resulted from the fraud. Buehner v. Hoeven, 228 N.W.2d 893, 1975 N.D. LEXIS 206 (N.D. 1975).

Inference from Facts.

Inducement and reliance may be inferred from facts and attending circumstances of transaction although fraud must be proved by evidence that is clear, satisfactory and convincing. Verry v. Murphy, 163 N.W.2d 721, 1968 N.D. LEXIS 88 (N.D. 1968).

No Presumption.

Fraud is never presumed. Pauly v. Haas, 84 N.W.2d 302, 1957 N.D. LEXIS 131 (N.D. 1957).

Purchase of Real Estate.

In an action to recover money paid for the purchase of real estate upon the ground that the plaintiff was fraudulently induced to enter into the contract of purchase, where evidence was conflicting, the question of whether or not the inducement was fraudulent was for the jury. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

Standard of Proof.

Fraud is a question of fact for the jury to determine, and the party alleging fraud must prove it by evidence that is clear and convincing. Benefiet v. Hoiby, 370 N.W.2d 513, 1985 N.D. LEXIS 339 (N.D. 1985).

Fraud must be proved by evidence that is clear and convincing to the finder of fact. Russell Land Co. v. Mandan Chrysler-Plymouth, Inc., 377 N.W.2d 549, 1985 N.D. LEXIS 428 (N.D. 1985).

9-03-11. Undue influence defined.

Undue influence consists:

  1. In the use, by one in whom a confidence is reposed by another or who holds a real or apparent authority over that person, of such confidence or authority for the purpose of obtaining an unfair advantage over that person;
  2. In taking an unfair advantage of another’s weakness of mind; or
  3. In taking a grossly oppressive and unfair advantage of another’s necessities or distress.

Source:

Civ. C. 1877, § 886; R.C. 1895, § 3851; R.C. 1899, § 3851; R.C. 1905, § 5296; C.L. 1913, § 5852; R.C. 1943, § 9-0311.

Derivation:

Cal. Civ. C., 1575.

Notes to Decisions

Intoxication.

In the absence of fraud on the part of the other contracting party, a person will not be relieved from a contract, otherwise valid, on the ground of intoxication alone, unless it is shown that the drunkenness was so excessive that the party was utterly deprived of his reason and understanding. Hauge v. Bye, 51 N.D. 848, 201 N.W. 159, 1924 N.D. LEXIS 81 (N.D. 1924); Christensen v. Larson, 77 N.W.2d 441, 1956 N.D. LEXIS 126 (N.D. 1956).

Mental Disability.

Where the brother and sister-in-law of a mentally disabled adult voluntarily assumed a relationship of personal confidence with their mentally disabled relative, and directed him to make payments on an insurance policy which it was their legal duty to pay as the result of the probate of a will, and where such brother and sister-in-law benefited from said insurance policy because the policy was not purchased as the will directed, unfair advantage had been taken of the mentally disabled person’s weakness of mind. Manikowske v. Manikowske, 136 N.W.2d 465, 1965 N.D. LEXIS 169 (N.D. 1965).

No Undue Influence Found.

The trial court’s finding that there was no evidence that nephews sought or obtained any unfair advantage from their terminally ill uncle in negotiating a contract to purchase the uncle’s ranch and its assets was not clearly erroneous. Kuntz v. Kuntz, 1999 ND 114, 595 N.W.2d 292, 1999 N.D. LEXIS 94 (N.D. 1999).

Trustee was entitled to summary judgment compelling the trustee’s brother to execute a trust’s purchase option because the facts, viewed most favorably to the brother and other family members, did not show the purchase option provision was the effect of the trustee’s undue influence on the parties’ mother, as (1) the statutory rebuttable influence presumption was not raised, (2) nothing showed the result of the trust appeared to be the effect of undue influence, (3) the purchase option carried over from the parties’ parents’ wills, (4) nothing showed the trustee exerted influence over the mother when the trust document was executed, and, (5) nothing showed what a fair distribution would have been in light of prior testamentary documents. Riskey v. Riskey, 2018 ND 214, 917 N.W.2d 488, 2018 N.D. LEXIS 222 (N.D. 2018).

Rescission.

A rescission may be had for undue influence, which consists in taking an unfair advantage of another’s weakness of mind. Buchanan v. Prall, 39 N.D. 423, 167 N.W. 488, 1918 N.D. LEXIS 38 (N.D. 1918).

Collateral References.

Ratification of contract voidable for duress, 77 A.L.R.2d 426.

9-03-12. Mistake classified.

Mistake may be either of fact or of law.

Source:

Civ. C. 1877, § 887; R.C. 1895, § 3852; R.C. 1899, § 3852; R.C. 1905, § 5297; C.L. 1913, § 5853; R.C. 1943, § 9-0312.

Derivation:

Cal. Civ. C., 1576.

Notes to Decisions

Mistake.

—Of Law.

Dismissal of a grantor’s complaint seeking reformation of a deed was appropriate because a reservation in the deed expressly providing the grantor with the right to hunt on any or all the premises was a severance of hunting rights from the surface rights that was prohibited by statute. Furthermore, the complaint clearly alleged a mistake of law in the context of ignorance of the law, not a misapprehension of the law, for which the remedy of reformation was not available as a matter of law. Hauer v. Zerr, 2020 ND 16, 937 N.W.2d 508, 2020 N.D. LEXIS 17 (N.D. 2020).

9-03-13. Mistake of fact defined.

Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake and consisting in:

  1. An unconscious ignorance or forgetfulness of a fact, past or present, material to the contract; or
  2. Belief in the present existence of a thing material to the contract which does not exist, or in the past existence of such a thing which has not existed.

Source:

Civ. C. 1877, § 888; R.C. 1895, § 3853; R.C. 1899, § 3853; R.C. 1905, § 5298; C.L. 1913, § 5854; R.C. 1943, § 9-0313.

Derivation:

Cal. Civ. C., 1577.

Notes to Decisions

Cancellation of Deed.

The right to have canceled by the federal courts a deed conveying land in North Dakota is governed by this section and N.D.C.C. § 9-09-02, as construed by the supreme court of this state. Bailes v. Advance-Rumley Thresher Co., 263 F. 676, 1920 U.S. App. LEXIS 2081 (8th Cir. N.D. 1920).

Computation Error.

In action for rescission of contract for sale of real estate on ground of mistake, where record disclosed that mistake of fact did exist due to mistake on part of seller’s clerk as to minimum for bids, such mistake was material to contract and rescission could be decreed under this section. Dvorak v. Kuhn, 175 N.W.2d 697, 1970 N.D. LEXIS 114 (N.D. 1970).

The vendor’s erroneous showing of 6.87 acres of real estate as the 4.65 acres to be conveyed created a mutual mistake of fact by the vendor and purchaser. Deichert v. Fitch, 424 N.W.2d 903, 1988 N.D. LEXIS 130 (N.D. 1988).

Defective Title to Land.

One who acquires title to land in ignorance of defects therein, and pays a mortgage upon the land, is subrogated to the rights of the mortgagee, and may have the release canceled. Hodge v. Dunlop, 49 N.D. 125, 190 N.W. 551, 1922 N.D. LEXIS 23 (N.D. 1922).

Equitable Rule Intact.

The equitable rule for reinstating a mortgage satisfied by mistake has not been altered by this section. Westgard v. Farstad Oil, 437 N.W.2d 522, 1989 N.D. LEXIS 60 (N.D. 1989).

Failure to Read Contract.

Failure to read contract at the time of signing is not a mistake of fact. Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606, 1951 N.D. LEXIS 93 (N.D. 1951).

Where a purchaser’s mistake of fact was caused by his failure to read the contract and thereby ascertain the type of agreement offered before signing it, he was deprived of any recovery, including rescission or reformation, on the basis of a mistake of fact, for the reason that his mistake of fact was caused by neglect of a legal duty. Rink v. NPN, Inc., 419 N.W.2d 194, 1988 N.D. LEXIS 29 (N.D. 1988).

Fraud, Mistake, or Accident.

Before a court examines the parties’ intentions under N.D.C.C. § 9-07-05, it must determine whether the case involves a relevant mistake of fact. This section provides the definition for mistake of fact. Biteler's Tower Serv. v. Guderian, 466 N.W.2d 141, 1991 N.D. LEXIS 16 (N.D. 1991).

Misdescription of Land.

Where by mistake a contract included land not intended by verbal agreement to be included, there was a mistake for which reform or rescission would be granted. Benesh v. Travelers' Ins. Co., 14 N.D. 39, 103 N.W. 405, 1905 N.D. LEXIS 17 (N.D. 1905).

Neglect of Legal Duty.

Bank that failed to ascertain type of securities offered before it purchased them did not exercise reasonable diligence and was thereby deprived of any recovery on basis of mistake of fact under this section. Security State Bank v. State, 181 N.W.2d 225, 1970 N.D. LEXIS 146 (N.D. 1970).

The mistake of fact which authorizes a decree of rescission or cancellation is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake. Bailes v. Advance-Rumley Thresher Co., 263 F. 676, 1920 U.S. App. LEXIS 2081 (8th Cir. N.D. 1920).

Where lessees’ failure to ascertain the true state of the title to property was the basis for their alleged mistake of fact, that mistake could not void the lease agreement, because they could have determined the true state of the title to the land in question before entering into the lease by checking the office of the register of deeds [now recorder]. Bangen v. Bartelson, 553 N.W.2d 754, 1996 N.D. LEXIS 216 (N.D. 1996).

Release of Claim.

Where plaintiff signed release mistakenly believing that he was releasing only his claim for damage to his car and was unaware of his possible claim for loss of consortium, plaintiff’s misunderstanding was not a mistake of fact or law as defined by statute and consequently mistake was not a ground for rescission under N.D.C.C. § 9-09-02(1). Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Plaintiff’s misunderstanding of the effect of the release he signed was not a mistake of fact under this section merely because he was aware of the facts as they really were. Rather, plaintiff’s erroneous belief that the release did not discharge his claim of loss of consortium resulted from his ignorance that under the facts he had such a claim. Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Rescission.

A mistake is not ground for rescission unless it is a mistake of the kind delineated in this section and N.D.C.C. § 9-03-14. Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Validity of Mortgage.

Where at the time the parties executed May, 1987 settlement agreement, promissory note, and warranty deed, they erroneously believed that April, 1984 collateral real estate mortgage was valid and enforceable, the parties’ mutual mistake as to the status of the collateral real estate mortgage was clearly material to the formation of the agreement. Viewed either as a mutual mistake of fact under subsection (2) of this section or of law under N.D.C.C. § 9-03-14(1), the parties’ erroneous belief as to the validity of the collateral real estate mortgage warranted rescission of the May, 1987 settlement agreement, note, and deed as a matter of law. Gust v. Peoples & Enderlin State Bank, 447 N.W.2d 914, 1989 N.D. LEXIS 209 (N.D. 1989).

9-03-14. Mistake of law defined.

Mistake of law constitutes a mistake within the meaning of this title only when it arises from:

  1. A misapprehension of the law by all parties, all supposing that they knew and understood it and all making substantially the same mistake as to the law; or
  2. A misapprehension of the law by one party of which the others are aware at the time of contracting, but which they do not rectify.

Source:

Civ. C. 1877, § 889; R.C. 1895, § 3854; R.C. 1899, § 3854; R.C. 1905, § 5299; C.L. 1913, § 5855; R.C. 1943, § 9-0314.

Derivation:

Cal. Civ. C., 1578.

Notes to Decisions

Mistake Not Shown.

Where neither bank nor seller was aware of purchase limitation of municipal bonds under N.D.C.C. § 40-57-10, there was no misunderstanding of law as provided for under subsection (1) of this section so as to justify rescission of purchase contract. Security State Bank v. State, 181 N.W.2d 225, 1970 N.D. LEXIS 146 (N.D. 1970).

Testimony did not support the argument that either party was laboring under a mistake of law when laboring under the false impression that, because stock was held in wife’s name alone, it could not become part of the marital estate for distribution upon their divorce. Clooten v. Clooten, 520 N.W.2d 843, 1994 N.D. LEXIS 189 (N.D. 1994).

Mutual Mistake.

A contract in form entered into by parties under a mutual mistake of law is not enforceable. Silander v. Gronna, 15 N.D. 552, 108 N.W. 544, 1906 N.D. LEXIS 66 (N.D. 1906).

Payments of Money.

This section does not apply to voluntary payments, but merely relates to the consent to an agreement. Jacobson v. Mohall Tel. Co., 34 N.D. 213, 157 N.W. 1033, 1916 N.D. LEXIS 20 (N.D. 1916).

If a city pays a part of a mother’s pension under a misapprehension as to the law, the payment is not voluntary, and the money must be refunded. City of Bismarck v. Burleigh County, 49 N.D. 205, 190 N.W. 811, 1922 N.D. LEXIS 40 (N.D. 1922).

A legal right of action to recover moneys paid under mistake arises out of the obligation imposed by law, and not out of contract. Chrysler Light & Power Co. v. Belfield, 58 N.D. 33, 224 N.W. 871, 1929 N.D. LEXIS 178 (N.D. 1929).

Receipt of Money.

The receipt of money paid under a mistake of law does not operate as an estoppel. Gjerstadengen v. Hartzell, 9 N.D. 268, 83 N.W. 230, 1900 N.D. LEXIS 142 (N.D. 1900).

Reformation of Contract.

Where a mistake of law results in the parties’ obvious failure to articulate their true and discoverable intent, reformation of the contract is available if justice and common sense require it; however, not all mistakes of law will justify reformation of a contract as ignorance of law must be distinguished, from misapprehension of law with which both parties are familiar. Hovden v. Lind, 301 N.W.2d 374, 1981 N.D. LEXIS 262 (N.D. 1981).

Release of Claim.

Where there was no evidence that defendant or the defendant’s insurance agent induced, shared or was aware of plaintiff’s ignorance of his possible claim for loss of consortium or of his misapprehension about the legal consequences of signing the release, plaintiff’s error as to the effect thereof was not a mistake of law. Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Where plaintiff signed release mistakenly believing that he was releasing only his claim for damage to his car and was unaware of his possible claim for loss of consortium, plaintiff’s misunderstanding was not a mistake of fact or law as defined by statute and consequently mistake was not a ground for rescission under N.D.C.C. § 9-09-02(1). Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Rescission.

Where a contract is induced under a misapprehension of the law by one party thereto, of which the other was aware, the contract may be rescinded. Hellebust v. Bonde, 42 N.D. 324, 172 N.W. 812, 1919 N.D. LEXIS 141 (N.D. 1919).

A mistake is not ground for rescission unless it is a mistake of the kind delineated in N.D.C.C. § 9-03-13 and this section. Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Signing Note.

Signature to promissory note was a mistake of law where signer signed the note relying on representations made to her by the cashier of a bank that she would never be liable on the note. Orth v. Procise, 38 N.D. 580, 165 N.W. 557, 1917 N.D. LEXIS 51 (N.D. 1917).

Validity of Mortgage.

Where at the time the parties executed May, 1987 settlement agreement, promissory note, and warranty deed, they erroneously believed that April, 1984 collateral real estate mortgage was valid and enforceable, the parties’ mutual mistake as to the status of the collateral real estate mortgage was clearly material to the formation of the agreement. Viewed either as a mutual mistake of fact under N.D.C.C. § 9-03-13(2) or of law under subsection (1) of this section, the parties’ erroneous belief as to the validity of the collateral real estate mortgage warranted rescission of the May, 1987 settlement agreement, note, and deed as a matter of law. Gust v. Peoples & Enderlin State Bank, 447 N.W.2d 914, 1989 N.D. LEXIS 209 (N.D. 1989).

Collateral References.

Mistake or fraud in agreement to drop or compromise will contest or withdraw objections to probate, 42 A.L.R.2d 1319, 1365.

9-03-15. Mistake of foreign laws.

Mistake of foreign laws is a mistake of fact.

Source:

Civ. C. 1877, § 890; R.C. 1895, § 3855; R.C. 1899, § 3855; R.C. 1905, § 5300; C.L. 1913, § 5856; R.C. 1943, § 9-0315.

Derivation:

Cal. Civ. C., 1579.

9-03-16. Mutual consent defined.

Consent is not mutual unless the parties all agree upon the same thing in the same sense. In certain cases defined in chapter 9-07, they are to be deemed so to agree without regard to the fact.

Source:

Civ. C. 1877, § 891; R.C. 1895, § 3856; R.C. 1899, § 3856; R.C. 1905, § 5301; C.L. 1913, § 5857; R.C. 1943, § 9-0316.

Derivation:

Cal. Civ. C., 1580.

Notes to Decisions

Adequacy of Consideration.

Agreement was a valid contract for the sale of a decedent’s farmstead and farmland because all four requirements of N.D.C.C. § 9-01-02 were met, and since the decedent was competent, he and a lessor were capable of contracting; both parties drafted and signed the same agreement, demonstrating consent to be bound by it, the agreement was unambiguous and reasonably definite and certain in its terms, and because the acreage was fixed at execution, the price too was fixed and was ascertainable. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

Agreement to Agree.

Although an agreement to agree is enforceable if its terms are reasonably certain and definite, provisions in an employment contract concerning an incentive bonus program, a salary deferral program and a severance package clearly indicated that further negotiation was contemplated and were too indefinite to be enforceable. Stout v. Fisher Indus., Inc., 1999 ND 218, 603 N.W.2d 52, 1999 N.D. LEXIS 239 (N.D. 1999).

Assent.

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Lack of Agreement to Essential Terms.

“Purchase Agreement” and “Amendment to the Purchase Agreement” the sellers received was an offer from the buyer to purchase the property; although the sellers signed the agreement, the district court found the sellers made substantive changes and additions to the agreement and the parties did not agree upon the essential terms. The sellers made substantive changes to the agreement before signing it and their acceptance was not unqualified; the evidence supported the finding that the parties did not agree to the essential terms of the agreement and the sellers’ modifications to the agreement constituted a counteroffer. Ehlen v. Melvin, 2012 ND 246, 823 N.W.2d 780, 2012 N.D. LEXIS 252 (N.D. 2012).

Lack of Consideration.

Equity will not decree the specific performance of a writing which lacks consideration and mutual assent of the signers to all of the terms thereof. Kaster v. Mason, 13 N.D. 107, 99 N.W. 1083, 1904 N.D. LEXIS 25 (N.D. 1904).

Lease.

District court properly granted a lessee summary judgment and dismissed an assignee's claims that an oil and gas lease terminated due the land manager's letter because the letter did not constitute a written contract required to modify the lease since it did not contain the elements for a valid contract; the letter did not establish a written agreement to modify the lessee's rights, and the lessors did not sign or otherwise communicate acceptance of the purported offer. Valentina Williston, LLC v. Gadeco, LLC, 2016 ND 84, 878 N.W.2d 397, 2016 N.D. LEXIS 84 (N.D. 2016).

Parol Evidence.

If a contract is ambiguous, parol evidence is admissible to explain existing essential terms or to show the parties’ intent. Thompson v. Thompson, 391 N.W.2d 608, 1986 N.D. LEXIS 374 (N.D. 1986).

Unaddressed Issue.

Bankruptcy court did not err in denying creditor claims for unauthorized taxes assessed through the debtor’s horse wagering service business and returned by the state; an alleged oral rebating agreement did not anticipate a retroactive change in taxes and thus lacked mutual intention to allocate the money. PW Enters. v. Bala (In re Racing Servs.), — F. Supp. 3d —, 617 B.R. 641, 2020 U.S. Dist. LEXIS 106642 (D.N.D. 2020), aff'd, 854 Fed. Appx. 777, 2021 U.S. App. LEXIS 22883 (8th Cir. N.D. 2021).

9-03-17. Communication of consent.

Consent can be communicated with effect only by some act or omission of the party contracting by which the party intends to communicate it, or which necessarily tends to such communication.

Source:

Civ. C. 1877, § 892; R.C. 1895, § 3857; R.C. 1899, § 3857; R.C. 1905, § 5302; C.L. 1913, § 5858; R.C. 1943, § 9-0317.

Derivation:

Cal. Civ. C., 1581.

Notes to Decisions

Payment of Money.

A legal right of action to recover moneys paid under mistake arises out of the obligation imposed by law, and not out of contract. Chrysler Light & Power Co. v. Belfield, 58 N.D. 33, 224 N.W. 871, 1929 N.D. LEXIS 178 (N.D. 1929).

9-03-18. Mode of communication of acceptance.

If a proposal prescribes any conditions concerning the communication of its acceptance, the proposer is not bound unless they are conformed to. In other cases any reasonable and usual mode may be adopted.

Source:

Civ. C. 1877, § 893; R.C. 1895, § 3858; R.C. 1899, § 3858; R.C. 1905, § 5303; C.L. 1913, § 5859; R.C. 1943, § 9-0318.

Derivation:

Cal. Civ. C., 1582.

Collateral References.

Difference between offer and acceptance as regards place as variance preventing consummation of contract, 3 A.L.R.2d 256.

Oral acceptance of written offer by party sought to be charged as satisfying statute of frauds, 30 A.L.R.2d 972.

Variance between offer and acceptance in regard to title as affecting consummation of contract for sale of real property, 16 A.L.R.3d 1424.

9-03-19. When consent communicated.

Consent is deemed to be communicated fully between the parties as soon as the party accepting a proposal has put that party’s acceptance in the course of transmission to the proposer in conformity to section 9-03-18.

Source:

Civ. C. 1877, § 894; R.C. 1895, § 3859; R.C. 1899, § 3859; R.C. 1905, § 5304; C.L. 1913, § 5860; R.C. 1943, § 9-0319.

Derivation:

Cal. Civ. C., 1583.

Notes to Decisions

Lack of Mutual Assent.

District court erred in determining a document became a part of the contract for the sale of a decedent’s farmstead and farmland because the document failed for lack of mutual assent; a lessor did not accept the document prior to the decedent’s death and thus, did not timely accept those additional terms. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

9-03-20. Acts constituting acceptance.

Performance of the conditions of a proposal, or the acceptance of the consideration offered with a proposal, is an acceptance of the proposal.

Source:

Civ. C. 1877, § 895, R.C. 1895, § 3860; R.C. 1899, § 3860; R.C. 1905, § 5305; C.L. 1913, § 5861; R.C. 1943, § 9-0320.

Derivation:

Cal. Civ. C., 1584.

Notes to Decisions

No Condition on Acceptance Found.

Trial court had not erroneously applied N.D.C.C. § 9-03-20 when it found that a subcontractor had not conditioned the acceptance of his oral quote for a road construction project on the contractor’s securing of a gravel pit for the aggregate and nor was it error for the court to have found that the subcontractor had orally contracted to provide the aggregate for $ 2 per cubic yard. Edward H. Schwartz Constr., Inc. v. Driessen, 2006 ND 15, 709 N.W.2d 733, 2006 N.D. LEXIS 15 (N.D. 2006).

Summary Judgment.

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Collateral References.

Private contests and lotteries: entrants’ rights and remedies, 64 A.L.R.4th 1021.

9-03-21. Acceptance must be absolute.

Except as provided by section 41-02-14, an acceptance must be absolute and unqualified, or must include in itself an acceptance of that character which the proposer can separate from the rest and which will conclude the person accepting. A qualified acceptance is a new proposal.

Source:

Civ. C. 1877, § 896; R.C. 1895, § 3861; R.C. 1899, § 3861; R.C. 1905, § 5306; C.L. 1913, § 5862; R.C. 1943, § 9-0321; S.L. 1965, ch. 296, § 3.

Derivation:

Cal. Civ. C., 1585.

Notes to Decisions

Counter Proposal.

Where plaintiff in contract action made offer to defendant, defendant replied with suggestions for modifications in letter, plaintiff sent agreement of purchase and sale which varied terms of counter proposal, and defendant never signed counter offer, there was no meeting of minds and no contract. Greenberg v. Stewart, 236 N.W.2d 862, 1975 N.D. LEXIS 147 (N.D. 1975).

“Purchase Agreement” and “Amendment to the Purchase Agreement” the sellers received was an offer from the buyer to purchase the property; although the sellers signed the agreement, the district court found the sellers made substantive changes and additions to the agreement and the parties did not agree upon the essential terms. The sellers made substantive changes to the agreement before signing it and their acceptance was not unqualified; the evidence supported the finding that the parties did not agree to the essential terms of the agreement and the sellers’ modifications to the agreement constituted a counteroffer. Ehlen v. Melvin, 2012 ND 246, 823 N.W.2d 780, 2012 N.D. LEXIS 252 (N.D. 2012).

Donation of Building Site.

The acceptance of a proposed donation or dedication of a building site to the public must be absolute to be effective. Grow v. Taylor, 23 N.D. 469, 137 N.W. 451, 1912 N.D. LEXIS 115 (N.D. 1912).

Qualified Acceptance.

Where a qualified acceptance of an offer by letter, amounting to a new proposal, was never accepted, there was no contract. First State Bank v. Hardgrove, 57 N.D. 396, 222 N.W. 265, 1928 N.D. LEXIS 142 (N.D. 1928).

Collateral References.

Difference between offer and acceptance as regards place of payment or of delivery as variance preventing consummation of contract, 3 A.L.R.2d 256.

Attaching condition to acceptance, or acceptance on different terms, of option for repurchase by vendor, 44 A.L.R.2d 342, 345.

Acceptance of offer for sale of realty subject to added condition that title must be satisfactory to purchaser, 47 A.L.R.2d 455, 461.

Variance between offer and acceptance in regard to title as affecting consummation of contract for sale of real property, 16 A.L.R.3d 1424.

9-03-22. When proposal revocable.

A proposal may be revoked at any time before its acceptance is communicated to the proposer, but not afterwards, except as provided by section 41-02-12.

Source:

Civ. C. 1877, § 897; R.C. 1895, § 3862; R.C. 1899, § 3862; R.C. 1905, § 5307; C.L. 1913, § 5863; R.C. 1943, § 9-0322; S.L. 1965, ch. 296, § 4.

Derivation:

Cal. Civ. C., 1586.

Notes to Decisions

Acceptance After Offer Withdrawn.

Where the trial court found as a fact that the offeree mailed his acceptance letter after a telephone conversation in which the offeror informed him that the terms contained in a previous letter were withdrawn, no enforceable contract was formed and, therefore, the trial court correctly dismissed the action seeking specific performance. Farley v. Champs Fine Foods, 404 N.W.2d 493, 1987 N.D. LEXIS 299 (N.D. 1987).

Purchase Order.

Until the acceptance thereof, an order to purchase machinery is not a contract and may be revoked. Reeves & Co. v. Bruening, 13 N.D. 157, 100 N.W. 241, 1904 N.D. LEXIS 28 (N.D. 1904).

9-03-23. How proposal may be revoked.

A proposal is revoked:

  1. By the communication of notice of revocation by the proposer to the other party in the manner prescribed by sections 9-03-17 and 9-03-19 before the latter’s acceptance has been communicated to the former;
  2. By the lapse of the time prescribed in such proposal for its acceptance, or if no time is so prescribed, the lapse of a reasonable time without communication of the acceptance;
  3. By the failure of the acceptor to fulfill a condition precedent to acceptance; or
  4. By the death or insanity of the proposer before acceptance of the proposal.

Source:

Civ. C. 1877, § 898; R.C. 1895, § 3863; R.C. 1899, § 3863; R.C. 1905, § 5308; C.L. 1913, § 5864; R.C. 1943, § 9-0323.

Derivation:

Cal. Civ. C., 1587.

Notes to Decisions

Lack of Mutual Assent.

District court erred in determining a document became a part of the contract for the sale of a decedent’s farmstead and farmland because the document failed for lack of mutual assent; a lessor did not accept the document prior to the decedent’s death and thus, did not timely accept those additional terms. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

Proposal Not Revoked.

Court did not err in finding that the offer by a subcontractor to contractor to supply aggregate was not revoked due to the lapse of a reasonable time between the offer and acceptance under N.D.C.C. § 9-03-23(2) where the contractor told the subcontractor in May of 2002 that he had the low bid and that he intended to use the subcontractor’s bid in calculating the contractor’s bid for the project and, although there was evidence in the record about industry standards of a five to ten day acceptance period for a subcontractor’s quote, there was also evidence in the record that industry standards established a contract between a prime contractor and a subcontractor if the subcontractor knew the prime contractor was relying on the subcontractor’s quote and the prime contractor was awarded the contract based upon that quote. There was evidence in the record which supported the creation of an oral contract between the parties in May 2002, when the contractor relied on the subcontractor’s quote and in June 2002, when the subcontractor agreed to do the job and the contract did not fail because of lack of timely acceptance. Edward H. Schwartz Constr., Inc. v. Driessen, 2006 ND 15, 709 N.W.2d 733, 2006 N.D. LEXIS 15 (N.D. 2006).

Collateral References.

Private contests and lotteries: entrants’ rights and remedies, 64 A.L.R.4th 1021.

9-03-24. Ratification as consent.

A contract which is voidable solely for want of due consent may be ratified by a subsequent consent.

Source:

Civ. C. 1877, § 899; R.C. 1895, § 3864; R.C. 1899, § 3864; R.C. 1905, § 5309; C.L. 1913, § 5865; R.C. 1943, § 9-0324.

Derivation:

Cal. Civ. C., 1588.

Cross-References.

Minors’ contracts, see ch. 14-10.

Ratification of agency, see § 3-01-08.

9-03-25. Acceptance of benefit equivalent to consent.

A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it so far as the facts are known or ought to be known to the person accepting.

Source:

Civ. C. 1877, § 900; R.C. 1895, § 3865; R.C. 1899, § 3865; R.C. 1905, § 5310; C.L. 1913, § 5866; R.C. 1943, § 9-0325.

Derivation:

Cal. Civ. C., 1589.

Notes to Decisions

Applicability.

This section was inapplicable where plaintiffs did not voluntarily accept money as a benefit of lease agreement but accepted it as a benefit of trial court’s judgment. Bangen v. Bartelson, 553 N.W.2d 754, 1996 N.D. LEXIS 216 (N.D. 1996).

Where a title company sought payment for title work done on an oil company’s behalf, it was not clearly erroneous to find that the parties entered into an implied contract, because (1) the title company kept the oil company informed on the progress of the work the title company was doing on the oil company’s behalf, (2) the oil company never notified the title company that it had not accepted the terms of the contract and never disputed the steady flow of invoices detailing the work the title company was doing, and (3) the oil company benefited from the title work. B. J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, 727 N.W.2d 270, 2007 N.D. LEXIS 13 (N.D. 2007).

Defendant was not bound to an area of mutual interest agreement (AMI) under North Dakota law because it voluntarily accepted the benefits of a transaction, as plaintiffs could not point to any evidence of conduct on the part of defendant that was inconsistent with its interpretation of the assignment — namely, that it refused to accept assignment of the AMI agreement in its dealings with another defendant. Spring Creek Exploration & Prod. Co., LLC v. Hess Bakken Invs. II, LLC, 882 F.3d 1176, 2018 U.S. App. LEXIS 4096 (10th Cir. Colo. 2018), op. withdrawn, sub. op., 2018 U.S. App. LEXIS 9803 (10th Cir. Colo. Apr. 10, 2018), op. withdrawn, sub. op., 887 F.3d 1003, 2018 U.S. App. LEXIS 9376 (10th Cir. 2018).

Court rejected plaintiffs’ argument that this statute bound defendant to an area of mutual interest (AMI) agreement because the defendant voluntarily accepted the benefits of a broader agreement; two arguments were unavailing because they were unmoored from any benefits that would relate to being a party to the AMI Agreement, as opposed to other portions of the multifaceted broader agreement. Spring Creek Exploration & Prod. Co., LLC v. Hess Bakken Invs. II, LLC, 2018 U.S. App. LEXIS 9803 (10th Cir. Colo. Apr. 10, 2018).

Corporation.

In a breach of contract case, there was no error in failing to dismiss a corporation as a party to the action, even though there was no pre-incorporation contract, because the corporation had knowledge of all of the material facts surrounding a transaction where a contractor was the principal shareholder and registered agent of the corporation, and he testified that the corporation received payments under the contract and that the project at issue became the corporation’s at some point. The evidence did not support a finding that a pre-incorporation contract existed based on the date that the corporation came into existence. Westby v. Schmidt, 2010 ND 44, 779 N.W.2d 681, 2010 N.D. LEXIS 41 (N.D. 2010).

Repudiation.

A party who accepts the benefits of a transaction cannot repudiate the same. Morris v. Ewing, 8 N.D. 99, 76 N.W. 1047, 1898 N.D. LEXIS 18 (N.D. 1898).

Summary Judgment.

Ambiguity existed as to whether an assignment of an interest in oil and gas leases and lands included an area of mutual interest clause in a letter agreement, and the recording of the letter agreement did not conclusively establish that an assignee had voluntarily accepted the benefit of the transaction; thus, summary judgment finding that the assignment included the clause was improper. Golden v. SM Energy Co., 2013 ND 17, 826 N.W.2d 610, 2013 N.D. LEXIS 17 (N.D. 2013).

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Waiver of Rights.

Acceptance of a deed under a decree of specific performance was not a waiver of right of action for damages for injury to the property committed subsequent to the entering into the contract so specifically enforced. Smith v. Bradley, 27 N.D. 613, 147 N.W. 784, 1914 N.D. LEXIS 83 (N.D. 1914).

CHAPTER 9-04 Object

9-04-01. Definition.

The object of a contract is the thing which it is agreed on the part of the party receiving the consideration to do or not to do.

Source:

Civ. C. 1877, § 901; R.C. 1895, § 3866; R.C. 1899, § 3866; R.C. 1905, § 5311; C.L. 1913, § 5867; R.C. 1943, § 9-0401.

Derivation:

Cal. Civ. C., 1595.

9-04-02. Requisites of object.

The object of a contract must be lawful when the contract is made and possible and ascertainable by the time the contract is to be performed. Everything is deemed possible except that which is impossible in the nature of things.

Source:

Civ. C. 1877, §§ 902, 903; R.C. 1895, §§ 3867, 3868; R.C. 1899, §§ 3867, 3868; R.C. 1905, §§ 5312, 5313; C.L. 1913, §§ 5868, 5869; R.C. 1943, § 9-0402.

Derivation:

Cal. Civ. C., 1596, 1597.

9-04-03. Unlawful, impossible, or unascertainable object voids contract.

When a contract has but a single object, and such object is unlawful in whole or in part, or wholly impossible of performance, or so vaguely expressed as to be wholly unascertainable, the entire contract is void.

Source:

Civ. C. 1877, § 904; R.C. 1895, § 3869; R.C. 1899, § 3869; R.C. 1905, § 5314; C.L. 1913, § 5870; R.C. 1943, § 9-0403.

Derivation:

Cal. Civ. C., 1598.

Notes to Decisions

Cattle Feeding Contract.

Agreement, whereby one party agreed to use his credit to borrow money for purchase of cattle and feed, second party would feed and care for the cattle at his feedlot, and the “finished” cattle would be sold for a sizable profit, was not so unduly uncertain and indefinite as to prevent formation of a valid contract. State Bank v. Rauh, 288 N.W.2d 299, 1980 N.D. LEXIS 180 (N.D. 1980).

Party to Contract.

Insurer argued that the frustration or impossibility was caused by the agent, a party to the local agent’s agreements; therefore, the district court did not err in ruling that neither doctrine applied as neither doctrine applied if the frustration or impossibility was caused by one of the contracting parties. Huber v. Farmers Union Serv. Ass'n of N.D., 2010 ND 151, 787 N.W.2d 268, 2010 N.D. LEXIS 155 (N.D. 2010).

Vagueness.

Vague and indefinite contract to sell livestock business was not subject to specific performance. Mandan-Bismarck Livestock Auction v. Kist, 84 N.W.2d 297, 1957 N.D. LEXIS 130 (N.D. 1957).

9-04-04. Several objects, part unlawful, contract void.

When a contract has several distinct objects, of which one at least is lawful and one at least is unlawful in whole or in part, the contract is void as to the latter and valid as to the rest.

Source:

Civ. C. 1877, § 905; R.C. 1895, § 3870; R.C. 1899, § 3870; R.C. 1905, § 5315; C.L. 1913, § 5871; R.C. 1943, § 9-0404.

Derivation:

Cal. Civ. C., 1599.

CHAPTER 9-05 Consideration

9-05-01. Good consideration defined.

Any benefit conferred or agreed to be conferred upon the promisor by any other person to which the promisor is not entitled lawfully, or any prejudice suffered or agreed to be suffered by such person, other than such as that person, at the time of consent, is lawfully bound to suffer as an inducement to the promisor, is a good consideration for a promise.

Source:

Civ. C. 1877, § 906; R.C. 1895, § 3871; R.C. 1899, § 3871; R.C. 1905, § 5316; C.L. 1913, § 5872; R.C. 1943, § 9-0501.

Derivation:

Cal. Civ. C., 1605.

Notes to Decisions

Adequacy of Consideration.

If consideration exists, courts will generally not inquire into the adequacy of the consideration. However, it is important to distinguish the adequacy of consideration from its existence. When no consideration is present a valid contract is not formed and this is a legal issue which may be determined by a court. Harrington v. Harrington, 365 N.W.2d 552, 1985 N.D. LEXIS 288 (N.D. 1985).

Uncertainty of the landowners ever receiving a one-sixth production royalty did not, as a matter of law, prevent that royalty from being enough consideration to avoid a total failure of consideration; both executed and executory consideration could support a contract, and the district court erred by concluding that the production royalty failed as a matter of law to support the leases. Ir. Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715, 2011 N.D. LEXIS 36 (N.D. 2011).

Plaintiff’s teaching contract with defendant school district was altered when the school district granted her unpaid leave to allow her to travel to Greece. The alteration of her teaching contract was supported by new consideration under N.D.C.C. § 9-05-01, because plaintiff received the benefit of having several months notice of being able to travel to Greece without being in breach of the teaching contract; and the district received the benefit of knowing it would not have to pay plaintiff for the days she was in Greece. Godon v. Kindred Pub. Sch. Dist., 2011 ND 121, 798 N.W.2d 664, 2011 N.D. LEXIS 115 (N.D. 2011).

District court did not err in concluding that a stock purchase agreement was supported by adequate consideration where the written agreement was presumptive evidence of consideration, and the brother’s shares were restricted by a right of first refusal at the lower of book value or the price offered by a third party. Molbert v. Kornkven, 2018 ND 120, 910 N.W.2d 888, 2018 N.D. LEXIS 114 (N.D. 2018).

Extension of Time for Payment.

An extension of time of payment of an indebtedness is sufficient consideration for the guaranty of payment thereof by a third party. Cassidy v. Reuter, 63 N.D. 267, 247 N.W. 890, 1933 N.D. LEXIS 181 (N.D. 1933).

Extension of Time for Redemption.

Where a real estate mortgage was given to secure a pre-existing debt, which was already secured by a chattel mortgage, it supported an agreement to extend the time of redemption, made before the redemption period had expired. Farmers State Bank v. Anton, 51 N.D. 202, 199 N.W. 582, 1924 N.D. LEXIS 161 (N.D. 1924).

Failure of Consideration.

The determination that consideration has failed is a question of fact. Farmers Union Oil Co. v. Maixner, 376 N.W.2d 43, 1985 N.D. LEXIS 414 (N.D. 1985).

Forbearance from Bringing Suit.

Forbearance from bringing suit can constitute good consideration. Farmers Union Oil Co. v. Maixner, 376 N.W.2d 43, 1985 N.D. LEXIS 414 (N.D. 1985).

Where each party to an agreement gave up the right to litigate resolution of their title dispute, where one party released all prior leases, paid a bonus, and promised that a well would be drilled, and the other party gave the first party a right to drill, the mutual benefits acquired and detriment borne by the parties constituted consideration. Maragos v. Norwest Bank Minn., N.A., 507 N.W.2d 562, 1993 N.D. LEXIS 201 (N.D. 1993).

College hockey player’s surrender of his legal right to sue 10K race sponsors in exchange for permission to run the race constituted consideration for the release. Reed v. University of North Dakota, 1999 ND 25, 589 N.W.2d 880, 1999 N.D. LEXIS 27 (N.D. 1999).

Signing of the stipulation, which dismissed claims for damages, constituted valid consideration for the lease, because forbearance from initiating or continuing a lawsuit may constitute good consideration. Aho v. Maragos, 2000 ND 14, 605 N.W.2d 161, 2000 N.D. LEXIS 15 (N.D. 2000).

Forbearance of Exercise of Option to Purchase.

Forbearance of the exercise of an option to purchase real estate was good consideration to support a contract regardless of the value of the option. Gulden v. Sloan, 311 N.W.2d 568, 1981 N.D. LEXIS 398 (N.D. 1981).

Forfeiture of Collection Rights.

There was sufficient consideration where bank gave up collection rights on previous notes for new renegotiated notes and mortgages to secure loans consolidating previous loans to mortgagor’s son and his partner. First Nat'l Bank & Trust Co. v. Brakken, 468 N.W.2d 633, 1991 N.D. LEXIS 69 (N.D. 1991).

Illusory Contract.

The lack of consideration invalidates a contract when the contract is illusory. An illusory contract may be defined as an expression cloaked in promissory terms, but which, upon closer examination, reveals that the promisor has not committed himself in any manner. In other words, an illusory promise is a promise that is not a promise. The promise is an illusion. Harrington v. Harrington, 365 N.W.2d 552, 1985 N.D. LEXIS 288 (N.D. 1985).

Lease.

District court properly granted a lessee summary judgment and dismissed an assignee's claims that an oil and gas lease terminated due the land manager's letter because the letter did not constitute a written contract required to modify the lease since it did not contain the elements for a valid contract; the letter did not establish a written agreement to modify the lessee's rights, and the lessors did not sign or otherwise communicate acceptance of the purported offer. Valentina Williston, LLC v. Gadeco, LLC, 2016 ND 84, 878 N.W.2d 397, 2016 N.D. LEXIS 84 (N.D. 2016).

Negotiable Instruments.

A payee furnishing the consideration for a negotiable instrument may be a holder for value whether the maker derived benefit or not. Baird v. Keitzman, 60 N.D. 317, 233 N.W. 905, 1930 N.D. LEXIS 233 (N.D. 1930).

Prejudice Suffered.

The consideration for a promise may be found in some prejudice either suffered or agreed to be suffered by the promisee, other than such as he at the time is lawfully bound to suffer. Roberts v. First Nat'l Bank, 8 N.D. 474, 79 N.W. 993, 1899 N.D. LEXIS 38 (N.D. 1899).

Detriment, as used in a contractual context, means legal detriment as distinguished, from detriment in fact. It means giving up something which the promisee was privileged to retain, or doing or refraining from doing something which he was privileged not to do, or not to refrain from doing. Harrington v. Harrington, 365 N.W.2d 552, 1985 N.D. LEXIS 288 (N.D. 1985).

Refraining from Act.

Refraining from doing something which one has a legal right to do constitutes good consideration. Farmers Union Oil Co. v. Maixner, 376 N.W.2d 43, 1985 N.D. LEXIS 414 (N.D. 1985).

Consideration may include any benefit to the promissor or detriment to the promissee, and refraining from doing something that one has a legal right to do constitutes good consideration, regardless of the value of that right to the other party. Aho v. Maragos, 2000 ND 14, 605 N.W.2d 161, 2000 N.D. LEXIS 15 (N.D. 2000).

Release of Lien.

A promise to release a seed lien is a good consideration for a promise to pay money, even though the lien be subsequent to another lien which would exhaust the value of the land. Divide County v. Citizens' State Bank, 52 N.D. 29, 201 N.W. 693, 1924 N.D. LEXIS 101 (N.D. 1924).

Release of Obligation.

Where a vendee in a land contract surrenders his contract to the vendor, and the same is accepted, the release of the vendor from the obligations of the contract is of sufficient consideration to support the surrender. Kvello v. Taylor, 5 N.D. 76, 63 N.W. 889, 1895 N.D. LEXIS 8 (N.D. 1895).

Relinquishment of Timber Rights.

The relinquishment of a timber culture entry, which carries with it valuable improvements made for the benefit of another person and so that he might file a homestead entry thereon, all under mutual agreement, is a sufficient consideration for the latter’s promise that the former might crop the land. Peoples v. Evens, 8 N.D. 121, 77 N.W. 93, 1898 N.D. LEXIS 22 (N.D. 1898).

Surrender of Legal Right.

A legal detriment may be sustained by a promisee by the surrender of a legal right, whether such right has substantial value or not. Divide County v. Citizens' State Bank, 52 N.D. 29, 201 N.W. 693, 1924 N.D. LEXIS 101 (N.D. 1924).

Time of Forbearance.

When the intent of the parties concerning time of forbearance from bringing suit as consideration for the making of a guarantee cannot be determined from the personal guarantee alone, forbearance should be for a reasonable time. What constitutes a reasonable time within the facts of a given case is a question of fact to be determined by the trier of fact. Farmers Union Oil Co. v. Maixner, 376 N.W.2d 43, 1985 N.D. LEXIS 414 (N.D. 1985).

Unfounded Claim.

An unfounded claim will not constitute a sufficient consideration to support a promise to pay money upon a settlement thereof. McGlynn v. Scott, 4 N.D. 18, 58 N.W. 460, 1894 N.D. LEXIS 13 (N.D. 1894).

Want of Consideration.

Where the maker of a promissory note alleges want of consideration as a defense, he has the burden of proving the allegation. First State Bank v. Radke, 51 N.D. 246, 199 N.W. 930, 1924 N.D. LEXIS 181 (N.D. 1924).

Written Guaranties.

A corporate director and his spouse’s guaranties of corporation debts were not without consideration; written guaranties create a presumption of consideration, and evidence established that the guarantors received benefits while the creditor bank suffered prejudice, constituting good consideration as a matter of law. First Nat'l Bank & Trust Co. v. Jacobsen, 431 N.W.2d 284, 1988 N.D. LEXIS 219 (N.D. 1988).

Collateral References.

Performance of work previously contracted for as consideration for promise to pay greater or additional amount, 12 A.L.R.2d 78, 85 A.L.R.3d 259.

Consideration for agreement to purchase property at judicial or tax sale for the joint benefit of parties to the agreement, 14 A.L.R.2d 1267, 1293.

Validity and enforceability of contract in consideration of naming child, 21 A.L.R.2d 1061.

Agreement to draw up or compromise will contest or to draw objections to probate, as sufficient consideration, 42 A.L.R.2d 1319, 1365.

Consideration for option for repurchase by vendor, 44 A.L.R.2d 342, 345.

Illegitimate child, mother’s forbearance to enforce statutory remedies against father as consideration for his promise to support, 20 A.L.R.3d 500.

Validity and effect, as between former spouses, of agreement releasing parent from payment of child support provided for in an earlier divorce decree, 100 A.L.R.3d 1129.

9-05-02. When legal or moral obligation good consideration.

An existing legal obligation resting upon the promisor, or a moral obligation originating in some benefit conferred upon the promisor or prejudice suffered by the promisee, also is a good consideration for a promise to an extent corresponding with the extent of the obligation, but no further or otherwise.

Source:

Civ. C. 1877, § 907; R.C. 1895, § 3872; R.C. 1899, § 3872; R.C. 1905, § 5317; C.L. 1913, § 5873; R.C. 1943, § 9-0502.

Derivation:

Cal. Civ. C., 1606.

Notes to Decisions

Extension of Time of Payment.

An extension of time for the payment of old notes is a sufficient consideration to support new notes and the mortgage. First Nat'l Bank v. Lamont, 5 N.D. 393, 67 N.W. 145, 1896 N.D. LEXIS 39 (N.D. 1896); RED RIVER VALLEY NAT'L BANK v. BARNES, 8 N.D. 432, 79 N.W. 880, 1899 N.D. LEXIS 32 (N.D. 1899).

An extension of time of payment of an indebtedness is sufficient consideration for the guaranty of payment thereof by a third party. Cassidy v. Reuter, 63 N.D. 267, 247 N.W. 890, 1933 N.D. LEXIS 181 (N.D. 1933).

Collateral References.

Lease, moral obligation as consideration for modification of, 30 A.L.R.3d 1259.

Illegitimate child, moral obligation of father as consideration for promise to provide for, 20 A.L.R.3d 500.

Law Reviews.

Reconsidering the Reliance Rules: The Restatement of Contracts and Promissory Estoppel in North Dakota, 66 N.D. L. Rev. 317 (1990).

9-05-03. Lawful consideration required.

The consideration of a contract must be lawful within the meaning of section 9-08-01.

Source:

Civ. C. 1877, § 908; R.C. 1895, § 3873; R.C. 1899, § 3873; R.C. 1905, § 5318; C.L. 1913, § 5874; R.C. 1943, § 9-0503.

Derivation:

Cal. Civ. C., 1607.

Collateral References.

Restrictive agreement or covenant in respect of purchase or handling of petroleum products by operator of filling station as unenforceable for want of consideration, 26 A.L.R.2d 219.

Consideration for promise not to make a will, 32 A.L.R.2d 370, 380.

Consideration for option for repurchase by vendor, 44 A.L.R.2d 342, 345.

9-05-04. Contract void when consideration unlawful.

If any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful, the entire contract is void.

Source:

Civ. C. 1877, § 909; R.C. 1895, § 3874; R.C. 1899, § 3874; R.C. 1905, § 5319; C.L. 1913, § 5875; R.C. 1943, § 9-0504.

Derivation:

Cal. Civ. C., 1608.

Notes to Decisions

Unlawful Purpose.

A party cannot avoid a contract made because of his unlawful purpose in making it. Gage v. Fisher, 5 N.D. 297, 65 N.W. 809, 1895 N.D. LEXIS 43 (N.D. 1895).

9-05-05. Consideration executed or executory.

A consideration may be executed or executory in whole or in part. Insofar as it is executory, it is subject to the provisions of chapter 9-04 relating to the object of a contract.

Source:

Civ. C. 1877, § 910; R.C. 1895, § 3875; R.C. 1899, § 3875; R.C. 1905, § 5320; C.L. 1913, § 5876; R.C. 1943, § 9-0505.

Derivation:

Cal. Civ. C., 1609.

Notes to Decisions

Adequacy of Consideration.

Uncertainty of the landowners ever receiving a one-sixth production royalty did not, as a matter of law, prevent that royalty from being enough consideration to avoid a total failure of consideration; both executed and executory consideration could support a contract, and the district court erred by concluding that the production royalty failed as a matter of law to support the leases. Ir. Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715, 2011 N.D. LEXIS 36 (N.D. 2011).

Option.

Valid consideration supported an option contract where the option stated that it was granted in consideration of the buyer’s previous purchase of real estate; moreover, even though it was argued that the consideration was past consideration, the only evidence that the land purchase was not in consideration of the option contract was controverted. The option provided ample consideration because a right given in the option contract was not given as consideration in the prior land purchase. Guthmiller Farms, LLP v. Guthmiller, 2013 ND 248, 840 N.W.2d 636, 2013 N.D. LEXIS 255 (N.D. 2013).

9-05-06. Executory consideration — Method of ascertaining.

When a consideration is executory, it is not indispensable that the contract should specify its amount or the means of ascertaining it. It may be left to the decision of a third person or regulated by any specified standard.

Source:

Civ. C. 1877, § 911; R.C. 1895, § 3876; R.C. 1899, § 3876; R.C. 1905, § 5321; C.L. 1913, § 5877; R.C. 1943, § 9-0506.

Derivation:

Cal. Civ. C., 1610.

Notes to Decisions

Adequacy of Consideration.

Uncertainty of the landowners ever receiving a one-sixth production royalty did not, as a matter of law, prevent that royalty from being enough consideration to avoid a total failure of consideration; both executed and executory consideration could support a contract, and the district court erred by concluding that the production royalty failed as a matter of law to support the leases. Ir. Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715, 2011 N.D. LEXIS 36 (N.D. 2011).

9-05-07. Consideration undetermined — Method of ascertaining.

When a contract does not determine the amount of the consideration nor the method by which it is to be ascertained, or when it leaves the amount thereof to the discretion of an interested party, the consideration must be so much money as the object of the contract reasonably is worth.

Source:

Civ. C. 1877, § 912; R.C. 1895, § 3877; R.C. 1899, § 3877; R.C. 1905, § 5322; C.L. 1913, § 5878; R.C. 1943, § 9-0507.

Derivation:

Cal. Civ. C., 1611.

Notes to Decisions

Contract Under Statute of Frauds.

Where parties entered contract for deed for real property which failed to specify the consideration for the conveyance, contract was unenforceable for failure to comply with the statute of frauds (N.D.C.C. § 9-06-04), which requires that all material terms of covered contracts be in writing; therefore, court could not supply reasonable consideration pursuant to this section. United States v. 308.56 Acres of Land, 520 F.2d 660, 1975 U.S. App. LEXIS 13884 (8th Cir. N.D. 1975).

Jury Question.

Trial court improperly granted defendant’s motion for summary judgment in contract action since whether defendant’s receipt of card entitling her to one free meal per week was just compensation for use of her name and recipe was an issue of material fact. Volk v. Auto-Dine Corp., 177 N.W.2d 525, 1970 N.D. LEXIS 100 (N.D. 1970).

Liquidated Damages Clause.

Where the parties fulfilled their promises to agree about the buildings to be sold and, based upon the evidence, the trial court determined a reasonable sale price for the buildings at each phase of the development plan, a liquidated damage clause in an exclusive real estate listing agreement was not unenforceably vague as an agreement to agree. Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

Renegotiation.

The trial court could properly fix a reasonable cash rent for the final four years of a seven-year lease, notwithstanding that the lease provided for renegotiation after the first three years. Ehrman v. Feist, 1997 ND 180, 568 N.W.2d 747, 1997 N.D. LEXIS 198 (N.D. 1997).

9-05-08. Consideration not ascertainable — Contract void.

When a contract provides an exclusive method by which its consideration is to be ascertained, and such method is on its face impossible of execution, the entire contract is void.

Source:

Civ. C. 1877, § 913; R.C. 1895, § 3878; R.C. 1899, § 3878; R.C. 1905, § 5323; C.L. 1913, § 5879; R.C. 1943, § 9-0508.

Derivation:

Cal. Civ. C., 1612.

9-05-09. Method of determining consideration becomes impossible — Provision void.

When a contract provides an exclusive method by which its consideration is to be ascertained, and such method appears possible on its face, but in fact is or becomes impossible of execution, such provision only is void.

Source:

Civ. C. 1877, § 914; R.C. 1895, § 3879; R.C. 1899, § 3879; R.C. 1905, § 5324; C.L. 1913, § 5880; R.C. 1943, § 9-0509.

Derivation:

Cal. Civ. C., 1613 to 1615.

Notes to Decisions

Written Instrument.

A written instrument imports a consideration. McGlynn v. Scott, 4 N.D. 18, 58 N.W. 460, 1894 N.D. LEXIS 13 (N.D. 1894).

A written instrument raises a statutory presumption that there was consideration for the written instrument. First Nat'l Bank v. Red River Valley Nat'l Bank, 9 N.D. 319, 83 N.W. 221, 1900 N.D. LEXIS 235 (N.D. 1900).

9-05-10. Written instrument — Presumption of consideration.

A written instrument is presumptive evidence of a consideration.

Source:

Civ. C. 1877, § 914; R.C. 1895, § 3880; R.C. 1899, § 3880; R.C. 1905, § 5325; C.L. 1913, § 5881; R.C. 1943, § 9-0510.

Derivation:

Cal. Civ. C., 1613 to 1615.

Notes to Decisions

Adequate Consideration.

A corporate director and his spouse’s guaranties of corporation debts were not without consideration; written guaranties create a presumption of consideration, and evidence established that the guarantors received benefits while the creditor bank suffered prejudice, constituting good consideration as a matter of law. First Nat'l Bank & Trust Co. v. Jacobsen, 431 N.W.2d 284, 1988 N.D. LEXIS 219 (N.D. 1988).

In a foreclosure action, the bank’s assignee was properly granted summary judgment because the mortgagors’ judgment creditor waived its right to the alleged surplus from the sheriff’s sale by subordinating its judgment in an agreement with the bank, the creditor failed to prove that it was fraudulently induced into entering the agreement, the creditor’s constructive fraud claim failed because no qualifying duty existed between the bank and the creditor, and the bank’s agreement not to make a claim for reimbursement against the creditor for the sheriff’s fees and commissions constituted valid consideration for the agreement because a bona fide controversy existed regarding the fees and commissions. Anderson v. Zimbelman, 2014 ND 34, 842 N.W.2d 852, 2014 N.D. LEXIS 25 (N.D. 2014).

Challenges.

Because statutes allow the parties to a written instrument to challenge the existence of consideration, and there is no common law where the law is declared by the code, the owner was not estopped from asserting the option was gratuitous and given without consideration. Deckert v. McCormick, 2014 ND 231, 857 N.W.2d 355, 2014 N.D. LEXIS 226 (N.D. 2014).

Contract of Endorsement.

A contract of endorsement presupposes a consideration. Baird v. Nicholson, 60 N.D. 566, 235 N.W. 685, 1931 N.D. LEXIS 204 (N.D. 1931).

Division of Estate.

Consideration for a family agreement for division of an estate is presumed. Muller v. Sprenger, 105 N.W.2d 433, 1960 N.D. LEXIS 90 (N.D. 1960).

Failure of Consideration.

Where real property was conveyed to an aunt and a cousin of the grantor in consideration of their promise to take grantor’s mother to Michigan and there to give her personal care and services necessary for her comfort and support, but before the mother could be taken to Michigan she died, there was a failure of consideration for such conveyance. Inches v. Butcher, 104 N.W.2d 556, 1960 N.D. LEXIS 80 (N.D. 1960).

Fraudulently Filed UCC Statements.

Trial court’s finding that debtors fraudulently filed UCC statements and security agreements purporting to grant a security interest in farm collateral to a certain relative was not clearly erroneous where debtors failed to prove that there had been any consideration to support the security agreements. Production Credit Ass'n v. Rub, 475 N.W.2d 532, 1991 N.D. LEXIS 162 (N.D. 1991), cert. denied, 502 U.S. 1118, 112 S. Ct. 1235, 117 L. Ed. 2d 469, 1992 U.S. LEXIS 1012 (U.S. 1992).

Good Faith Purchaser.

The party claiming to be a good faith purchaser has the burden of proof to establish valuable consideration from evidence other than the deed. Anderson v. Anderson, 435 N.W.2d 687, 1989 N.D. LEXIS 27 (N.D. 1989).

Note and Mortgage.

Written note and mortgage alone were presumptive evidence of consideration. Midwest Fed. Sav. & Loan Ass'n v. Kouba, 335 N.W.2d 780, 1983 N.D. LEXIS 382 (N.D. 1983).

Option Lacked Consideration.

Buyers did not pay the owner $ 10 for the option, the owner executed the option without the buyers' knowledge as part of her estate planning, the buyers were unaware of the option and did not learn of it until weeks after its execution, and an affidavit did not raise an issue of fact that ranch work was done in exchange for the option; the district court did not err in ruling that the option was given without consideration and was revoked before acceptance. Deckert v. McCormick, 2014 ND 231, 857 N.W.2d 355, 2014 N.D. LEXIS 226 (N.D. 2014).

Recitals in Deed.

The recitals in a deed as to the consideration therefor are not conclusive but the true and actual consideration may be shown by proof aliunde. Fraley v. Bentley, 46 N.W. 506, 1 Dakota 25, 1874 Dakota LEXIS 2 (Dakota 1874).

The rule as to the presumption of a consideration for a written instrument applies to deeds. Smith v. Hogue, 19 N.D. 337, 123 N.W. 827 (N.D. 1909); Styles v. Dickey, 22 N.D. 515, 134 N.W. 702, 1912 N.D. LEXIS 38 (N.D. 1912).

The recital of a nominal consideration in a deed is insufficient to establish a valuable consideration or to raise a presumption of value for a good faith purchase. Anderson v. Anderson, 435 N.W.2d 687, 1989 N.D. LEXIS 27 (N.D. 1989).

Replacement Note.

Where the holder of a negotiable note admits that it was given him as a replacement for a note he had lost, the presumption prescribed by this section need not be considered as to such note, but only as to the note it replaced. In re Estate of Larsen, 143 N.W.2d 656, 1966 N.D. LEXIS 156 (N.D. 1966).

Written Instrument.

A written instrument imports a consideration. McGlynn v. Scott, 4 N.D. 18, 58 N.W. 460, 1894 N.D. LEXIS 13 (N.D. 1894).

A written instrument raises a statutory presumption that there was consideration for the written instrument. First Nat'l Bank v. Red River Valley Nat'l Bank, 9 N.D. 319, 83 N.W. 221, 1900 N.D. LEXIS 235 (N.D. 1900).

Any written contract is presumed to have been made for a sufficient consideration. Lincoln Nat'l Life Ins. Co. v. Kelly, 73 N.D. 622, 17 N.W.2d 906, 1945 N.D. LEXIS 77 (N.D. 1945).

Valid consideration supported an option contract where the option stated that it was granted in consideration of the buyer’s previous purchase of real estate; moreover, even though it was argued that the consideration was past consideration, the only evidence that the land purchase was not in consideration of the option contract was controverted. The option provided ample consideration because a right given in the option contract was not given as consideration in the prior land purchase. Guthmiller Farms, LLP v. Guthmiller, 2013 ND 248, 840 N.W.2d 636, 2013 N.D. LEXIS 255 (N.D. 2013).

9-05-11. Burden of proving want of consideration.

The burden of showing a want of consideration sufficient to support an instrument lies with the party seeking to invalidate or avoid it.

Source:

Civ. C. 1877, § 914; R.C. 1895, § 3881; R.C. 1899, § 3881; R.C. 1905, § 5326; C.L. 1913, § 5882; R.C. 1943, § 9-0511.

Derivation:

Cal. Civ. C., 1613 to 1615.

Notes to Decisions

Challenges.

Because statutes allow the parties to a written instrument to challenge the existence of consideration, and there is no common law where the law is declared by the code, the owner was not estopped from asserting the option was gratuitous and given without consideration. Deckert v. McCormick, 2014 ND 231, 857 N.W.2d 355, 2014 N.D. LEXIS 226 (N.D. 2014).

Chattel Mortgage.

In an action involving a chattel mortgage no independent proof of its consideration was necessary until it was attacked by the defendant by evidence which would overcome the statutory presumption. First Nat'l Bank v. Red River Valley Nat'l Bank, 9 N.D. 319, 83 N.W. 221, 1900 N.D. LEXIS 235 (N.D. 1900).

Consideration.

Consideration may be any benefit conferred or detriment suffered. In re Estate of Jorstad, 447 N.W.2d 283, 1989 N.D. LEXIS 202 (N.D. 1989).

Refraining from doing something which one has a legal right to do is legal detriment and constitutes good consideration. In re Estate of Jorstad, 447 N.W.2d 283, 1989 N.D. LEXIS 202 (N.D. 1989).

The existence of consideration is a question of law, but whether or not consideration has passed is a question of fact. In re Estate of Jorstad, 447 N.W.2d 283, 1989 N.D. LEXIS 202 (N.D. 1989).

Failure of Consideration.

The burden of proof in an action to set aside, for an alleged failure of consideration, a written instrument, valid upon its face, is upon the plaintiff. Englert v. Dale, 25 N.D. 587, 142 N.W. 169, 1913 N.D. LEXIS 130 (N.D. 1913).

Failure of consideration for a contract of endorsement is an affirmative defense. Baird v. Nicholson, 60 N.D. 566, 235 N.W. 685, 1931 N.D. LEXIS 204 (N.D. 1931).

Good Faith Purchaser.

The party claiming to be a good faith purchaser has the burden of proof to establish valuable consideration from evidence other than the deed. Anderson v. Anderson, 435 N.W.2d 687, 1989 N.D. LEXIS 27 (N.D. 1989).

Option.

Valid consideration supported an option contract where the option stated that it was granted in consideration of the buyer’s previous purchase of real estate; moreover, even though it was argued that the consideration was past consideration, the only evidence that the land purchase was not in consideration of the option contract was controverted. The option provided ample consideration because a right given in the option contract was not given as consideration in the prior land purchase. Guthmiller Farms, LLP v. Guthmiller, 2013 ND 248, 840 N.W.2d 636, 2013 N.D. LEXIS 255 (N.D. 2013).

Promissory Notes.

The maker of a negotiable promissory note, alleging want of consideration, has the burden of proof. First State Bank v. Radke, 51 N.D. 246, 199 N.W. 930, 1924 N.D. LEXIS 181 (N.D. 1924).

This section applies to all written instruments, including promissory notes. First State Bank v. Radke, 51 N.D. 246, 199 N.W. 930, 1924 N.D. LEXIS 181 (N.D. 1924).

Promise Adequate Consideration.

Trial court’s conclusion that consideration for the option to purchase was son’s promise to stay and tend parents’ farm, which he did for the next seventeen years after the option was executed, comported with the law. In re Estate of Jorstad, 447 N.W.2d 283, 1989 N.D. LEXIS 202 (N.D. 1989).

Recital in Deed.

The recital of a nominal consideration in a deed is insufficient to establish a valuable consideration or to raise a presumption of value for a good faith purchase. Anderson v. Anderson, 435 N.W.2d 687, 1989 N.D. LEXIS 27 (N.D. 1989).

CHAPTER 9-06 Formation of Contract

9-06-01. Express and implied contracts defined.

A contract is either express or implied. An express contract is one the terms of which are stated in words. An implied contract is one the existence and terms of which are manifested by conduct.

Source:

Civ. C. 1877, §§ 915 to 917; R.C. 1895, §§ 3882 to 3884; R.C. 1899, §§ 3882 to 3884; R.C. 1905, §§ 5327 to 5329; C.L. 1913, §§ 5883 to 5885; R.C. 1943, § 9-0601.

Derivation:

Cal. Civ. C., 1619 to 1621.

Cross-References.

Contracts made in airplane, jurisdiction, see § 2-03-09.

Notes to Decisions

Acknowledgment of Debt.

Where the existence of a debt is acknowledged, the law implies a promise to pay. Finch, Van Slyke & McConville v. Styer, 51 N.D. 148, 199 N.W. 444, 1924 N.D. LEXIS 154 (N.D. 1924).

Contract Implied In Fact.

Where a title company sought payment for title work done on an oil company’s behalf, it was not clearly erroneous to find that the parties entered into an implied contract, because (1) the title company kept the oil company informed on the progress of the work the title company was doing on the oil company’s behalf, (2) the oil company never notified the title company that it had not accepted the terms of the contract and never disputed the steady flow of invoices detailing the work the title company was doing, and (3) the oil company benefited from the title work. B. J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, 727 N.W.2d 270, 2007 N.D. LEXIS 13 (N.D. 2007).

District court properly determined ownership interests in a limited liability company because, although there was documentary evidence that supported the claim by the company’s vice-president that the president agreed that the vice-president would own half of the company, there was also testimony which the court credited that supported the court’s finding that the vice-president failed to establish that there was an agreement that the president intended to transfer an additional percentage of ownership to the vice-president. Kruger v. Goossen, 2021 ND 88, 959 N.W.2d 847, 2021 N.D. LEXIS 85 (N.D. 2021).

Contract Implied in Law.

A contract implied in law is a fiction of law adopted to achieve justice where no true contract exists. Johnson v. Estate of Zent (In re Estate of Zent), 459 N.W.2d 795, 1990 N.D. LEXIS 269 (N.D. 1990), reprinted, 1990 N.D. LEXIS 154 (N.D. July 31, 1990).

The conferral of any benefit which is commonly the subject of pecuniary compensation, including the rendition of personal services, is an adequate foundation for a legally implied promise to pay the benefit’s reasonable value. Johnson v. Estate of Zent (In re Estate of Zent), 459 N.W.2d 795, 1990 N.D. LEXIS 269 (N.D. 1990), reprinted, 1990 N.D. LEXIS 154 (N.D. July 31, 1990).

Contract Implied in Law Distinguished from Unjust Enrichment.

The concepts of contract implied in law and unjust enrichment are interrelated. A contract implied in law, or quasi-contract, is not a contract at all but rather an obligation imposed by law to do justice even though it is clear that no promise was ever made or intended. The essence of an implied-in-law contract is the receipt of a benefit by a person from the claimant, which it would be inequitable for the person to retain without payment therefor. Johnson v. Estate of Zent (In re Estate of Zent), 459 N.W.2d 795, 1990 N.D. LEXIS 269 (N.D. 1990), reprinted, 1990 N.D. LEXIS 154 (N.D. July 31, 1990).

Correspondence.

The terms of an express contract may be stated in correspondence between the parties. Glass v. Swimaster Corp., 74 N.D. 282, 21 N.W.2d 468, 1946 N.D. LEXIS 63 (N.D. 1946).

Medical Care.

Where a smallpox patient in a pest house, who was not indigent, received medicines and medical attendance, and accepted the same without objection, and received the benefit thereof, there was an implied contract to pay. Ostland v. Porter, 25 N.W. 731, 4 Dakota 98, 1885 Dakota LEXIS 13 (Dakota 1885).

The domestic and nursing services for which plaintiff, who provided around-the-clock care to an elderly man suffering from Alzhimer’s disease, sought to recover could properly be the subject of restitution under an implied-in-law contract. Johnson v. Estate of Zent (In re Estate of Zent), 459 N.W.2d 795, 1990 N.D. LEXIS 269 (N.D. 1990), reprinted, 1990 N.D. LEXIS 154 (N.D. July 31, 1990).

Municipal Water Plant.

Where a municipality furnishes water to its residents an implied contract exists obligating the city in the conduct of its water plant to furnish consumer with reasonably pure water. McGurren v. Fargo, 66 N.W.2d 207, 1954 N.D. LEXIS 103 (N.D. 1954).

Quasi-Contract.

Where buyer purchased goods from an intermediary who purchased them from seller, but buyer paid seller directly pursuant to an agreement between all three, and buyer was charged sales tax although exempt from such tax, seller’s acceptance from buyer of the purchase price and the sales tax created a quasi-contract between them, on grounds of unjust enrichment, entitling buyer to a refund of the sales tax. Gate City Sav. & Loan Ass'n v. IBM Corp., 213 N.W.2d 888, 1973 N.D. LEXIS 137 (N.D. 1973).

Where lessor claimed that written contract allowing certain number of cattle to graze on land was enlarged by oral executed contract and at same time claimed that those acts constituted violation of written contract, lessor could not claim both theories and trial court’s denial of recovery based upon quasi-contract was not error. Beck v. Lind, 235 N.W.2d 239, 1975 N.D. LEXIS 136 (N.D. 1975).

Services for a Family Member.

Whenever services are rendered by one family member to another, a presumption arises that the services are gratuitous and that compensation was not intended. However, the presumption does not apply to cases relying on implied-in-law contracts, nor does it apply to nonfamily members unless the parties, although never married, lived together as husband and wife. Johnson v. Estate of Zent (In re Estate of Zent), 459 N.W.2d 795, 1990 N.D. LEXIS 269 (N.D. 1990), reprinted, 1990 N.D. LEXIS 154 (N.D. July 31, 1990).

District court did not clearly err when it found that there was no implied-in-fact contract between a son and his parents because the evidence supported its determination that any services the son performed over the more than twenty year time span were rendered gratuitously, and the son failed to present evidence to rebut the presumption that his services were gratuitous. Lund v. Lund, 2014 ND 133, 848 N.W.2d 266, 2014 N.D. LEXIS 121 (N.D. 2014).

Unjust Enrichment.

If it would be inequitable for a person to retain the benefit, he is said to be unjustly enriched. A person who is unjustly enriched at the expense of another is required to make restitution to the other. Johnson v. Estate of Zent (In re Estate of Zent), 459 N.W.2d 795, 1990 N.D. LEXIS 269 (N.D. 1990), reprinted, 1990 N.D. LEXIS 154 (N.D. July 31, 1990).

In a contract dispute, there was no implied in law contract under N.D.C.C. § 9-06-01 to prevent unjust enrichment because a buyer and a seller had either an express or implied agreement that there was no reimbursement of expenses between the parties in relation to their attempt to merge their businesses. There could have been no implied in law contract to prevent unjust enrichment when there was an express or implied in fact contract between the parties relating to the same subject matter. Lord & Stevens, Inc. v. 3D Printing, Inc., 2008 ND 189, 756 N.W.2d 789, 2008 N.D. LEXIS 183 (N.D. 2008).

District court did not err in denying a son’s claim for unjust enrichment because any benefits his parents received would not be inequitable for them to retain without paying for its value; the son received reciprocal benefits, including a house, meals, and assistance with yard work. Lund v. Lund, 2014 ND 133, 848 N.W.2d 266, 2014 N.D. LEXIS 121 (N.D. 2014).

Collateral References.

Recovery for services rendered by member of household or family other than spouse without express agreement for compensation, 7 A.L.R.2d 8.

Right of customer or public utility with respect to fund representing a refund from another supplying utility upon reduction of latter’s rates, 18 A.L.R.2d 1335.

Right of tenant to recover rentals previously paid to one mistakely believed to be owner of property, 57 A.L.R.2d 350.

Duty of Publisher with 43 A.L.R.4th 1182.

9-06-02. What contracts may be oral.

All contracts may be oral except such as are specially required by statute to be in writing.

Source:

Civ. C. 1877, § 918; R.C. 1895, § 3885; R.C. 1899, § 3885; R.C. 1905, § 5330; C.L. 1913, § 5886; R.C. 1943, § 9-0602.

Derivation:

Cal. Civ. C., 1622.

Notes to Decisions

Definiteness.

To be valid and enforceable, a contract must be reasonably definite and certain in its terms so that a court may require it to be performed. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Essential Terms for a Loan.

Essential terms of an oral contract to continue lending money in the future include the amount and duration of the loans, interest rates, and, where appropriate, the methods of repayment and collateral for the loans, if any. Taken alone, the absence of any one of these terms may not be of great significance; however, viewed collectively, their absence is fatal to the existence of a binding contract. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Interest Rate.

Interest rate of alleged line of credit under oral agreement could have reasonably been inferred from bank’s prevailing lending rate in the farming and ranching sector. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Not Valid.

In a partnership dispute, a trial court did not err by finding that a written and unsigned dissolution agreement was not a valid written contract; moreover, testimony of partial performance to take the writing outside of the statute of frauds was not credible. Knudson v. Kyllo, 2012 ND 155, 819 N.W.2d 511, 2012 N.D. LEXIS 155 (N.D. 2012).

Sale of Real Property.

An agreement concerning the sale of real property need not be in writing when there has been such part performance of the contract as would render it a fraud on the plaintiff to permit the defendant to refuse to carry out the contract. Fideler v. Norton, 30 N.W. 128, 32 N.W. 57, 4 Dakota 258 (Dakota 1886).

Where a real estate agent with verbal authority only to find a purchaser for land enters into a contract with an alleged purchaser, such contract is within the statute of frauds, and is void, and cannot be ratified. Halland v. Johnson, 42 N.D. 360, 174 N.W. 874, 1919 N.D. LEXIS 188 (N.D. 1919).

Writing Construed as Extrinsic Evidence in Interpretation of Oral Contract.

Where plaintiff company had an agreement with another company to help it complete concrete work on a construction site and defendant company alleged that a “work order” contained language creating a flat rate price as opposed to the time-and-materials price sought by the plaintiff, the writing did not constitute the contract between the parties because it did not include both parties and all the essential or material terms and conditions of the agreement. Even though the contract between the parties was not a contract required to be in writing under the statute of frauds, the writing alleged to be the contract nevertheless had to meet all the requirements of a written contract under the statute of frauds, i.e., (1) who the contracting parties are, (2) the identity of the subject matter involved, (3) the consideration and (4) the terms and conditions upon which the contract was entered into. Therefore, the document was considered merely extrinsic evidence that the district court could consider when deciding what the terms of the oral contract were. Curtis Constr. Co. v. Am. Steel Span, Inc., 2005 ND 218, 707 N.W.2d 68, 2005 N.D. LEXIS 262 (N.D. 2005).

9-06-03. Written contract prevented by fraud — Oral contract enforceable.

When a contract which is required by law to be in writing is prevented from being put into writing by the fraud of a party thereto, any other party who by such fraud is led to believe that it is in writing and acts upon such belief to that party’s prejudice may enforce it against the fraudulent party.

Source:

Civ. C. 1877, § 919; R.C. 1895, § 3886; R.C. 1899, § 3886; R.C. 1905, § 5331; C.L. 1913, § 5887; R.C. 1943, § 9-0603.

Derivation:

Cal. Civ. C., 1623.

Notes to Decisions

Existence of Oral Contract.

To invoke the provisions of this section, one must, under the express terms of the statute, first establish the existence of an oral contract. Lohse v. Atlantic Richfield Co., 389 N.W.2d 352, 1986 N.D. LEXIS 337 (N.D. 1986).

Fraud Not Shown.

Loan made by limited partner to partnership was held not to be a contribution to capital, and limited partner did not make representations which would estop him from enforcing note evidencing the loan. Pear v. Grand Forks Motel Assocs., 553 N.W.2d 774, 1996 N.D. LEXIS 222 (N.D. 1996).

9-06-04. Contracts invalid unless in writing — Statute of frauds.

The following contracts are invalid, unless the same or some note or memorandum thereof is in writing and subscribed by the party to be charged, or by the party’s agent:

  1. An agreement that by its terms is not to be performed within a year from the making thereof.
  2. A special promise to answer for the debt, default, or miscarriage of another, except in the cases provided for in section 22-01-05.
  3. An agreement for the leasing for a longer period than one year, or for the sale, of real property, or of an interest therein. Such agreement, if made by an agent of the party sought to be charged, is invalid unless the authority of the agent is in writing subscribed by the party sought to be charged.
  4. An agreement or promise for the lending of money or the extension of credit in an aggregate amount of twenty-five thousand dollars or greater.
  5. An agreement or promise to alter the terms of repayment or forgiveness of a debt that is in an aggregate amount of twenty-five thousand dollars or greater.

Source:

Civ. C. 1877, § 920; R.C. 1895, § 3887; R.C. 1899, § 3887; R.C. 1905, § 5332; C.L. 1913, § 5888; R.C. 1943, § 9-0604; S.L. 1985, ch. 139, § 1; 1985, ch. 190, § 10; 1991, ch. 94, § 1.

Cross-References.

Agreements for sale of realty, see §§ 3-02-06, 47-10-01, 47-10-02.

Authorization of agent must be in writing, see § 3-02-06.

Guaranty to be in writing, see § 22-01-04.

Lease of real property, see § 47-16-01.

Seed sales agreements to be in writing, see ch. 4-25.

Notes to Decisions

Acceptance of Warranty Deed.

Evidence tending to show a parol agreement by a vendee to accept a warranty deed with existing defects in the title is inadmissible. McCulloch v. Bauer, 24 N.D. 109, 139 N.W. 318, 1912 N.D. LEXIS 20 (N.D. 1912).

Agency Contract Between Property Owner and Real Estate Broker.

Listing agreement between property owner and a real estate broker in which owner engages broker to sell his property in exchange for a commission fee is not a “contract for the sale of real property” within meaning of this section and is not subject to requirements of this section. Bismarck Realty Co. v. Folden, 354 N.W.2d 636, 1984 N.D. LEXIS 324 (N.D. 1984).

Agency Contracts.

A contract of agency is not within the statute of frauds. Schmidt v. Beiseker, 14 N.D. 587, 105 N.W. 1102, 1905 N.D. LEXIS 92 (N.D. 1905); Odegard v. Haugland, 40 N.D. 547, 169 N.W. 170, 1918 N.D. LEXIS 107 (N.D. 1918).

Agreements to Lend Money.
—In General.

Where debtor alleged that bank orally agreed to make new loans annually for an indefinite period of time and where there was no dispute that the aggregate amount exceeded $25,000, the alleged oral agreement was unenforceable under this section. First State Bank v. Oster, 500 N.W.2d 593, 1993 N.D. LEXIS 95 (N.D. 1993).

Even if a court were to consider the creditors’ claims as loans, they would be still be denied under 11 U.S.C.S. § 502(b)(1) as unenforceable under the statute of frauds in N.D.C.C. § 9-06-04(4) where there were no written agreements or documentation for any of the alleged transactions and where the aggregate amount of each party’s loan would exceed $25,000. In re Keeley & Grabanski Land P'ship, 2013 Bankr. LEXIS 2204 (Bankr. D.N.D. May 30, 2013).

—Period More Than One Year.

An alleged agreement between debtor and bank which required the bank to lend sufficient funds to purchase 30 to 40 head of cattle each year for three years was barred by the provisions of the statute of frauds. First State Bank v. Oster, 500 N.W.2d 593, 1993 N.D. LEXIS 95 (N.D. 1993).

Alleged oral agreement requiring 36 monthly payments over three years without an express provision for prepayment, by its terms was not to be performed within a year from the making thereof and was invalid under the statute of frauds, N.D.C.C. § 9-06-04(1). The writing of two checks was not sufficient part performance because these actions were not consistent only with the existence of a loan, but were explained by the borrower’s fiancee as consistent with her practice of paying the borrower’s bills for him out of a joint account. Kohanowski v. Burkhardt, 2012 ND 199, 821 N.W.2d 740, 2012 N.D. LEXIS 207 (N.D. 2012).

Alleged oral agreement to loan money for the purchase of land was barred under the statute of frauds because it exceeded the statutory amount, provided for repayment over more than one year, and lacked express terms for prepayment. Bidding, preparing purchase agreements, and paying earnest money did not constitute part performance because these acts were consistent with obtaining other financing and were not obligations imposed by the alleged agreement. Bloomquist v. Goose River Bank, 2013 ND 154, 836 N.W.2d 450, 2013 N.D. LEXIS 157 (N.D. 2013).

Ambiguities.

Parol evidence was admissible to interpret existing ambiguous terms in a memorandum. Johnson v. Auran, 214 N.W.2d 641, 1974 N.D. LEXIS 248 (N.D. 1974).

Applicability to Contracts Not Required to be in Writing.

Where plaintiff company had an agreement with another company to help it complete concrete work on a construction site and defendant company alleged that a “work order” contained language creating a flat rate price as opposed to the time-and-materials price sought by the plaintiff, the writing did not constitute the contract between the parties because it did not include both parties and all the essential or material terms and conditions of the agreement. Even though the contract between the parties was not a contract required to be in writing under the statute of frauds, the writing alleged to be the contract nevertheless had to meet all the requirements of a written contract under the statute of frauds, i.e., (1) who the contracting parties are, (2) the identity of the subject matter involved, (3) the consideration and (4) the terms and conditions upon which the contract was entered into. Therefore, the document was considered merely extrinsic evidence that the district court could consider when deciding what the terms of the oral contract were. Curtis Constr. Co. v. Am. Steel Span, Inc., 2005 ND 218, 707 N.W.2d 68, 2005 N.D. LEXIS 262 (N.D. 2005).

Auction Sale Agreements.

Land auction sale agreements were not void and unenforceable. Although defendants relied on N.D.C.C. § 47-18-05 to argue that the agreements were unenforceable, that statute was inapplicable because no sale of property occurred and no homestead rights had been conveyed or encumbered. Pifer Group, Inc. v. Liebelt, 2015 ND 150, 864 N.W.2d 759, 2015 N.D. LEXIS 165 (N.D. 2015).

Bar to Assertion of Statute of Frauds.

Part performance of an oral contract, promissory estoppel, or equitable estoppel may bar the assertion of the statute of frauds as a defense if, in fact, there is an oral agreement. Cooke v. Blood Sys., 320 N.W.2d 124, 1982 N.D. LEXIS 268 (N.D. 1982).

Collateral Oral Agreement.

A party to a written contract may not under the guise of proving a collateral oral agreement establish as a cause of action an oral agreement within the statute of frauds. Alsterberg v. Bennett, 14 N.D. 596, 106 N.W. 49, 1905 N.D. LEXIS 95 (N.D. 1905); A. M. Wilson Co. v. Knowles, 52 N.D. 886, 204 N.W. 663, 1925 N.D. LEXIS 139 (N.D. 1925).

Constructive Possession.

Constructive possession is not recognized as a factor of any force in determining whether acts of part performance, in any case, are sufficient to take it out of the statute of frauds. Henry S. Grinde Corp. v. Klindworth, 77 N.D. 597, 44 N.W.2d 417, 1950 N.D. LEXIS 155, 1950 N.D. LEXIS 156 (N.D. 1950).

Debts of Husband, Payment by Wife.

Wife’s agreement to pay the debts of her husband was unaffected by the statute of frauds where funds claimed by wife never belonged to her, but at all times had been the property of her husband. Boelter v. Crist, 33 N.D. 331, 157 N.W. 115, 1916 N.D. LEXIS 85 (N.D. 1916).

Easements.

An easement may not be created by parol. Hille v. Nill, 58 N.D. 536, 226 N.W. 635, 1929 N.D. LEXIS 248 (N.D. 1929).

Employment Contract.

An oral terminable at-will employment contract can be performed within one year and is not invalidated by the statute of frauds. Fronteer Directory Co. v. Maley, 1997 ND 162, 567 N.W.2d 826, 1997 N.D. LEXIS 181 (N.D. 1997).

Escrow Agreement.

To constitute an escrow and render the deposit irrevocable, there must be a contract between the proposed purchaser and proposed seller, which in turn, to satisfy the statute of frauds, must be evidenced by a memorandum in writing signed by the party sought to be bound thereby. Seifert v. Lanz, 29 N.D. 139, 150 N.W. 568, 1914 N.D. LEXIS 19 (N.D. 1914).

Executed Contract.

The statute of frauds has no application to an executed contract. Bunting v. Creglow, 40 N.D. 98, 168 N.W. 727, 1918 N.D. LEXIS 85 (N.D. 1918).

Existence of Contract.

No contract existed where there was no meeting of the minds of the parties. Yetter v. Goolsby, 26 N.D. 403, 144 N.W. 1075, 1913 N.D. LEXIS 78 (N.D. 1913); Gunsch v. Gunsch, 67 N.W.2d 311, 1954 N.D. LEXIS 115 (N.D. 1954).

Extension of Time for Payment of Note.

An oral agreement extending the time for the payment of a note is within the statute of frauds. Bangs, Berry, & Carson v. Nichols, 47 N.D. 123, 181 N.W. 87, 1920 N.D. LEXIS 89 (N.D. 1920).

Farm Contract.

Where bankrupt tenant of sugar beet lands informally agreed with owners of land that the subsidy payment received by them was to be applied as part payment of the rent payable under the farm contract, such agreement was valid because, being capable of performance within a year, it was not required to be in writing under this section. In re Lindholm, 134 F. Supp. 301, 1955 U.S. Dist. LEXIS 2736 (D.N.D. 1955).

Forbearance Makes Oral Agreement Enforceable.

Where one party forbore pressing a claim for her interest in her mother’s estate on the faith of an oral agreement with her stepfather that she would receive the entire estate upon his death in return for such forbearance, the said forbearance constituted sufficient performance of the oral agreement to remove the agreement from the operation of the statute of frauds. Keen v. Larson, 132 N.W.2d 350, 1964 N.D. LEXIS 150 (N.D. 1964).

Improvements to Property.

When improvements to property are relied upon as part performance of an oral contract for purposes of removing it from the statute of frauds, the improvements made on the land must be valuable, substantial, and permanent. Williston Coop. Credit Union v. Fossum, 459 N.W.2d 548, 1990 N.D. LEXIS 174 (N.D. 1990).

Where plaintiff and his family operated a farm and ranch on defendants’ land for a number of years, making regular semi-annual payments to the landowners and making various improvements to the ranch during their occupancy, there was insufficient evidence to support plaintiff’s allegation of partial performance of an oral contract with the landowners giving the plaintiffs a lease option to buy out the principal balance at zero percent interest. The semi-annual payments and possession by the plaintiffs was consistent with a contract for deed and a lease, with or without an option to purchase and the various improvements, while numerous, were not consistent only with the alleged oral contract as they were made in conjunction with the plaintiffs’ farming and ranching operation and were consistent with a lease without an option to purchase. Thus, the alleged oral contract was not removed from the statute of frauds because there was not partial performance consistent only with the existence of the alleged contract. Fladeland v. Gudbranson, 2004 ND 118, 681 N.W.2d 431, 2004 N.D. LEXIS 215 (N.D. 2004).

Indemnity.

District court properly found that the seller's CEO had authority to execute a stock purchase agreement on behalf of his wife and the other selling shareholders because the statute at issue authorized the action, the shareholders and board of directors authorized the CEO, individually and as their agent, to execute the stock purchase agreement, and the stock purchase agreement included two paragraphs relating to the judgment creditor's litigation and indemnification, and nothing statutorily relating to indemnity required a contract for indemnity to be in writing. SNAPS Holding Co. v. Leach, 2017 ND 140, 895 N.W.2d 763, 2017 N.D. LEXIS 136 (N.D. 2017).

Lease of Real Estate.
—In General.

An agreement which undertook to cover the production and ownership of crops in the future, in effect, a lease, although repugnant to the statute of frauds as to time, governed the rights of the parties so far as executed. Peoples v. Evens, 8 N.D. 121, 77 N.W. 93, 1898 N.D. LEXIS 22 (N.D. 1898).

Agreement to furnish purchaser of poolroom equipment with a lease for poolroom was within the statute of frauds. A. M. Wilson Co. v. Knowles, 52 N.D. 886, 204 N.W. 663, 1925 N.D. LEXIS 139 (N.D. 1925).

If the lessee enters into possession under the lease and the lessor consents thereto, the obligations thus created are binding and the statute of frauds does not apply. Wood v. Homelvig, 68 N.D. 735, 283 N.W. 278, 1938 N.D. LEXIS 163 (N.D. 1938); 204 N.W.2d 187 (N.D. 1973).

The statute has reference to the agreement to make a lease rather than to the lease. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

—Options.

The exercise of an option to extend a lease, and the authority of an agent to exercise it, are not required to be in writing. Signal Management Corp. v. Lamb, 541 N.W.2d 449, 1995 N.D. LEXIS 235 (N.D. 1995).

—Period of More Than One Year.

A parol agreement for the leasing of real estate for a longer period than one year does not become an executed contract, and therefore valid, if no possession is taken under the agreement. Merchants State Bank v. Ruettell, 12 N.D. 519, 97 N.W. 853, 1903 N.D. LEXIS 59 (N.D. 1903).

A lease for a term of four years is not binding unless it is reduced to writing. Valker v. National Tea Co., 48 N.D. 982, 188 N.W. 306, 1922 N.D. LEXIS 127 (N.D. 1922).

District court did not err in dismissing plaintiff’s breach of contract and interference with contractual relations claims because the written farm lease signed by one of the defendants did not state the consideration to be paid by plaintiff for the lease and, thus, did not satisfy the statute of frauds. Trosen v. Trosen, 2014 ND 7, 841 N.W.2d 687, 2014 N.D. LEXIS 6 (N.D. 2014).

—Period of Year or Less.

An oral agreement to lease land for a year or less is valid. Marken v. Robideaux Grain Co., 56 N.D. 94, 216 N.W. 197, 1927 N.D. LEXIS 75 (N.D. 1927).

Lifetime Contracts.

Contract is not within the statute of frauds if it is for the duration of a lifetime. Bergquist-Walker Real Estate v. William Clairmont, Inc., 333 N.W.2d 414, 1983 N.D. LEXIS 270 (N.D. 1983).

Loan for Future.

Essential terms of an oral contract to continue lending money in the future include the amount and duration of the loans, interest rates, and, where appropriate, the methods of repayment and collateral for the loans, if any. Taken alone, the absence of any one of these terms may not be of great significance; however, viewed collectively, their absence is fatal to the existence of a binding contract. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Loan Repayment Guarantees.

Promise by an officer, director, or stockholder of a corporation to be responsible for the repayment of a loan to the corporation, made as an inducement to the promisee to make the loan, is an original promise and one not within the statute of frauds. Nelson v. TMH, Inc., 292 N.W.2d 580, 1980 N.D. LEXIS 232 (N.D. 1980).

Although the evidence presented during the bench trial on the alleged creditor’s claim against the alleged debtor that the alleged debtor had orally agreed to repay loans the alleged creditor had extended to the alleged debtor supported the trial court’s N.D.R.Civ.P. 52(a) findings of fact that the parties had an oral loan repayment agreement, that oral agreement was unenforceable. Under N.D.C.C. § 9-06-04(4), that agreement had to be memorialized by a writing since the aggregate loan amount exceeded $ 25,000. Smestad v. Harris, 2011 ND 91, 796 N.W.2d 662, 2011 N.D. LEXIS 86 (N.D. 2011).

Loan Repayment Guarantor Receiving Direct Benefit.

Where defendant received a direct personal benefit as a result of his oral promise to guarantee loan repayments on loan he induced plaintiff to make to a corporation of which defendant was an incorporator and stockholder, the promise to guarantee loan repayments was outside the statute of frauds and could not be invoked as a defense to plaintiff’s action on the oral guarantee to make repayments. Nelson v. TMH, Inc., 292 N.W.2d 580, 1980 N.D. LEXIS 232 (N.D. 1980).

Loan to Bank.

Agreement between state bank and financial concerns, creditors of state bank, that state bank would deliver such bills receivable as national bank should elect to receive as collateral security, in consideration for which the national bank and the other concerns would loan to the state bank sufficient cash to meet its obligations, was not within the statute of frauds. Murphy v. Hanna, 37 N.D. 156, 164 N.W. 32, 1917 N.D. LEXIS 115 (N.D. 1917).

Modification by Parol Agreement.

The modification of a written contract by a parol agreement must be clear and satisfactory. Buttz v. Colton, 43 N.W. 717, 6 Dakota 306, 1888 Dakota LEXIS 45 (Dakota 1888).

Oil, Gas, and Mineral Leases.

An agreement to accept or purchase oil, gas, and mineral leases or assignments thereof is required to be in writing signed by the party to be charged whether such party be the assignor or the assignee; and if such agreements are executed by an agent his authority must be in writing subscribed by the party sought to be charged. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

Oil, gas, and mineral leases are conveyances of interests in real property under the provisions of this section. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

It is undisputed that oil, gas, and mineral leases constitute conveyances of interests in real property, and as such, are subject to the provisions of the statute of frauds. Lohse v. Atlantic Richfield Co., 389 N.W.2d 352, 1986 N.D. LEXIS 337 (N.D. 1986).

Statute of frauds applied to an alleged settlement agreement; an agreement to transfer oil interests for valuable consideration is an agreement for the sale of real property, or of an interest therein, under subsection (3). Lund v. Swanson, 2021 ND 38, 956 N.W.2d 354, 2021 N.D. LEXIS 38 (N.D. 2021).

Alleged settlement agreement between an owner and a limited liability company (LLC) and its member was invalid under the statute of frauds because the owner failed to identify any evidence in the record of a signed writing authorizing the attorney for the LLC and member to execute the agreement; under subsection {3}, the LLC and member needed to sign a writing granting authority to the attorney to execute the agreement on their behalf. Lund v. Swanson, 2021 ND 38, 956 N.W.2d 354, 2021 N.D. LEXIS 38 (N.D. 2021).

Because a statute of frauds defense under the circumstances did not promote an injustice or perpetrate a fraud, the supreme court declined to remove the case from the statute of frauds. Lund v. Swanson, 2021 ND 38, 956 N.W.2d 354, 2021 N.D. LEXIS 38 (N.D. 2021).

Oral Contracts.

District court did not clearly err in concluding that the elements of promissory estoppel were present in the case where the testimony from several family members established a clear, definite, and unambiguous promise to permit the parents to lease a property and repurchase it at any time, the terms of the agreement were unambiguous and clear, the parents had substantially changed their position in reliance on the oral agreement, and injustice could only be avoided by enforcing the oral promise. Knorr v. Norberg, 2015 ND 284, 872 N.W.2d 323, 2015 N.D. LEXIS 300 (N.D. 2015).

Oral contract without an express term specifying a time of performance beyond one year and which could be performed within one year did not violate N.D.C.C. § 9-06-04(1), and thus appellant’s argument that the oral agreement was unenforceable because it violates the statute was without merit. Tornabeni v. Wold, 2018 ND 253, 920 N.W.2d 454, 2018 N.D. LEXIS 280 (N.D. 2018).

Nothing suggested that the oral agreement was intended to be a loan, and thus appellant’s argument that the oral agreement was unenforceable because it violated N.D.C.C. § 9-06-04(4) was without merit. Tornabeni v. Wold, 2018 ND 253, 920 N.W.2d 454, 2018 N.D. LEXIS 280 (N.D. 2018).

—Part Performance.

The evidence was sufficient to establish part performance of an oral contract to sell real estate so as to remove it from the statute of frauds where the purchasers under the alleged oral contract constructed permanent grain bins on the property, summer-fallowed the land, improved drainage ditches, possessed and farmed the land, paid property taxes on the land and were not charged rent for their occupancy. Vasichek v. Thorsen, 271 N.W.2d 555, 1978 N.D. LEXIS 179 (N.D. 1978).

Part performance of an oral contract removes it from the statute of frauds; the part performance must be consistent only with the existence of the alleged contract. Poyzer v. Amenia Seed & Grain Co., 409 N.W.2d 107, 1987 N.D. LEXIS 356 (N.D. 1987).

Where the evidence established that the senior mortgagee was eager for the mortgagor to find outside sources of capital, the junior mortgagees had a title opinion done on the land, and when that opinion did not disclose any prior mortgages, they loaned the mortgagor $90,000 which went to reduce its indebtedness to the senior mortgagee, the junior mortgages would not have loaned the money had they not received a first mortgage, and the junior mortgagees fully performed their part of the agreement by lending a total of $90,000; these facts constituted sufficient part performance consistent only with the oral subordination agreement to remove it from the operation of the statute of frauds. Poyzer v. Amenia Seed & Grain Co., 409 N.W.2d 107, 1987 N.D. LEXIS 356 (N.D. 1987).

The general rule is that contracts for the sale of real property and transfers of real property interests must be made by an instrument in writing. However, part performance of an oral contract which is consistent only with the existence of the alleged contract removes it from the statute of frauds. Williston Coop. Credit Union v. Fossum, 459 N.W.2d 548, 1990 N.D. LEXIS 174 (N.D. 1990).

While partial payment of the purchase price alone is not justification for enforcing an oral contract to convey land, partial payment together with other acts such as possession or the making of valuable improvements may be sufficient to take a contract out of the statute of frauds. Williston Coop. Credit Union v. Fossum, 459 N.W.2d 548, 1990 N.D. LEXIS 174 (N.D. 1990).

Where defendants took possession pursuant to an oral contract of sale and made substantial permanent improvements to the property in reliance upon that contract, the statute of frauds did not bar specific enforcement of the oral contract of sale of the property. Green v. Gustafson, 482 N.W.2d 842, 1992 N.D. LEXIS 56 (N.D. 1992).

The trial court erred in granting summary judgment in partnership’s action seeking specific performance of an oral agreement for the purchase of real property where the partnership raised genuine issues of material fact in support of its allegations of an oral contract and partial performance of that contract so as to remove it from the statute of frauds. Johnson Farms v. McEnroe, 1997 ND 179, 568 N.W.2d 920, 1997 N.D. LEXIS 197 (N.D. 1997).

Part performance doctrine was inapplicable to alleged five-year oral contract between municipal waste facility and waste transporter, where dispute concerned municipal solid waste disposal, and municipality had never permitted any solid waste disposal, thus precluding any partial performance. Red River Serv. Corp. v. City of Minot, 146 F.3d 583, 1998 U.S. App. LEXIS 12130 (8th Cir. N.D. 1998).

Where nephews of farm owner rented additional farm pasture lands and took over operation and maintenance of the farm, there was sufficient evidence of part performance of the parties’ oral contract to sell the farm to remove the contract from the statute of frauds. Kuntz v. Kuntz, 1999 ND 114, 595 N.W.2d 292, 1999 N.D. LEXIS 94 (N.D. 1999).

Trial court did not err in granting possession of land to the personal representative of a mother’s estate because a son failed to prove that he had an oral contract for deed to buy the land from his parents; the son failed to clearly and definitely prove payments made by him were for the purchase of the real estate and he failed to prove by clear and definite evidence the existence of an oral contract for the sale of land which possessed all the necessary elements and features of an enforceable agreement. Although the trial court’s findings about the existence of an oral agreement considered criteria relevant to the statute of frauds, N.D.C.C. § 9-06-04(3), and specific performance in the context of finding there was no contract for the sale of land, the trial court’s findings reflected a correct application of the burden of proof under N.D.C.C. § 47-10-01 for claims for specific performance of an alleged oral contract to convey land. Thompson v. Thompson (In re Estate of Thompson), 2008 ND 144, 752 N.W.2d 624, 2008 N.D. LEXIS 142 (N.D. 2008).

Oral Waiver and Annulment of Written Contract.

The mutual rights and obligations of the parties to a written contract for the purchase and sale of real estate may be waived, and the contract annulled and extinguished, by oral agreement, the rationale being that there is no reconveyance when the contract is annulled. Sabot v. Rykowsky, 363 N.W.2d 550, 1985 N.D. LEXIS 265 (N.D. 1985).

The statute of frauds does not apply to an oral agreement to terminate a contract for the sale of land. Sabot v. Rykowsky, 363 N.W.2d 550, 1985 N.D. LEXIS 265 (N.D. 1985).

The statute of frauds does not prohibit enforcement of an oral agreement between seller and the purchasers to terminate contract for deed. Sabot v. Rykowsky, 363 N.W.2d 550, 1985 N.D. LEXIS 265 (N.D. 1985).

Oral Modification.

District court properly granted summary judgment to a seller, its trustee, and the ultimate purchaser in a buyer's action for breach of contract, equitable and promissory estoppel, and tortious interference with a business contract because the seller did not breach any agreement it had with the buyer where the buyer's exercise of a purchase option extinguished the right of first refusal provision, the buyer did nothing to accept the right of first offer, which was triggered by the seller's decision to sell the property, the buyer was statutorily precluded from orally modifying the written purchase agreement. Constellation Dev., LLC v. Western Trust Co., 2016 ND 141, 882 N.W.2d 238, 2016 N.D. LEXIS 141 (N.D. 2016).

Original Undertaking.

A parol agreement by a mortgagee to pay for building material furnished to the mortgagor is an original undertaking not within the statute of frauds. Security Bldg. & Loan Ass'n v. Bacon, 62 N.D. 658, 244 N.W. 644, 1932 N.D. LEXIS 231 (N.D. 1932).

When the principal object of a promisor is to subserve some object of his own, notwithstanding the effect is to pay or discharge the debt or obligation of another, his promise is an original obligation and is not within the statute of frauds. Glock v. Hillestad, 85 N.W.2d 568, 1957 N.D. LEXIS 156 (N.D. 1957).

Parol Gift of Land.

Where under a parol gift of land the donee takes possession and makes improvements in reliance on the gift so it would work a substantial injustice to hold the gift void, the transaction is taken out of the statute of frauds. Heuer v. Heuer, 64 N.D. 497, 253 N.W. 856, 1934 N.D. LEXIS 227 (N.D. 1934).

Trial court did not err in finding plaintiff acquired title to property through executed parol gift from his parents, and occupancy by adverse possession. Mertz v. Arendt, 1997 ND 113, 564 N.W.2d 294, 1997 N.D. LEXIS 106 (N.D. 1997).

Partial Performance.

Alleged agreement relating to a corporation fell under the scope of N.D.C.C. § 9-06-04(1) because it could not have been performed within one year, and partial performance did not save the agreement; there was no conduct or action of the parties prior to the corporation’s dissolution that was inconsistent with closely held corporations and passive shareholders. The acceptance of a share of the profits of a corporation, although providing no work, was entirely consistent with the benefits routinely afforded to a passive shareholder. Rickert v. Dakota Sanitation Plus, Inc., 2012 ND 37, 812 N.W.2d 413, 2012 N.D. LEXIS 24 (N.D. 2012).

District court did not clearly err by finding the parties entered into an oral agreement granting an easement to plaintiffs or in finding that the parties’ agreement was taken out of the statute of frauds by partial performance. Niles v. Eldridge, 2013 ND 52, 828 N.W.2d 521, 2013 N.D. LEXIS 44 (N.D. 2013).

In a quiet title action, an oral agreement relating to the purchase of property did not comply with the statute of frauds, and an argument that partial performance of the alleged oral contract precluded the application of the statute of frauds was not considered because it was raised for the first time on appeal. Klein v. Sletto, 2017 ND 26, 889 N.W.2d 918, 2017 N.D. LEXIS 14 (N.D. 2017).

Partly Oral.

Contracts can be partly oral and partly written. Fronteer Directory Co. v. Maley, 1997 ND 162, 567 N.W.2d 826, 1997 N.D. LEXIS 181 (N.D. 1997).

In a beneficiary’s action against his brother and the borther’s wife, the district court did not err in admitting testimony relating to the oral agreements for the purchase of the property the beneficiary thought was his, as it was not used to add to or vary the contract for deed’s terms but to explain the circumstances surrounding the contract and the reasons for executing the contract. Heartland Trust Co. v. Finstrom (In re Estate of Finstrom), 2020 ND 227, 950 N.W.2d 401, 2020 N.D. LEXIS 228 (N.D. 2020).

Partnership Dissolution.

In a partnership dispute, a trial court did not err by finding that a written and unsigned dissolution agreement was not a valid written contract; moreover, testimony of partial performance to take the writing outside of the statute of frauds was not credible. Knudson v. Kyllo, 2012 ND 155, 819 N.W.2d 511, 2012 N.D. LEXIS 155 (N.D. 2012).

Party to Be Charged.

There is no conflict between subdivision 4 of this section and N.D.C.C. § 47-10-01. Under the former, the “party to be charged” may be either the vendor or the vendee or their agents, while the latter requires a transfer by the vendor to be in writing. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

The term “party to be charged” as used in subdivision 4 of this section clearly includes both vendor and vendee. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

The absence of an employer’s signature on a wage summary sheet as “the party to be charged” under this section does not preclude the document’s contents from becoming terms of the overall employment agreement. Fronteer Directory Co. v. Maley, 1997 ND 162, 567 N.W.2d 826, 1997 N.D. LEXIS 181 (N.D. 1997).

Payment of Interest.

Where a contract to pay interest in excess of the legal rate is not in writing, it may be enforced for the legal rate only. First Nat'l Bank v. Messner, 35 N.D. 78, 159 N.W. 92, 1916 N.D. LEXIS 140 (N.D. 1916).

Performance of Contract.

Statute of frauds offered no defense where one party had fully performed the contract and the other party had partially performed. Kadrmas v. Kadrmas, 264 N.W.2d 892, 1978 N.D. LEXIS 226 (N.D. 1978).

Performance Within a Year.

An oral contract which is capable of performance within a year is valid, although its performance was not actually completed within that time. Sarles v. Sharlow, 37 N.W. 748, 5 Dakota 100, 1888 Dakota LEXIS 12 (Dakota 1888).

A contract which may be performed within a year is not required to be in writing. Bergh v. John Wyman Farm Land & Loan Co., 30 N.D. 158, 152 N.W. 281, 1915 N.D. LEXIS 114 (N.D. 1915).

If there is any possibility that an oral contract is capable of being completed within one year, the contract is not within the statute of frauds even though it is clear that the parties may have intended and thought probable that the contract would extend over a longer period, and even though the contract does so extend; contract must be impossible of performance within one year if it is to be proscribed by the statute of frauds. Bergquist-Walker Real Estate v. William Clairmont, Inc., 333 N.W.2d 414, 1983 N.D. LEXIS 270 (N.D. 1983).

Since there was a possibility, however remote, that asserted oral agreement was capable of being completed within one year, the agreement would not fall within the statute of frauds and, consequently, would not be proscribed by the provisions of N.D.C.C. § 9-06-04(1). Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Since it did not appear from the pleadings that the prospective lessee could allege a claim that entitled him to relief regarding his alleged three-year oral lease of trucks from the prospective truck lessor, the trial court granted the prospective truck lessor’s motion for judgment on the pleadings; the three-year oral lease violated the statute of frauds, and neither the doctrines of promissory estoppel nor equitable estoppel applied to defeat the prospective truck lessor’s statute of frauds defense. Karch v. Equilon Enters., L.L.C., 286 F. Supp. 2d 1075, 2003 U.S. Dist. LEXIS 18175 (D.N.D. 2003).

Part performance exception to the statute of frauds did not apply because an owner did not cite any authority that had applied the part performance of an oral sale of real property to any actions outside of the three major categories or provided any reason to expand the doctrine; the owner had not demonstrated that the act of emailing the district court to request the pending trial be removed from the calendar was consistent only with the existence of the alleged oral contract. Lund v. Swanson, 2021 ND 38, 956 N.W.2d 354, 2021 N.D. LEXIS 38 (N.D. 2021).

Personal Defense.

The defense of the statute of frauds is personal and can be interposed only by the parties to the contract, or their representatives and privies. Ugland v. Farmers & Merchants' State Bank, 23 N.D. 536, 137 N.W. 572, 1912 N.D. LEXIS 124 (N.D. 1912); Erickson v. Wiper, 33 N.D. 193, 157 N.W. 592, 1916 N.D. LEXIS 108 (N.D. 1916).

The statute of frauds pertaining to the sale of real estate is available as a defense under a general denial. Fried v. Lonski, 48 N.D. 1023, 188 N.W. 582, 1922 N.D. LEXIS 135 (N.D. 1922); Brey v. Tvedt, 74 N.D. 192, 21 N.W.2d 49, 1945 N.D. LEXIS 67 (N.D. 1945).

Prior Void Parol Contract.

A valid written contract is not invalidated by a prior void parol contract relating to the same subject matter entered into by the same parties to the same effect. Larison v. Wilbur, 1 N.D. 284, 47 N.W. 381, 1890 N.D. LEXIS 37 (N.D. 1890).

Promise to Pay for Good Delivered to Another.

Where gas company was largely indebted to bank of which defendant was receiver, promise of receiver to pay for fuel delivered by lumber and coal company to gas company was an original promise not within the statute of frauds. Grand Forks Lumber & Coal Co. v. Tourtelot, 7 N.D. 587, 75 N.W. 901, 1898 N.D. LEXIS 94 (N.D. 1898).

Where a party declares that he will see that another party will get his pay for goods delivered to a third person, and the goods are delivered to such third person and charged to him, the party making the promise is bound under the statute of frauds. Gidley v. Glass, 41 N.D. 542, 171 N.W. 93, 1919 N.D. LEXIS 81 (N.D. 1919).

Oral promise of owner of premises to pay plumbing contractor for plumbing and heating equipment installed in dwelling, if building contractor did not, was within exception to the statute of frauds where it was made for the purpose of keeping up the supply of plumbing material to the job and of seeing that it was installed, so that home would be ready for occupancy by Christmas. Glock v. Hillestad, 85 N.W.2d 568, 1957 N.D. LEXIS 156 (N.D. 1957).

Promotion of Injustice.

Statute of frauds should not be allowed to be used to promote an injustice; defendant was not allowed to invoke the statute of frauds as a defense to an action on his oral guarantee to make repayments of a loan made by plaintiff to a corporation where defendant induced plaintiff to make the loan to a corporation of which defendant was an incorporator and a stockholder, gave several assurances to plaintiff that loan would be repaid, was in position of trust with plaintiff at time when she was in an emotionally weakned state, induced the plaintiff to make the loan under false pretenses that he was financially unable to make the loan himself, avoided plaintiff’s request to have the terms of the loan reduced to writing, and received a direct personal benefit as a result of the loan in the form of a reimbursement from the corporation on a loan that he had previously made to the corporation, since to allow defendant to invoke the statute of frauds under such facts would promote an injustice. Nelson v. TMH, Inc., 292 N.W.2d 580, 1980 N.D. LEXIS 232 (N.D. 1980).

Quitclaim Deed.

Quitclaim deed which conveys an interest in real property falls under the provisions of this section. Ell v. Ell, 295 N.W.2d 143, 1980 N.D. LEXIS 276 (N.D. 1980).

Real Estate Sales Agreements.
—In General.

A verbal agreement to purchase interest in land which was never executed by either party was within the statute of frauds. Ugland v. Farmers & Merchants' State Bank, 23 N.D. 536, 137 N.W. 572, 1912 N.D. LEXIS 124 (N.D. 1912).

An oral agreement for the sale of real estate where there has been no compliance with the provisions of this section is void. Weber v. Bader, 42 N.D. 142, 172 N.W. 72, 1919 N.D. LEXIS 127 (N.D. 1919); Fried v. Lonski, 48 N.D. 1023, 188 N.W. 582, 1922 N.D. LEXIS 135 (N.D. 1922); Baird v. Elliott, 63 N.D. 738, 249 N.W. 894, 1933 N.D. LEXIS 230 (N.D. 1933); Brey v. Tvedt, 74 N.D. 192, 21 N.W.2d 49, 1945 N.D. LEXIS 67 (N.D. 1945); Syrup v. Pitcher, 73 N.W.2d 140, 1955 N.D. LEXIS 150 (N.D. 1955).

Agreement for present transfer of barn annexed to and part of the real estate was a sale of real property within the statute of frauds although it was agreed that the barn was to be wrecked and the lumber removed by the purchaser at his convenience. Baird v. Elliott, 63 N.D. 738, 249 N.W. 894, 1933 N.D. LEXIS 230 (N.D. 1933).

The statute has reference to the agreement for the sale of real property, or an interest therein, rather than to the instrument of conveyance. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

In order to consummate a sale or transfer of land or an estate or interest therein at least two parties are necessary to the transaction; and to render the rights and equities of the parties equal the “party to be charged” must apply to either party. Petroleum Exch. v. Poynter, 64 N.W.2d 718, 1954 N.D. LEXIS 78 (N.D. 1954).

District court did not err by failing to find the identity of the seller was a genuine issue of material fact precluding summary judgment because the purchase agreement was an enforceable contract against the purchasers, the seller sued them in his individual capacity for breach of contract, and no business entities were named; the seller signed the property purchase agreement and contracted to sell the property, and he signed the agreement and subsequent warranty deed conveying the property. Flaten v. Couture, 2018 ND 136, 912 N.W.2d 330, 2018 N.D. LEXIS 145 (N.D. 2018).

No genuine issue of material fact existed whether the minutes at a city council meeting created an effective agreement to allow property owners to use city land because an agreement allowing the owners to use city streets and alleys did not appear in the minutes; although the writing could constitute a sufficient memorandum in the proper circumstance, the minutes did not contain what the owners’ claimed. City of Glen Ullin v. Schirado, 2021 ND 72, 959 N.W.2d 47, 2021 N.D. LEXIS 73 (N.D. 2021).

District court did not err by failing to quiet title to real property in favor of corporations because the evidence supported the finding that the owner of the property did not intend the property to be partnership property; there was no evidence there was a written agreement for the owner to sell his individual interest in the property to the corporations at the time redemption agreements were executed because the property was not partnership property and was not included as part of the sale. Galvanizers, Inc. v. Kautzman, 2021 ND 169, 965 N.W.2d 51, 2021 N.D. LEXIS 172 (N.D. 2021).

—Deed in Escrow.

Where memorandum, containing substantially the provisions of the oral contract of sale of the land and relied on, is delivered in escrow, it is not necessary for the escrow agreement to be in writing. Heinzeroth v. Bentz, 116 N.W.2d 611, 1962 N.D. LEXIS 79 (N.D. 1962).

Where a deed containing substantially the provisions of an oral contract of sale of land is delivered in escrow so that it has passed beyond control of grantor, the contract is taken out of the statute of frauds as against the party or parties who executed the instrument. Heinzeroth v. Bentz, 116 N.W.2d 611, 1962 N.D. LEXIS 79 (N.D. 1962).

—Improvement of Land.

Improvements made on land, in order to constitute part performance of an oral contract for its sale, must be something more than a tenant at will expecting to occupy the premises for a number of years would make for his own convenience. Henry S. Grinde Corp. v. Klindworth, 77 N.D. 597, 44 N.W.2d 417, 1950 N.D. LEXIS 155, 1950 N.D. LEXIS 156 (N.D. 1950).

Improvements made on land to take an oral contract out of the statute of frauds have to be valuable, substantial, and permanent. Henry S. Grinde Corp. v. Klindworth, 77 N.D. 597, 44 N.W.2d 417, 1950 N.D. LEXIS 155, 1950 N.D. LEXIS 156 (N.D. 1950); Syrup v. Pitcher, 73 N.W.2d 140, 1955 N.D. LEXIS 150 (N.D. 1955).

—Memorandum.

The provisions necessary in a formal contract need not be set forth in a memorandum of an agreement for the sale of realty required by the statute of frauds, and the memorandum need not be one document, but it is sufficient if several documents show the identity of the contracting parties and the subject matter involved, express consideration, and disclose the terms and conditions of the contract. Goetz v. Hubbell, 66 N.D. 491, 266 N.W. 836 (1936); Hoth v. Kahler, 74 N.W.2d 440, 1956 N.D. LEXIS 89 (N.D. 1956).

An agreement for the sale of real property, or an interest therein, is invalid unless it, or some note or memorandum thereof, is in writing, signed by the party to be charged. Heinzeroth v. Bentz, 116 N.W.2d 611, 1962 N.D. LEXIS 79 (N.D. 1962).

The memorandum of an agreement to sell real estate must contain all of the material terms and conditions of the oral contract of sale, including the consideration or price. Heinzeroth v. Bentz, 116 N.W.2d 611, 1962 N.D. LEXIS 79 (N.D. 1962).

A memorandum need not be a completed contract to satisfy the statute of frauds and it is sufficient if it is merely written evidence of the contract. Hartman v. McNamara, 186 F. Supp. 293, 1960 U.S. Dist. LEXIS 3429 (D.N.D. 1960).

A letter which purported to recite the terms of an offer to purchase real estate and which was certified to by the vendor as correct was insufficient to satisfy the statute of frauds since the instrument was prepared and signed after the oral sale agreement had been abrogated. Hartman v. McNamara, 186 F. Supp. 293, 1960 U.S. Dist. LEXIS 3429 (D.N.D. 1960).

Where contract for deed for land provided that “exact amount and terms are between the parties to the said agreement and will be determined….,” contract was void because no definite and ascertainable amount of land or compensation was provided in contract; contract for sale of real estate must satisfy statute of frauds and entire contract, including consideration, must be in writing. United States v. 308.56 Acres of Land, 520 F.2d 660, 1975 U.S. App. LEXIS 13884 (8th Cir. N.D. 1975).

Where parties made an oral land sale agreement later referred to in a series of letters between them in which the property was referred to variously as “the farm”, “our farm”, “the farm in Steele” and similar phrases which unambiguously identified the tract referred to, the letters constituted a memorandum sufficient to satisfy the statute of frauds, and no legal description of the property was necessary. Rohrich v. Kaplan, 248 N.W.2d 801, 1976 N.D. LEXIS 171 (N.D. 1976).

A letter which sufficiently described the land to be sold and the parties to the transaction, but did not recite the consideration to be paid was not enforceable as a contract to sell real estate. Vasichek v. Thorsen, 271 N.W.2d 555, 1978 N.D. LEXIS 179 (N.D. 1978).

—Part Performance.

A parol agreement concerning the sale of real property cannot be avoided in equity on the ground that it is not in writing and is therefore within the statute of frauds, when it has been partly performed and such part performance would render it a fraud on the plaintiff to permit the defendant to refuse to carry out the contract. Fideler v. Norton, 30 N.W. 128, 32 N.W. 57, 4 Dakota 258 (Dakota 1886).

In an action for specific performance of an alleged oral contract to convey real estate, performed on the part of the purchaser, the plaintiff, the initial payment, subsequent payments, attempted performance by defendant, and the memorandum agreement, and performance thereunder, took the case from under the operation of the statute of frauds. Ketchum v. Zeeland Mercantile Co., 29 N.D. 119, 150 N.W. 453, 1914 N.D. LEXIS 15 (N.D. 1914).

The statute of frauds has no application where the agreement has been completely performed as to the part thereof which comes within the provisions of the statute, and the part remaining to be performed is merely the payment of money or the performance of some act the promise to do which is not required to be put in writing. Erickson v. Wiper, 33 N.D. 193, 157 N.W. 592, 1916 N.D. LEXIS 108 (N.D. 1916).

Part payment of the purchase price is not in itself sufficient part performance to take a contract out of the statute of frauds. Fried v. Lonski, 48 N.D. 1023, 188 N.W. 582, 1922 N.D. LEXIS 135 (N.D. 1922); Brey v. Tvedt, 74 N.D. 192, 21 N.W.2d 49, 1945 N.D. LEXIS 67 (N.D. 1945); Henry S. Grinde Corp. v. Klindworth, 77 N.D. 597, 44 N.W.2d 417, 1950 N.D. LEXIS 155, 1950 N.D. LEXIS 156 (N.D. 1950).

Where the vendee of an oral contract for the sale of real estate seeks to avoid the impact of the statute of frauds by showing partial performance, he must establish a contract that possesses all the elements and features necessary to the specific enforcement of any agreement, except the written memorandum required by the statute. Syrup v. Pitcher, 73 N.W.2d 140, 1955 N.D. LEXIS 150 (N.D. 1955).

The payment of money consideration by the buyer generally is not sufficient justification for enforcing an oral contract to convey land unless followed by other acts such as possession or the making of valuable improvements. Parceluk v. Knudtson, 139 N.W.2d 864, 1966 N.D. LEXIS 202 (N.D. 1966).

Where defendant cotenants allege that an oral agreement for the sale to them by another cotenant of that cotenant’s interest in the common property has been removed from the statute of frauds by their partial performance, the acts alleged as partial performance must not be consistent with the continuance of the seller-cotenant’s interest. Parceluk v. Knudtson, 139 N.W.2d 864, 1966 N.D. LEXIS 202 (N.D. 1966).

Actions of purchaser did not constitute sufficient part performance to remove an oral contract for the sale of real property from the statute of frauds and entitle purchaser to specific performance where there was a dispute as to the amount of property to be sold and the actions were consistent with either disputed amount. Anderson v. Mooney, 279 N.W.2d 423, 1979 N.D. LEXIS 251 (N.D. 1979).

Property owners failed to raise an issue of material fact that part performance removed an alleged agreement with the city from the statute of frauds because the affidavit and testimony of one of the owners provided nothing more than conclusory allegations of part performance; the owner’s testimony went no further than to allege she spent eight years cleaning the city’s streets so she could use them as pasture land. City of Glen Ullin v. Schirado, 2021 ND 72, 959 N.W.2d 47, 2021 N.D. LEXIS 73 (N.D. 2021).

—Separate Writings.

Contract may be authenticated and established through the medium of letters and separate writings and documents, provided they refer to each other and to the same persons and things, and manifestly relate to the same contract and transaction. Thomas J. Baird Invest Co. v. Harris, 209 F. 291, 1913 U.S. App. LEXIS 1790 (8th Cir. Okla. 1913).

—Terms Left Open.

An agreement within the statute will not be enforced in equity nor at law if it appears from the face of the agreement that any of the terms, no matter how unimportant they may seem to be, are left open to be settled by future conferences between the parties thereto. Thomas J. Baird Invest Co. v. Harris, 209 F. 291, 1913 U.S. App. LEXIS 1790 (8th Cir. Okla. 1913).

Real Estate Sold at Public Auction.

The statute of frauds applies to sales of privately owned real estate at public auction with the express modification contained in section 3-05-02. Brey v. Tvedt, 74 N.D. 192, 21 N.W.2d 49, 1945 N.D. LEXIS 67 (N.D. 1945).

Where offer by auctioneer and purported acceptance by the bidder were oral, the statute of frauds was applicable, and the contract of sale was void where memorandum prepared by auctioneer’s clerk was not signed by party to be charged. Brey v. Tvedt, 74 N.D. 192, 21 N.W.2d 49, 1945 N.D. LEXIS 67 (N.D. 1945).

Reciprocal Will.

Where husband and wife attempted to execute reciprocal wills and one instrument contained no reference to a contract or its terms, or the other will, it was not a memorandum of an oral contract sufficient to satisfy this section. Hagen v. Schluchter, 126 N.W.2d 899, 1964 N.D. LEXIS 93 (N.D. 1964).

Restitution.

Plaintiff was entitled to equitable relief, because plaintiff’s complaint gave defendant fair notice that she could be entitled to recover her money by way of equitable relief, and a party barred by N.D.C.C. § 9-06-04 from recovering on a contract could be entitled to restitution; the complaint alleged plaintiff was entitled to repayment of loans made to defendant during their relationship and demanded a money judgment, and such other and further relief as the court deemed just and equitable. Smestad v. Harris, 2012 ND 166, 820 N.W.2d 363, 2012 N.D. LEXIS 174 (N.D. 2012).

Sale of Real Estate by Agent.

A real estate broker with whom lands are listed for sale by the owner has no authority to make a contract for the sale thereof which will bind the owner, in the absence of written authority signed by the owner authorizing him to do so. Ballou v. Bergvendsen, 9 N.D. 285, 83 N.W. 10, 1900 N.D. LEXIS 226 (N.D. 1900).

The authority of an agent to execute a contract for the sale of real property must be in writing. Brandrup v. Britten, 11 N.D. 376, 92 N.W. 453, 1902 N.D. LEXIS 227 (N.D. 1902).

The ordinary authority of a real estate broker with whom lands are listed for sale does not extend to the contract of sale. The authority to execute such contract is an additional authority which must be expressly given in writing. Queen City Lumber Co. v. Fisher, 111 N.W.2d 714, 1961 N.D. LEXIS 105 (N.D. 1961).

An agreement for sale of real property, if made by an agent of the party sought to be charged, is invalid unless the authority of the agent is in writing and subscribed by the party to be charged. Queen City Lumber Co. v. Fisher, 111 N.W.2d 714, 1961 N.D. LEXIS 105 (N.D. 1961).

Where contract entered into by the purchaser and the real estate broker specifically provides that it is understood and agreed that the sale is made subject to approval in writing by the owner, it is immaterial whether the broker had the actual authority to make such contract in behalf of the owner, as approval of owner is necessary before a valid contract is made. Queen City Lumber Co. v. Fisher, 111 N.W.2d 714, 1961 N.D. LEXIS 105 (N.D. 1961).

Rule that land sale contract entered into with purchaser by agent who had only verbal authority from owner was applicable even though agent was attorney; mere payment of money consideration by buyer is not sufficient justification for enforcing oral contract to convey land; acts relied upon as partial performance, to take an oral agreement out of statute of frauds, must be such as to be incomprehensible unless related to contract; payment of taxes, partial payment of $3,000 mortgage and possession of premises by purchaser were consistent with operation of land under his seven-eighths ownership of property and were insufficient to take alleged oral contract for sale of remaining one-eighth interest out of statute of frauds. Tostenson v. Ihland, 147 N.W.2d 104, 1966 N.D. LEXIS 152 (N.D. 1966).

Sale of Sheep.

A contract for the sale of sheep to be delivered in twelve days was not required by the statute of frauds to be in writing. Sturgeon v. Hanson, 62 N.D. 720, 245 N.W. 481, 1932 N.D. LEXIS 237 (N.D. 1932).

Sufficiency of Memorandum.

The sufficiency of a memorandum to constitute a contract meeting the requirements of this section was a question of law. Johnson v. Auran, 214 N.W.2d 641, 1974 N.D. LEXIS 248 (N.D. 1974).

Letter from automobile dealer offering salary of one hundred dollars per month and use of a new car yearly for five years in exchange for recipient’s acceptance of employment as good will representative was sufficient memorandum to take oral contract out of subsection 1 despite that the terms of the letter were sufficiently ambiguous to require admission of parol testimony. Johnson v. Auran, 214 N.W.2d 641, 1974 N.D. LEXIS 248 (N.D. 1974).

Whether or not letter was sufficient memorandum of oral contract of employment for a period of five years in return for one hundred dollars per month and use of automobile for natural life of employee was a question for the court to determine as a matter of law. Johnson v. Auran, 214 N.W.2d 641, 1974 N.D. LEXIS 248 (N.D. 1974).

The sufficiency of a memorandum to constitute a contract meeting the requirements of the statute of frauds is generally a question of law for the court. There are, however, instances when underlying factual determinations will have a bearing upon that conclusion of law. Jerry Harmon Motors v. First Nat'l Bank & Trust Co., 472 N.W.2d 748, 1991 N.D. LEXIS 129 (N.D. 1991).

Suretyship.

When the principal object of a promisor is to subserve some object of his own, notwithstanding the effect is to pay or discharge the debt or obligation of another, his promise is an original obligation and is not within the statute of frauds as suretyship. Austford v. Smith, 196 N.W.2d 413, 1972 N.D. LEXIS 170 (N.D. 1972).

Termination of Contract.

Exclusive distributorship contract which neither expressly nor impliedly fixed the time of its duration was capable of termination by either party by giving reasonable notice to the other and was not within the statute of frauds, even though it was not terminated within one year of its commencement. North Am. Pump Corp. v. Clay Equip. Corp., 199 N.W.2d 888, 1972 N.D. LEXIS 125 (N.D. 1972).

Transfer of Property.

Where one to whom property is transferred in performance of a contract within the statute of frauds refuses to perform, its value may be recovered. Jelleff v. Hummel, 56 N.D. 512, 218 N.W. 227, 1928 N.D. LEXIS 165 (N.D. 1928).

Trusts or Charges upon Land.

The law refuses aid to enforce agreements creating trusts or charges upon land when they rest altogether in parol, not because the trusts are void, but because the law will not permit them to be proved by parol evidence. Arntson v. First Nat'l Bank, 39 N.D. 408, 167 N.W. 760, 1918 N.D. LEXIS 48 (N.D. 1918).

An oral contract to hold land in trust is within the statute of frauds and is void. Weber v. Bader, 42 N.D. 142, 172 N.W. 72, 1919 N.D. LEXIS 127 (N.D. 1919).

To ingraft a trust by parol on the legal title to real estate the proof of an implied or resulting trust must be clear, specific, substantial, and satisfactory. Shong v. Farmers' & Merchants' State Bank, 70 N.W.2d 907, 1955 N.D. LEXIS 112 (N.D. 1955).

Typewritten “Signature.”

Question whether name of officer of bank typed upon the signature line constituted a “signature” of the bank sufficient to satisfy the statute of frauds, turned upon the intention of the parties, which was a question of fact. Jerry Harmon Motors v. First Nat'l Bank & Trust Co., 472 N.W.2d 748, 1991 N.D. LEXIS 129 (N.D. 1991).

A typewritten “signature” may be sufficient to satisfy the requirements of the statute of frauds, but only if the party intends to authenticate the instrument by that act. Jerry Harmon Motors v. First Nat'l Bank & Trust Co., 472 N.W.2d 748, 1991 N.D. LEXIS 129 (N.D. 1991).

Waiver of Objection.

An objection based on this section was not raised at trial therefore, it was waived on appeal. Conitz v. Conitz, 467 N.W.2d 93, 1991 N.D. LEXIS 46 (N.D. 1991).

Will Contest.

Alleged oral agreement between attorney and client involving the contest of a will was capable of performance within one year, and therefore, if such an agreement existed, it was not within the statute of frauds. In re Estate of Starcher, 447 N.W.2d 293, 1989 N.D. LEXIS 200 (N.D. 1989).

Written, Unaccepted Offer.

A written offer to sell real estate which is signed by the offeror but is never accepted by the offeree cannot later be used by the offeree in a suit for specific performance as evidence that the statute of frauds has been satisfied. Heinrich v. Martin, 134 N.W.2d 786, 1965 N.D. LEXIS 146 (N.D. 1965).

Collateral References.

Undelivered lease or contract (other than that for sale of land), or undelivered memorandum thereof, as satisfying statute of frauds, 12 A.L.R.2d 508.

Sufficiency of memorandum of lease agreement to satisfy statute of frauds, as regards terms and conditions of lease, 16 A.L.R.2d 621.

Sufficiency of description or designation of land in contract or memorandum of sale, under statute of frauds, 23 A.L.R.2d 6.

Necessity and sufficiency of statement of consideration in contract or memorandum of sale of land, under statute of frauds, 23 A.L.R.2d 164.

Rights of parties under oral agreement to buy land or bid it in at judicial sale, 27 A.L.R.2d 1285.

Oral contract for personal services as long as employee is able to continue in work, to do satisfactory work, or the like, as within statute of frauds relating to contracts not to be performed within year, 28 A.L.R.2d 878.

Validity of oral promise or agreement not to revoke will, 29 A.L.R.2d 1229.

Oral acceptance of written offer of parties sought to be charged with satisfying statute of frauds, 30 A.L.R.2d 972.

Real estate broker’s right to recovery quantum meruit for services although contract is not in writing as required by statute, 41 A.L.R.2d 905.

Vendee’s liability for use and occupancy of premises, where vendor disaffirms land contract unenforceable under statute of frauds, 49 A.L.R.2d 1169.

Contract to support, maintain, or educate a child as within provision of statute of frauds relating to contract not to be performed within a year, 49 A.L.R.2d 1293.

Applicability of statute of frauds to promise to pay for medical, dental, or hospital services furnished another, 64 A.L.R.2d 1071.

Minerals: solid mineral royalty as real or personal property for purposes of statute of frauds, 68 A.L.R.2d 728, 735.

Marriage: what constitutes promise made in or upon consideration of marriage within statute of frauds, 75 A.L.R.2d 633.

Part performance doctrine with respect to renewal option in lease not complying with statute of frauds, 80 A.L.R.2d 425.

Signatures: admissibility of parol evidence to connect signed and unsigned documents relied upon as memorandum to satisfy statute of frauds, 81 A.L.R.2d 991.

Employment contract: enforceability, under statute of frauds provision as to contracts not to be performed within a year, of oral employment contract for more than one year but specifically made terminable upon death of either party, 88 A.L.R.2d 701.

Price fixed in contract violating statute of frauds as evidence of value in action on quantum meruit, 21 A.L.R.3d 9.

Rescission of contract: applicability of statute of frauds to agreement to rescind contract for sale of land, 42 A.L.R.3d 242.

Consumer class actions based on fraud or misrepresentations, 53 A.L.R.3d 534.

Employment contracts: action by employee in reliance on employment contract which violates statute of frauds as rendering contract enforceable, 54 A.L.R.3d 715.

Promissory estoppel as basis for avoidance of statute of frauds, 56 A.L.R.3d 1037.

Circumstances excusing lessee’s failure to give timely notice of exercise of option to renew or extend lease, 27 A.L.R.4th 266.

Sufficiency as to method of giving oral or written notice exercising option to renew or extend lease, 29 A.L.R.4th 903.

What constitutes timely notice of exercise of option to renew or extend lease, 29 A.L.R.4th 956.

Waiver or estoppel as to notice requirement for exercising option to renew or extend lease, 32 A.L.R.4th 452.

Sufficiency as to parties giving or receiving notice of exercise of option to renew or extend lease, 34 A.L.R.4th 857.

Specificity of description of premises as affecting enforceability of lease, 73 A.L.R.4th 236.

Applicability of statute of frauds to promise to pay for legal services furnished to another, 84 A.L.R.4th 994.

Satisfaction of statute of frauds by e-mail, 110 A.L.R.5th 277.

Sufficiency of description of terms and conditions of lease, or lease provision, so as to comply with statute of frauds, 12 A.L.R.6th 123.

Law Reviews.

The Statute of Frauds Restatement with North Dakota Annotations, 2 Dak. L. Rev. 373 (1929); 3 Dak. L. Rev. 119 (1930).

Case Comment: Fraud - Rights of Action and Defenses: Statute Of Frauds Does Not Preclude the Assertion of a Deceit Claim, Irish Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715, see 87 N.D. L. Rev. 743 (2011).

9-06-05. Contracts unenforceable unless in writing — Statute of frauds. [Repealed]

Repealed by S.L. 1965, ch. 296, § 32.

Note.

For present provisions, see §§ 41-02-08, 41-02-16.

Collateral References.

Sufficiency of description of terms and conditions of lease, or lease provision, so as to comply with statute of frauds, 12 A.L.R.6th 123.

9-06-06. Auction sale — Auctioneer memorandum sufficient.

When a sale of any goods or choses in action is made by auction, an entry by the auctioneer in the auctioneer’s salebook at the time of the sale of the kind of property sold, the terms of sale, the price, and names of the purchaser and person on whose account the sale is made is a sufficient memorandum.

Source:

R.C. 1943, § 9-0606.

Cross-References.

Authority of auctioneer to bind both parties, see § 3-05-02.

9-06-07. Written contract supersedes oral negotiations.

The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.

Source:

Civ. C. 1877, § 921; R.C. 1895, § 3888; R.C. 1899, § 3888; R.C. 1905, § 5333; C.L. 1913, § 5889; R.C. 1943, § 9-0607.

Derivation:

Cal. Civ. C., 1625.

Notes to Decisions

Agency of Contracting Party.

This section does not bar introduction of parol evidence for the purpose of proving that a contracting party was acting as agent of another when the purpose of the evidence is to establish the liability of the nonsigning principal, but it does bar admission of such evidence for the purpose of exculpating principal signatories to the written instrument. Signal Drilling Co. v. Liberty Petroleum Co., 226 N.W.2d 148, 1975 N.D. LEXIS 186 (N.D. 1975).

Appeal.

The decision to admit parol evidence is a determination of law and is thus fully reviewable on appeal. First Nat'l Bank v. Burich, 367 N.W.2d 148, 1985 N.D. LEXIS 300 (N.D. 1985).

Application of Rule.
—In General.

This rule can have no application until a written contract or agreement is established. Foot Schulze & Co. v. Skeffington, 52 N.D. 307, 202 N.W. 642, 1925 N.D. LEXIS 22 (N.D. 1925).

A written contract supersedes all prior or contemporaneous oral agreements or conditions concerning the subject matter of the contract, even though the contract is not required to be in writing. Jensen v. Siegfried, 66 N.D. 222, 263 N.W. 715, 1935 N.D. LEXIS 191 (N.D. 1935).

Under this section, execution of written contract, whether law required it to be written or not, supersedes all preceding or accompanying oral negotiations or stipulations concerning subject matter of contract. Rieger v. Rieger, 175 N.W.2d 563, 1970 N.D. LEXIS 111 (N.D. 1970).

Parol evidence is inadmissible to vary or contradict the terms of a written contract between the parties to the contract; however, if an ambiguity exists in the contract, parol evidence is admissible to explain existing essential terms or to show the parties’ intent. Bye v. Elvick, 336 N.W.2d 106, 1983 N.D. LEXIS 309 (N.D. 1983).

Since nothing in written quit claim deeds suggested that the deeds were given as security for a loan to property owner, but rather the deeds unambiguously conveyed the owner’s interest in the land and no allegations of fraud, mistake, or accident were made, parol evidence was not admissible to contradict the grants in those quit claim deeds. Des Lacs Valley Land Corp. v. Herzig, 2001 ND 17, 621 N.W.2d 860, 2001 N.D. LEXIS 14 (N.D. 2001).

Because the quitclaim deeds were unambiguous, the parol evidence rule precluded the consideration of extrinsic evidence, including that of mistake. Syversen v. Hess, 2003 ND 118, 665 N.W.2d 23, 2003 N.D. LEXIS 129 (N.D. 2003).

Where the individuals claimed title through a series of quitclaim deeds, the judgment quieting title in the owner was affirmed because (1) the evidence supported the district court’s finding that the deed was conditional, and (2) this section could only have been applied to a deed with the conditions attached. Valley Honey Co., LLC v. Graves, 2003 ND 125, 666 N.W.2d 453, 2003 N.D. LEXIS 138 (N.D. 2003), cert. denied, 540 U.S. 1165, 124 S. Ct. 1179, 157 L. Ed. 2d 1212, 2004 U.S. LEXIS 900 (U.S. 2004).

Summary judgment was not appropriate on the grantors’ claim for reformation of a deed because there was parol evidence supporting the inference that a mistake was made; the deed was signed when the flowage easement had not yet been recorded, a mistake the grantee knew about, and there was also evidence that the grantee had told his real estate agent not to say anything about the flowage easement during the closing. Anderson v. Selby, 2005 ND 126, 700 N.W.2d 696, 2005 N.D. LEXIS 162 (N.D. 2005).

District court did not abuse its discretion by admitting witness testimony to establish whether a mutual mistake caused the decedent to execute the quitclaim deed without a reservation of mineral rights; in reformation actions, courts could properly look into the surrounding circumstances and take into consideration all facts which disclosed the intention of the parties. Spitzer v. Bartelson, 2009 ND 179, 773 N.W.2d 798, 2009 N.D. LEXIS 191 (N.D. 2009).

Contract for deed did not contemplate payments after 2003, so evidence that post-2003 payments were intended as rent does not vary or add to the terms of the contract for deed; the parol evidence rule did not prohibit evidence of a new agreement after abandonment of the contract for deed. Johnson v. Mark, 2013 ND 128, 834 N.W.2d 291, 2013 N.D. LEXIS 116 (N.D. 2013).

—Legislative Enactment.

This section is a legislative enactment, in part, of the parol evidence rule. Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606, 1951 N.D. LEXIS 93 (N.D. 1951).

—Parties to Contract.

The rule prohibiting the introduction of parol testimony to vary the terms of the contract applies only to a party thereto and not to one who is neither a party to the contract nor a privy to one who is. Roberts v. First Nat'l Bank, 8 N.D. 474, 79 N.W. 993, 1899 N.D. LEXIS 38 (N.D. 1899).

District court did not err by failing to find the identity of the seller was a genuine issue of material fact precluding summary judgment because the purchase agreement was an enforceable contract against the purchasers, the seller sued them in his individual capacity for breach of contract, and no business entities were named; the seller signed the property purchase agreement and contracted to sell the property, and he signed the agreement and subsequent warranty deed conveying the property. Flaten v. Couture, 2018 ND 136, 912 N.W.2d 330, 2018 N.D. LEXIS 145 (N.D. 2018).

—Specific Matters.

The rule that a written contract supersedes all prior and contemporaneous negotiations and stipulations between the parties applies only to the specific matter embraced in the contract. Grand Forks Lumber & Coal Co. v. Tourtelot, 7 N.D. 587, 75 N.W. 901, 1898 N.D. LEXIS 94 (N.D. 1898).

Substantial evidence showed that a subcontractor was bound by a subcontract requiring installation of a particular tank liner system rather than a competitor’s system called for in the subcontractor’s bid. Any agreement relating to inclusion of the bid in the subcontract could not be used to vary the subcontract’s terms pursuant to N.D.C.C. § 9-06-07. John T. Jones Constr. Co. v. Hoot Gen. Constr. Co., 613 F.3d 778, 2010 U.S. App. LEXIS 15061 (8th Cir. Iowa 2010).

—Substantive Law.

The statutory rule that a written contract supersedes oral negotiations is positive substantive law. Allgood v. National Life Ins. Co., 61 N.D. 763, 240 N.W. 874, 1932 N.D. LEXIS 255 (N.D. 1932).

The so-called parol evidence rule is neither a rule of evidence nor of interpretation, but rather one of substantive law. Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606, 1951 N.D. LEXIS 93 (N.D. 1951); Northwestern Equip. v. Tentis, 74 N.W.2d 832, 1956 N.D. LEXIS 92 (N.D. 1956).

The parol evidence rule is not a rule of evidence, but rather one of substantive law. Radspinner v. Charlesworth, 369 N.W.2d 109, 1985 N.D. LEXIS 332 (N.D. 1985).

—Uniform Commercial Code.

In cases covered by Article 1 of the Uniform Commercial Code, this section may not be applied to prevent relevant evidence of course of dealing or usage of trade to explain, qualify or supplement written terms, but such evidence may not contradict the written terms. People Bank & Trust v. Reiff, 256 N.W.2d 336, 1977 N.D. LEXIS 146 (N.D. 1977).

Concerning Its Matter.

This section does not preclude proof of the existence of any separate oral stipulation or agreement as to any matter on which the written contract is silent and which is not inconsistent with its terms if, from the circumstances of the case, the court infers that the parties did not intend the document to be a complete and final statement of the whole transaction between them. Putnam v. Dickinson, 142 N.W.2d 111, 1966 N.D. LEXIS 183 (N.D. 1966).

Consideration for Contract.

It is permissible, under the guise of proving the true consideration for a contract, to establish as a cause of action an oral agreement within the statute of frauds. Alsterberg v. Bennett, 14 N.D. 596, 106 N.W. 49, 1905 N.D. LEXIS 95 (N.D. 1905).

Constructive Trust.

Notwithstanding the statute of frauds and the parol evidence rule, a constructive trust may be imposed upon land based upon prior oral agreements when the requisites of N.D.C.C. § 59-01-06 are met. Radspinner v. Charlesworth, 369 N.W.2d 109, 1985 N.D. LEXIS 332 (N.D. 1985).

Deed of Conveyance.

In an action for damage for a breach of contract to purchase real property, it may not be shown that the vendee agreed to accept a warranty deed with existing defects in the title. McCulloch v. Bauer, 24 N.D. 109, 139 N.W. 318, 1912 N.D. LEXIS 20 (N.D. 1912).

The true consideration of a deed of conveyance may be inquired into, and shown by parol evidence. Erickson v. Wiper, 33 N.D. 193, 157 N.W. 592, 1916 N.D. LEXIS 108 (N.D. 1916).

Notwithstanding the failure of the opposing party to object, oral testimony is inadmissible to invalidate a quitclaim deed. Gajewski v. Bratcher, 221 N.W.2d 614, 1974 N.D. LEXIS 173, 1974 N.D. LEXIS 222 (N.D. 1974).

A deed is a written contract, and is subject to the parol evidence rule. Radspinner v. Charlesworth, 369 N.W.2d 109, 1985 N.D. LEXIS 332 (N.D. 1985).

Grantors could not vary the express terms of deeds conveying property in fee simple under the guise of showing that an alleged oral agreement between the grantors and the grantees regarding the use of certain land as a park was part of the consideration for the conveyance; such agreement was superseded by the subsequent deeds and was unenforceable. Radspinner v. Charlesworth, 369 N.W.2d 109, 1985 N.D. LEXIS 332 (N.D. 1985).

Although the debtors provided extrinsic evidence indicating that a quitclaim deed between them and the lender was not intended to be an actual transfer of ownership, extrinsic evidence could not be considered under the parol evidence rule because the delivered and recorded deed clearly and unambiguously conveyed all of the debtors' right, title, and interest in the property to the lender. Finstad v. Gord, 2014 ND 72, 844 N.W.2d 913, 2014 N.D. LEXIS 74 (N.D. 2014).

Execution of a Written Contract.

The execution of a written contract supersedes all preceding oral negotiations. Biteler's Tower Serv. v. Guderian, 466 N.W.2d 141, 1991 N.D. LEXIS 16 (N.D. 1991).

Failure of Consideration.

Parol evidence is admissible to prove failure of consideration. First Nat'l Bank v. Burich, 367 N.W.2d 148, 1985 N.D. LEXIS 300 (N.D. 1985).

The trial court did not err as a matter of law in allowing parol evidence as to bank’s oral representations as evidence that consideration for note executed by defendant had failed, under the failure of consideration exception to the parol evidence rule, in view of the bank’s active solicitation of defendant to improve home which he was refinancing but to which he no longer had title and execute a note to purchase materials for the renovation, after its discovery of the home’s insufficient value for federal financing. First Nat'l Bank v. Burich, 367 N.W.2d 148, 1985 N.D. LEXIS 300 (N.D. 1985).

Fixtures on Land.

Admission of testimony concerning alleged oral exclusion of fixtures from warranty deed was error where party contending that deed was incomplete in its statement of consideration was actually endeavoring to prove something different than consideration and to impose further contractual obligations; while resort may be had to parol evidence to prove that actual consideration differs from that recited in deed, party may not show that agreement was other than that set forth in the writing. Zimmer v. Bellon, 153 N.W.2d 757, 1967 N.D. LEXIS 100 (N.D. 1967).

Guaranty.

District court erred in granting summary judgment on a bank’s guaranty claim. The district court effectively considered the issues and defenses raised in defendant’s amended answer and concluded the guaranty was unambiguous without considering defendant’s evidence about alleged statements made to induce him to sign the guaranty. Citizens State Bank - Midwest v. Symington, 2010 ND 56, 780 N.W.2d 676, 2010 N.D. LEXIS 65 (N.D. 2010).

Incomplete Contract.

A receipt on an incomplete contract may be explained. Prairie Sch. Township v. Haseleu, 3 N.D. 328, 55 N.W. 938, 1893 N.D. LEXIS 29 (N.D. 1893).

The rule against the violation of a written contract by parol does not preclude proof of a separate oral stipulation as to any matter on which a written contract is silent if the oral agreement is not inconsistent with the written, and if it appears from the circumstances that the parties did not intend the document to be complete. Putnam v. Prouty, 24 N.D. 517, 140 N.W. 93, 1913 N.D. LEXIS 14 (N.D. 1913); Minneapolis Threshing Mach. Co. v. Huncovsky, 49 N.D. 1086, 194 N.W. 830, 1923 N.D. LEXIS 58 (N.D. 1923).

Where a contract is partly oral and partly written, the written portion is no more subject to contradiction by parol than the entire contract would be had it been wholly reduced to writing. Odegaard v. Investors Oil, 118 N.W.2d 362, 368, 1962 N.D. LEXIS 103 (N.D. 1962).

The rule that a written contract supersedes all discussions, conversations, and oral negotiations concerning the subject matter of the contract which preceded or accompanied its execution presupposes that the entire subject matter involved in the prior negotiations was included within the framework of the written contract and does not exclude the possibility of a contract being partly oral and partly written. Odegaard v. Investors Oil, 118 N.W.2d 362, 368, 1962 N.D. LEXIS 103 (N.D. 1962).

Where an agreement is partly written and partly parol, that part which is parol and is not mentioned or covered in the written contract may be proven by competent testimony. Whether the written contract was intended to be the complete final agreement is to be determined from the circumstances of the case. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Commercial lease was not fully integrated where tenant allegedly owed landlord money under prior lease, tenant alleged an oral agreement whereby landlord forgave past due rent in exchange for increased rent in new lease, and new lease was silent on past due rent. Felco, Inc. v. Doug's North Hill Bottle Shop, 1998 ND 111, 579 N.W.2d 576, 1998 N.D. LEXIS 120 (N.D. 1998).

Intent of Parties.

This section barred consideration of an alleged oral agreement between the parties where written lease agreement was silent on the subject matter covered by the alleged oral agreement; the lease contained a clear and unambiguous provision stating that the lease constituted the whole and complete agreement between the parties and it could not be inferred from the circumstances that the parties did not intend the written lease agreement to be complete. Tkach v. American Sportsman, 316 N.W.2d 785, 1982 N.D. LEXIS 212 (N.D. 1982).

Where plaintiffs showed that bank contemplated lending three hundred thousand dollars, a security interest in all the assets of the ranch was given and plaintiffs had told bank they could not pledge all the assets unless they got the additional funds to purchase cattle, and bank actually advanced more than one hundred fifty thousand dollars, plaintiff’s were allowed to present parol evidence to show oral agreement to lend three hundred thousand dollars, even though written agreement for loan of one hundred fifty thousand dollars had standard boiler plate language stating that bank would lend no more than one hundred fifty thousand dollars. Delzer v. United Bank, 459 N.W.2d 752, 1990 N.D. LEXIS 153 (N.D. 1990).

Two companies that acquired oil and gas interests that belonged to a third company (“debtor”) while the debtor was in Chapter 7 bankruptcy were not barred by N.D.C.C. § 28-01-15 from seeking reformation of documents that transferred the debtor's interests because they discovered the fact that there were problems with the documents less than ten years before they sought reformation, and the court was allowed under N.D.C.C. § 9-06-07 to consider extrinsic evidence to determine the intent of the bankruptcy trustee when he sold the debtor's property, and to order reformation of the documents pursuant to N.D.C.C. § 32-04-17 to the extent they did not accurately convey interests the trustee intended to sell. Great Plains Royalty Corp. v. Earl Schwartz Co., 2015 Bankr. LEXIS 883 (Bankr. D.N.D. Mar. 18, 2015).

Interpretation of Contract.
—In General.

Parol evidence is not admissible to vary a writing. Hutchinson v. Cleary, 3 N.D. 270, 55 N.W. 729, 1893 N.D. LEXIS 22 (N.D. 1893).

Parol testimony is not admissible to vary the terms of a complete and unambiguous contract. Gilbert Mfg. Co. v. Bryan, 39 N.D. 13, 166 N.W. 805, 1918 N.D. LEXIS 9 (N.D. 1918); Streeter v. Archer, 46 N.D. 251, 176 N.W. 826, 1920 N.D. LEXIS 2 (N.D. 1920); Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946); Mevorah v. Goodman, 79 N.D. 443, 57 N.W.2d 600, 1953 N.D. LEXIS 54 (N.D. 1953).

Parol evidence is not admissible to vary or contradict the terms of a written contract as between the parties thereto. Stair v. Hibbs, 52 N.D. 910, 204 N.W. 621 (N.D. 1925).

Where a written contract is complete, clear and unambiguous and contains mutual and contractual covenants, or the consideration consists of a specific, direct promise to do or not to do certain things, its provisions cannot be changed by parol in the absence of fraud, misconduct, or accident. Allgood v. National Life Ins. Co., 61 N.D. 763, 240 N.W. 874, 1932 N.D. LEXIS 255 (N.D. 1932); Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946); Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606, 1951 N.D. LEXIS 93 (N.D. 1951); Mevorah v. Goodman, 79 N.D. 443, 57 N.W.2d 600, 1953 N.D. LEXIS 54 (N.D. 1953).

Where the parties to a contract reduce it to writing, such written contract supersedes all the oral negotiations and stipulations and suggestions concerning its matter which preceded or accompanied the execution. Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946); Mevorah v. Goodman, 79 N.D. 443, 57 N.W.2d 600, 1953 N.D. LEXIS 54 (N.D. 1953).

In action contesting validity of a realtor’s listing contract, parol evidence was admissible as to negotiations surrounding the execution of an ancillary earnest money contract which had already been rescinded and was not an issue. Dardis v. Eddy Bros., 223 N.W.2d 674, 1974 N.D. LEXIS 174 (N.D. 1974).

District court erred in granting summary judgment to a mineral lessee because applying the parol evidence rule to prohibit consideration of the lessee's alleged fraudulent conduct would allow it to perpetrate fraud and injustice where genuine issues of material fact remained as to whether the lessee made the alleged fraudulent misrepresentations and whether the mineral owners were thereby induced to enter into the leases with the lessee. Golden Eye Res., LLC v. Ganske, 2014 ND 179, 853 N.W.2d 544, 2014 N.D. LEXIS 181 (N.D. 2014).

—Ambiguities.

An agreement in writing may be explained, by oral evidence if it is ambiguous or uncertain. Kennedy v. Falde, 29 N.W. 667, 4 Dakota 319, 1886 Dakota LEXIS 13 (Dakota 1886).

—Fraud.

Parol evidence is admissible to show that one was induced fraudulently to become a party to a contract, even though the contract is in writing. Dalheimer v. Lucia, 50 N.D. 78, 194 N.W. 925, 1923 N.D. LEXIS 79 (N.D. 1923); Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946).

Oral evidence is admissible to show that assent to a written contract was induced by fraud, thus rendering the contract voidable. Carufel v. Kounts, 60 N.D. 91, 232 N.W. 609, 1930 N.D. LEXIS 212 (N.D. 1930).

Where a written contract is complete and unambiguous, parts cannot be changed by parol, or new terms added, in the absence of fraud, misconduct, or accident. Allgood v. National Life Ins. Co., 61 N.D. 763, 240 N.W. 874, 1932 N.D. LEXIS 255 (N.D. 1932); Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946).

Parol testimony that wife who signed indemnity agreement was misled by her former husband to believe that document was a bond and other testimony as to negotiations leading to signature was not error since it may be shown by parol evidence that writing was never executed or delivered as a contract, or that assent thereto was impaired by fraud, illegality, duress, mistake, or failure of consideration, rendering contract void or voidable. Hartford Accident & Indem. Co. v. Anderson, 155 N.W.2d 728, 1968 N.D. LEXIS 113 (N.D. 1968).

Statute does not apply where one is induced by fraud to become party to written contract, and in such case parol evidence will be admitted to show such fraud but parties entering written party-wall agreement were not within exception where alleged fraud consisted in purported oral agreement to assist other signers in selling beer, which agreement was unlawful. Schue v. Jacoby, 162 N.W.2d 377, 1968 N.D. LEXIS 79 (N.D. 1968).

—Waiver of Terms.

Prior negotiations which become merged in a written contract cannot operate as a waiver of the terms of the writing. State Bank v. Burke, 53 N.D. 777, 208 N.W. 115, 1926 N.D. LEXIS 30 (N.D. 1926); Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946).

Lease Agreement.

Because of the explicit and clear language of the written lease agreement, no course of conduct before that agreement should modify or be used to explain the unambiguous repair and maintenance lease provision. B.W.S. Inv. v. Mid-Am Restaurants, 459 N.W.2d 759, 1990 N.D. LEXIS 160 (N.D. 1990).

Machinery, Sale of.

A written order for machinery, to be shipped to the purchaser, which fully describes the machinery and the terms under which it is to be purchased, becomes a contract by the unconditional acceptance of such order. Reeves & Co. v. Bruening, 13 N.D. 157, 100 N.W. 241, 1904 N.D. LEXIS 28 (N.D. 1904).

A written contract for the sale of machinery which restricts a warranty to one set out excludes all other warranties, express or implied. Dowagiac Mfg. Co. v. Mahon, 13 N.D. 516, 101 N.W. 903 (1904), distinguished, 15 N.D. 477, 107 N.W. 1078 (1906) and Sorg v. Brost, 29 N.D. 124, 150 N.W. 455, 1914 N.D. LEXIS 16 (N.D. 1914).

In proceedings to recover balance of purchase price of tractor, purchasers could show that their signatures to the alleged written contract were procured by fraud and the damages suffered because of the breach of warranty of quality. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931).

Mistake of Fact.

Party signing a simple contract without reading it may not introduce parol evidence tending to vary its terms on the ground that his ignorance of its contents constituted a mistake of fact. Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606, 1951 N.D. LEXIS 93 (N.D. 1951).

Mortgages.

The terms of a mortgage may not be contradicted or varied by parol evidence. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

In mortgage foreclosure proceedings against husband and wife, the wife could show that her signature to the note and the mortgage, which accompanied it as security, was obtained by fraud as to purpose and intent of contract and that she received no consideration. Powell v. Bach, 56 N.D. 297, 217 N.W. 172, 1927 N.D. LEXIS 100 (N.D. 1927).

Negotiable Instruments.
—In General.

In an action on a promissory note, parol evidence is not admissible to vary and contradict its terms. National German-American Bank v. Lang, 2 N.D. 66, 49 N.W. 414, 1891 N.D. LEXIS 27 (N.D. 1891); First State Bank v. Kelly, 30 N.D. 84, 152 N.W. 125, 1915 N.D. LEXIS 105 (N.D. 1915).

In action against husband and wife to foreclose mortgage securing promissory note, wife could show that her signature was obtained by fraud as to the purpose and intent of the contract and that she received no consideration. Powell v. Bach, 56 N.D. 297, 217 N.W. 172, 1927 N.D. LEXIS 100 (N.D. 1927).

Terms of promissory note may not be varied by extrinsic verbal agreement that it is not to be transferred and is to be paid only by crediting collections from strangers to the note. Baird v. Keitzman, 60 N.D. 317, 233 N.W. 905, 1930 N.D. LEXIS 233 (N.D. 1930).

Parol evidence rule does not apply to intermediate parties to note where maker alleged fraud and failure of consideration as defense to its validity; thus, evidence offered to prove that execution and delivery of note was procured by fraud and that consideration for note had failed was competent and admissible under well recognized exceptions to parol evidence rule. Verry v. Murphy, 163 N.W.2d 721, 1968 N.D. LEXIS 88 (N.D. 1968).

Parol evidence was admissible to show whether notation on a check was intended as part of the written contract between the parties where it was unclear if the notation, concerning application of the check’s proceeds, was intended as a condition of acceptance or whether it was merely for bookkeeping purposes. National Bank v. Pauly, 280 N.W.2d 85, 1979 N.D. LEXIS 247 (N.D. 1979).

—Endorsement.

Parol evidence to vary the endorsement on a draft is not admissible. Thompson v. McKee, 37 N.W. 367, 5 Dakota 172, 1888 Dakota LEXIS 5 (Dakota 1888).

Parol evidence may be admitted to explain the endorsement on a note. Dickinson v. Burke, 8 N.D. 118, 77 N.W. 279, 1898 N.D. LEXIS 27 (N.D. 1898).

The contract evidenced by the endorsement and delivery of a negotiable note is an express written contract with fixed terms and the terms of such contract may not be contradicted or varied by parol evidence. Routier v. Williams, 52 N.D. 793, 204 N.W. 678, 1925 N.D. LEXIS 144 (N.D. 1925).

Nonacceptance of Contract.

Parol evidence may be admitted to prove that a written contract was never accepted. Edwards & McCulloch Lumber Co. v. Baker, 2 N.D. 289, 50 N.W. 718, 1891 N.D. LEXIS 52 (N.D. 1891).

Parol Evidence.

Widow claimed the farmer failed to comply with an agreement with her husband to account for 130 cows, but the farmer testified that only seven cows remained and the husband had not furnished the 130 cows or maintained the same during subsequent years, despite the language of the agreement; the farmer properly raised an affirmative defense of failure of consideration, such that the district court did not err in permitting him to present parol evidence to prove failure of consideration. Brash v. Gulleson, 2013 ND 156, 835 N.W.2d 798, 2013 N.D. LEXIS 142 (N.D. 2013).

Partnership Agreement.

Demand notes and partnership agreement were so clear and unambiguous on the subjects of capital and debt that they precluded evidence about related oral negotiations inconsistent with the written documents. Pear v. Grand Forks Motel Assocs., 553 N.W.2d 774, 1996 N.D. LEXIS 222 (N.D. 1996).

Premarital Agreements.

Unfulfilled oral promise could be evidence of the voluntariness of a premarital agreement, and parol or extrinsic evidence could be used to show agreement had no effect because of fraud, illegality or mistake, or because essential elements were not reduced to writing. Lutz v. Schneider (In re Estate of Lutz), 1997 ND 82, 563 N.W.2d 90, 1997 N.D. LEXIS 83 (N.D. 1997), dismissed, 1999 ND 121, 595 N.W.2d 590, 1999 N.D. LEXIS 113 (N.D. 1999).

Prior Oral Agreement.

Oral agreement made at time bid for transporting children by school bus was opened and accepted, to effect that bidder would be moving prior to the commencement of school and would therefore not be driving the last four miles of the school bus route, was ineffective to alter written contract signed and delivered to school board four months subsequent to acceptance of the bid. Rettig v. Taylor Pub. Sch. Dist., 211 N.W.2d 743, 1973 N.D. LEXIS 118 (N.D. 1973).

Evidence of oral negotiations and agreements which preceded a written contract may not be offered to vary the terms expressed in the written contract, nor may such agreements be separately enforced. Radspinner v. Charlesworth, 369 N.W.2d 109, 1985 N.D. LEXIS 332 (N.D. 1985).

Summary judgment was properly awarded to a corporation and its president in plaintiff’s breach of contract suit because the president’s oral assurance that a product line would not be sold could not be used to vary or add to the parties’ subsequent written dealership agreement. Written agreement provided that termination of the dealer relationship could be made by either party, for any reason, by written notice. Evenson v. Quantum Indus., 2004 ND 178, 687 N.W.2d 241, 2004 N.D. LEXIS 308 (N.D. 2004).

Sale of Animal.

The terms of a written agreement for the sale of a mare could not be varied by oral warranty of quality of the animal. Fletcher v. Nelson, 6 N.D. 94, 69 N.W. 53, 1896 N.D. LEXIS 15 (N.D. 1896).

Settlement Agreements.

Trial court did not err in refusing to permit the introduction of parol evidence to clarify parts of a settlement agreement in a breach of contract action where plaintiffs’ attempt to introduce parol evidence that interest was intended to accrue on a $150,000 debt would vary and contradict the terms of the settlement agreement. Silbernagel v. Silbernagel, 2007 ND 124, 736 N.W.2d 441, 2007 N.D. LEXIS 115 (N.D. 2007).

Subsequent Contracts.

Parties who have undertaken contractual obligations by an agreement in writing may enter into a new parol agreement creating obligations separate from the old ones and at variance with them, and such new agreements will be binding, unless the contract is one required to be in writing. Quinlivan v. Dennstedt Land Co., 39 N.D. 606, 168 N.W. 51, 1918 N.D. LEXIS 53 (N.D. 1918).

This section did not preclude proof of a second, subsequent contract in which the contracting parties were identical. Johnson v. Auran, 214 N.W.2d 641, 1974 N.D. LEXIS 248 (N.D. 1974).

Waiver of Objections Against Original Contract.

Where a buyer of an auto on a conditional sales contract enters into a new agreement with the assignee of such contract which revises the original terms to provide for lower monthly payments until a definite sum remaining due is paid, the buyer is deemed to have thereby waived any objections he might have raised against the original contract. First Nat'l Bank v. O'Callaghan, 143 N.W.2d 104, 1966 N.D. LEXIS 160 (N.D. 1966).

Law Reviews

Some Thoughts About Warranty Law: Express and Implied Warranties, 56 N.D. L. Rev. 509, 553.

9-06-08. Written contract takes effect on delivery.

A contract in writing takes effect upon its delivery to the party in whose favor it is made or to that party’s agent.

Source:

Civ. C. 1877, § 922; R.C. 1895, § 3889; R.C. 1899, § 3889; R.C. 1905, § 5335; C.L. 1913, § 5891; R.C. 1943, § 9-0608.

Derivation:

Cal. Civ. C., 1626.

Notes to Decisions

Guaranty.

A written guaranty is not effective unless and until it is delivered. Foot Schulze & Co. v. Skeffington, 52 N.D. 307, 202 N.W. 642, 1925 N.D. LEXIS 22 (N.D. 1925); Security Nat'l Bank v. Andrews, 53 N.D. 328, 205 N.W. 732, 1925 N.D. LEXIS 82 (N.D. 1925).

Lack of Mutual Assent.

District court erred in determining a document became a part of the contract for the sale of a decedent’s farmstead and farmland because the document failed for lack of mutual assent; a lessor did not accept the document prior to the decedent’s death and thus, did not timely accept those additional terms. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

Notes and Mortgages.
—Effective Date.

A mortgage takes effect on its delivery free from any extraneous condition upon which delivery was made. Sargent v. Cooley, 12 N.D. 1, 94 N.W. 576, 1902 N.D. LEXIS 6 (N.D. 1902).

Where note was signed by maker and endorsers and deposited in the mails at direction of payee, it became binding and effective as against the makers and endorsers when it was delivered. Douglas County State Bank v. Sutherland, 52 N.D. 617, 204 N.W. 683, 1925 N.D. LEXIS 145 (N.D. 1925).

A mortgage is not effective as such until it is delivered with intent that it become effective. Tenney Co. v. Thomas, 61 N.D. 202, 237 N.W. 710, 1931 N.D. LEXIS 267 (N.D. 1931).

—Intention of Parties.

A negotiable promissory note, like any other written instrument, has no legal inception or valid existence as such until it has been delivered in accordance with the purpose and intention of the parties. First State Bank v. Kelly, 30 N.D. 84, 152 N.W. 125, 1915 N.D. LEXIS 105 (N.D. 1915).

A written instrument, such as a promissory note or a mortgage, has no legal inception until it is delivered in accordance with the intention of the parties. Stockton v. Turner, 30 N.D. 641, 153 N.W. 275, 1915 N.D. LEXIS 142 (N.D. 1915); Guild v. More, 32 N.D. 432, 155 N.W. 44, 1915 N.D. LEXIS 58 (N.D. 1915).

Prior Oral Agreement.

Oral agreement made at time of bid for busing school children, to effect that bidder would not be driving the last four miles of the school bus route, was ineffective to alter written contract signed by bidder and delivered to school board four months subsequent to acceptance of the bid. Rettig v. Taylor Pub. Sch. Dist., 211 N.W.2d 743, 1973 N.D. LEXIS 118 (N.D. 1973).

9-06-09. Law of transfers of property applies.

The provisions of the laws of this state concerning the delivery of grants, absolute and conditional, apply to all written contracts.

Source:

Civ. C. 1877, § 923; R.C. 1895, § 3890; R.C. 1899, § 3890; R.C. 1905, § 5336; C.L. 1913, § 5892; R.C. 1943, § 9-0609.

Derivation:

Cal. Civ. C., 1627.

Notes to Decisions

Delivery of Mortgage.

Where the delivery of a mortgage was absolute, it took effect, according to its terms, when delivered, wholly discharged from other conditions and agreements. Sargent v. Cooley, 12 N.D. 1, 94 N.W. 576, 1902 N.D. LEXIS 6 (N.D. 1902).

9-06-10. How seal affixed. [Repealed]

Repealed by S.L. 1973, ch. 80, § 21.

9-06-11. Seals abolished.

All distinctions between sealed and unsealed instruments are abolished.

Source:

Civ. C. 1877, § 925; R.C. 1895, § 3892; R.C. 1899, § 3892; R.C. 1905, § 5338; C.L. 1913, § 5894; R.C. 1943, § 9-0611.

Derivation:

Cal. Civ. C., 1629.

Notes to Decisions

Abolishment.

The distinction between sealed and unsealed instruments has been abolished. Benson v. Post, 9 N.W. 684, 2 Dakota 220, 1880 Dakota LEXIS 7 (Dakota 1880), aff'd, 108 U.S. 418, 2 S. Ct. 799, 27 L. Ed. 774, 1883 U.S. LEXIS 1052 (U.S. 1883); Lincoln Nat'l Life Ins. Co. v. Kelly, 73 N.D. 622, 17 N.W.2d 906, 1945 N.D. LEXIS 77 (N.D. 1945).

Attorney in Fact.

A deed signed and sealed by “Patrick M., attorney in fact for Amelia B.” was the deed of the latter although the words “he” or “his” were used in the deed as all distinctions between sealed and unsealed instruments have been abolished and any instrument within the scope of his authority by which an agent intends to bind his principal does bind him, if such intent is plainly inferable from the instrument itself. Donovan v. Welch, 11 N.D. 113, 90 N.W. 262, 1902 N.D. LEXIS 191 (N.D. 1902).

CHAPTER 9-07 Interpretation of Contract

9-07-01. Public and private contracts interpreted by same rules.

All contracts, whether public or private, are to be interpreted by the same rules, except as otherwise provided by the laws of this state.

Source:

Civ. C. 1877, § 926; R.C. 1895, § 3893; R.C. 1899, § 3893; R.C. 1905, § 5339; C.L. 1913, § 5895; R.C. 1943, § 9-0701.

Derivation:

Cal. Civ. C., 1635.

Cross-References.

“Contracts for carriage” defined, see § 8-01-01.

Municipality, contract for special improvements, see §§ 40-05-05, 40-22-36, 40-32-07, 40-33-14, 40-34-16.

Revision of contracts, see §§ 32-04-17 to 32-04-20.

Notes to Decisions

Construction of Contract.

Where the parties to a contract designate the city engineer to determine questions relating to its performance, the engineer may not change the terms of the contract, as the power to construe the contract itself is a legal one and remains with the court. Eickhof Constr. Co. v. Grafton, 123 N.W.2d 580, 1963 N.D. LEXIS 111 (N.D. 1963).

Divorce Settlement.

An agreement between the parties to a divorce suit as to the division of property, and the findings of fact, and conclusions of law, and decree must be taken together to give effect to every part, if practicable. Bailey v. Bailey, 53 N.D. 887, 207 N.W. 987, 1926 N.D. LEXIS 19 (N.D. 1926).

Teacher Contracts.

In the absence of statutory provisions to the contrary, teacher contracts are governed by the same rules as ordinary contracts of employment. Seher v. Woodlawn Sch. Dist., 79 N.D. 818, 59 N.W.2d 805, 1953 N.D. LEXIS 78 (N.D. 1953); Campbell v. Wishek Pub. Sch. Dist., 150 N.W.2d 840, 1967 N.D. LEXIS 142 (N.D. 1967).

A school board has no power or authority to determine the question of “cause” for dismissal of teacher insofar as the school district’s liability for breach of the contract of employment is concerned. Seher v. Woodlawn Sch. Dist., 79 N.D. 818, 59 N.W.2d 805, 1953 N.D. LEXIS 78 (N.D. 1953).

DECISIONS UNDER PRIOR LAW

The validity of a mandatory arbitration clause in a contract was a question of substantive law, and where such contract was fully performed in Minnesota, the law of Minnesota will be applied to determine the enforceability of such arbitration clause. Nordenstrom v. Swedberg, 143 N.W.2d 848 (N.D. 1966), decided prior to the repeal of former N.D.C.C. § 9-07-11 by Session Laws 1973, ch. 77.

A lease for mining of sand and gravel which was to be performed within the state of Minnesota required North Dakota supreme court to apply the substantive law and usage of Minnesota. Bjerken v. Ames Sand & Gravel Co., 189 N.W.2d 366, 1971 N.D. LEXIS 198 (N.D. 1971).

The place of performance of a promissory note was the place of payment. First Nat'l Bank v. Dreher, 202 N.W.2d 670, 1972 N.D. LEXIS 96 (N.D. 1972).

In diversity of citizenship case tried in the federal court of North Dakota, the rules that would have applied had the case been pending in the courts of North Dakota, were controlling. Kansas City Life Ins. Co. v. Wells, 133 F.2d 224, 1943 U.S. App. LEXIS 4269 (8th Cir. N.D. 1943).

The interpretation of an insurance contract was controlled by Missouri law where the contract, to be performed in Missouri, was the subject of a diversity of citizenship case tried in federal court of North Dakota. Kansas City Life Ins. Co. v. Wells, 133 F.2d 224, 1943 U.S. App. LEXIS 4269 (8th Cir. N.D. 1943).

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

9-07-02. Language of contract governs if clear.

The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity.

Source:

Civ. C. 1877, § 929; R.C. 1895, § 3896; R.C. 1899, § 3896; R.C. 1905, § 5342; C.L. 1913, § 5898; R.C. 1943, § 9-0702.

Derivation:

Cal. Civ. C., 1638.

Notes to Decisions

Accident Insurance.

When the language of an accident insurance policy is clear and unequivocal it must be construed according to the meaning thereof. Conklin v. North Am. Life & Casualty Co., 88 N.W.2d 825, 1958 N.D. LEXIS 69 (N.D. 1958).

Application for Insurance.

Where an application for insurance is made the basis of a contract, and is attached to and made a part of a policy, the application and questions and answers thereto are as material as any other part of the contract. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Automobile Insurance.

Death was not covered by automobile policy insuring against loss from injury sustained “while driving or riding within automobile” where insured was crushed by automobile, which he had driven partially off approach grade and gotten stuck, while attempting to extricate it with borrowed tractor and chain; at the time of insured’s death, he had terminated his driving and had voluntarily left the vehicle and thus, his death was not sufficiently associated with or incidental to driving to come within the policy’s terms. Andersen v. Standard Life & Accident Ins. Co., 149 N.W.2d 378, 1967 N.D. LEXIS 148 (N.D. 1967).

Chattel Mortgage.

A chattel mortgage is not a mortgage on real estate. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Contract Documents.

Safety manual and orientation video were not contract documents under the clear and explicit language of the contract, since the contract provided that the list of documents contained in its Table of Contents were the contract documents and the Table did not list those documents. Rogstad v. Dakota Gasification Co., 2001 ND 54, 623 N.W.2d 382, 2001 N.D. LEXIS 57 (N.D. 2001).

Guaranty was absolute, and one of payment rather than one of collection, because the guaranty contained no limiting language, nor did it impose a condition precedent to the lessor’s ability to proceed directly against the president of a medical practice as guarantor; the guaranty provided that if the practice defaulted in its performance of lease obligations, the president would be individually liable for all expenses, costs, and damages the lessor would be entitled to collect from the practice. Big Pines, LLC v. Baker, 2021 ND 70, 958 N.W.2d 480, 2021 N.D. LEXIS 71 (N.D. 2021).

Deeds.

Where deeds conveying land and mineral interests were ambiguous as to parties’ intent concerning the estate in the mineral rights conveyed, trial court properly permitted use of an unrecorded land-purchase agreement to explain parties’ intent as to the mineral estate to be conveyed. Schulz v. Hauck, 312 N.W.2d 360, 1981 N.D. LEXIS 413 (N.D. 1981).

Depository Bond.

One signing a bond for a depository of public funds is a surety for the benefit of the debtor, and cannot be held beyond the expressed terms of his contract, which will be interpreted as other contracts are interpreted. Mountrail County v. Farmers' State Bank, 53 N.D. 789, 208 N.W. 380, 1926 N.D. LEXIS 35 (N.D. 1926).

Farm Lease.

A written farm lease, under which lessor’s obligation was to furnish the land and the seed, and lessee was to crop the land, and deliver the crop to the elevator and divide one half to each party, was clear and unambiguous. Reitman v. Miller, 78 N.D. 1003, 54 N.W.2d 477, 1952 N.D. LEXIS 92 (N.D. 1952).

Intent of Parties.

If a contract is unambiguous, the intention of the parties is to be ascertained from the contract alone. If a contract is ambiguous, extrinsic evidence can be considered to clarify the intent of the parties. First Nat'l Bank & Trust Co. v. Scherr, 435 N.W.2d 704, 1989 N.D. LEXIS 34 (N.D. 1989).

Since application of principles under N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-04, 9-07-06, 9-07-09 and 9-07-12 to the dispute between the licensees and the company over whether the licensees were required under the current license agreements to disclose certain business information to the company and whether the company could unilaterally terminate the current license agreements showed that a genuine dispute existed over the parties’ duties and obligations, the licensees were not entitled to summary judgment on their declaratory judgment action and further proceedings were required. Riedlinger v. Steam Bros., 2013 ND 14, 826 N.W.2d 340, 2013 N.D. LEXIS 14 (N.D. 2013).

Life Insurance Exclusion Clause.

Where the language of an exclusion clause in a life insurance policy is clear and explicit and does not involve an absurdity, such language will not be construed in a strained manner so as to impose liability upon the insurer where none was intended. Tennefos v. Guarantee Mut. Life Co., 136 N.W.2d 155, 1965 N.D. LEXIS 157 (N.D. 1965).

Oil and Gas Lease.

Lessee under standard form of oil and gas lease was authorized to produce other minerals not associated with, and distinctly different from, oil and gas. MacMaster v. Onstad, 86 N.W.2d 36, 1957 N.D. LEXIS 164, 1957 N.D. LEXIS 165 (N.D. 1957).

Summary judgment for defendant corporation in a lease dispute was affirmed because the disputed term “engaged in drilling or reworking operations” was not ambiguous and meant “engaged in drilling operations or reworking operations;” both the context and plain language of the habendum clause compelled that conclusion. Anderson v. Hess Corp., 649 F.3d 891, 2011 U.S. App. LEXIS 16820 (8th Cir. N.D. 2011).

Option to Purchase.

Language of the option defined how it could be exercised, and the terms of the option did not require that the owner furnish the abstract before the buyers exercised the option by tendering the purchase price; the option was clear that to exercise it, the buyers had to tender the full purchase price prior to a certain date, but the buyers did not do so, and thus the trial court did not err in ruling that they did not exercise the option. Deckert v. McCormick, 2014 ND 231, 857 N.W.2d 355, 2014 N.D. LEXIS 226 (N.D. 2014).

Option to Sell.

A provision that on a certain payment by a certain time a purchaser of land could sell was an option which the purchaser could exercise, and a purchaser exercising an option to sell can show by parol an agreement to release him from all liability. Baldwin v. Opsvig, 56 N.D. 698, 219 N.W. 112, 1928 N.D. LEXIS 189 (N.D. 1928).

Parol Evidence.

Where the language and clauses employed in an instrument, when read together, are clear and explicit, no parol evidence is required as an aid to a correct interpretation of the same. Harding v. Trenor, 157 F. Supp. 350, 1957 U.S. Dist. LEXIS 2506 (D.N.D. 1957).

Price Terms.

Patient's complaint seeking a declaratory judgment that a medical center's billing practices were unfair, unconscionable, or unreasonable failed to state a claim upon which relief could be granted because there was no “open price” term in the medical center's statement of financial responsibility and release of information“ form; the language in the contract was reasonably definite and certain to refer to rates of services set out in the medical center's spreadsheet list. Limberg v. Sanford Med. Ctr. Fargo, 2016 ND 140, 881 N.W.2d 658, 2016 N.D. LEXIS 123 (N.D. 2016).

Patient's complaint seeking a declaratory judgment that a medical center's billing practices were unfair, unconscionable, or unreasonable failed to state a claim upon which relief could be granted because there was no “open price” term in the medical center's statement of financial responsibility and release of information“ form; the language in the contract was reasonably definite and certain to refer to rates of services set out in the medical center's spreadsheet list. Limberg v. Sanford Med. Ctr. Fargo, 2016 ND 140, 881 N.W.2d 658, 2016 N.D. LEXIS 123 (N.D. 2016).

Questions of Law.

The construction of a written contract to determine its legal effect and the determination of whether or not a contract is ambiguous are questions of law for the court to decide. Sorlie v. Ness, 323 N.W.2d 841, 1982 N.D. LEXIS 364 (N.D. 1982).

Real Estate Sales Contract.

A certain clause of a contract for the sale of real estate, providing that vendor might continue upon said premises, without payment of rent, until all of the above described notes, with accrued interest thereon, were fully paid by the vendee, was not inconsistent with and repugnant to general covenant of warranty giving grantee quiet and peaceable possession of land free from claims of all parties. Harding v. Trenor, 157 F. Supp. 350, 1957 U.S. Dist. LEXIS 2506 (D.N.D. 1957).

—Ambiguity.

Where a clause in a real estate sales contract stated “I hereby agree to give an exclusive contract for sale of Florano Motel for six months”, such clause was ambiguous in that it could be interpreted as destroying the owner’s right to sell, but it did not do so by necessary implication. The intention of the parties in this regard therefore became a jury question. Berry v. Heinz, 139 N.W.2d 145, 1965 N.D. LEXIS 90 (N.D. 1965).

Where contract provided that an urban renewal agency, prior to conveyance of property to purchaser, was to prepare property for purposes of redevelopment by demolishing all existing buildings, removing all debris and filling and grading the land “as shall be necessary to make it ready for construction of improvements to be made thereon by redeveloper”, language was clear and renewal agency was required to remove debris. Fargo Pub. Library v. Fargo Urban Renewal Agency, 185 N.W.2d 500, 1971 N.D. LEXIS 169 (N.D. 1971).

Teaching Contract.

When plaintiff teacher entered into a teaching contract with defendant school district for the school year, the language of the contract governed in accordance with N.D.C.C. § 9-07-02. In plaintiff’s action for breach of contract, the parties agreed that no term in the contract explained their rights and duties when unpaid leave was granted for days when school was initially scheduled to be in session but later cancelled. Godon v. Kindred Pub. Sch. Dist., 2011 ND 121, 798 N.W.2d 664, 2011 N.D. LEXIS 115 (N.D. 2011).

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, an inconsistent provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

Unambiguous Language.

If the language of an insurance contract is unambiguous, the court construes that language according to its clear meaning. State Farm Mut. Auto. Ins. Co. v. LaRoque, 486 N.W.2d 235, 1992 N.D. LEXIS 147 (N.D. 1992).

When the clear language of a corporate lease did not by its terms require pro rata payment of the lessor’s liability insurance, the corporate tenant had not breached the lease by failing to pay for the insurance; the tenant’s stipulation at trial that it would pay was not an admission that it had breached the contract but merely an effort to settle the issue. VND, LLC v. Leevers Foods, Inc., 2003 ND 198, 672 N.W.2d 445, 2003 N.D. LEXIS 222 (N.D. 2003).

In a dispute over an agreement involving property management, contract between the parties explicitly provided a procedure for termination that was combined with an automatic renewal provision; thus, the district court properly found that the termination agreements were breached. Hendricks Prop. Mgmt. Corp. v. Birchwood Props. Ltd. P'ship, 2007 ND 181, 741 N.W.2d 461, 2007 N.D. LEXIS 184 (N.D. 2007).

Termination provisions of the local agent’s agreements were clear and explicit and did not involve an absurdity; under the undisputed facts in this case, the 30 days notice did not expire until early January 2003, and, therefore, the local agent’s agreements were effective on the last day of 2002, and the agent was entitled to his annuity benefit for calendar year 2002. Huber v. Farmers Union Serv. Ass'n of N.D., 2010 ND 151, 787 N.W.2d 268, 2010 N.D. LEXIS 155 (N.D. 2010).

Debtor’s bankruptcy estate was not entitled to the liquidation proceeds of a cash-value life insurance policy that debtor purchased for an employee, as the plain language of a split-dollar/collateral-assignment agreement limited debtor’s rights. By specifically providing for rights only in the event of a surrender by the employee and not for a surrender generally or for some other type of triggering event, the most natural reading of the contract clause (applying North Dakota rules of statutory construction) made an act of surrender by the employee a necessary trigger for the debtor to realize the right assigned in that clause. Kaler v. Bala (In re Racing Servs.), 744 F.3d 543, 2014 U.S. App. LEXIS 3714 (8th Cir. 2014).

Collateral References.

Post-mortem payment or performance, provisions in contracts for, as entire or severable, 1 A.L.R.2d 1178, 1270.

Construction of contract of party to procure insurance on his own life, 12 A.L.R.2d 983.

Building or construction contract providing for installment or “progress” payments as entire or divisible, 22 A.L.R.2d 1343.

Divisibility of broker’s contract, 47 A.L.R.2d 680.

Construction of “escalator” price adjustment clause, 63 A.L.R.2d 1337.

Identification: admissibility of extrinsic evidence to identify person or persons intended to be designated by the name in which a contract is made, 80 A.L.R.2d 1137.

Venue: sufficiency of contractual designation of place of performance to fix venue at that place, under statute authorizing or requiring such venue, 97 A.L.R.2d 934.

Validity and construction of “no damage” clause with respect to delay in building or construction contract, 74 A.L.R.3d 187.

What constitutes medical or surgical treatment, or the like, within exclusionary clause of accident policy or accidental-death feature of life policy, 56 A.L.R.5th 471.

What constitutes use of automobile “to carry persons or property for fee” within exclusion of automobile insurance policy, 57 A.L.R.5th 591.

Law Reviews.

Comment on Kief Farmers Coop. Elevator Co. v. Farmland Mut. Ins. Co., 534 N.W.2d 28 (N.D. 1995), 72 N.D. L. Rev. 721 (1996).

9-07-03. Contract interpreted to give effect to mutual intention.

A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful. For the purpose of ascertaining the intention of the parties to a contract, if otherwise doubtful, the rules given in this chapter are to be applied.

Source:

Civ. C. 1877, §§ 927, 928; R.C. 1895, §§ 3894, 3895; R.C. 1899, §§ 3894, 3895; R.C. 1905, §§ 5340, 5341; C.L. 1913, §§ 5896, 5897; R.C. 1943, § 9-0703.

Derivation:

Cal. Civ. C., 1636, 1637.

Notes to Decisions

Accident Insurance.

An accident insurance policy should be construed as a whole and all of its parts considered together and harmonized. Every clause, sentence, or provision should be given effect consistent with the main purpose of the contract and the intention of the parties, if that can be ascertained therefrom. Conklin v. North Am. Life & Casualty Co., 88 N.W.2d 825, 1958 N.D. LEXIS 69 (N.D. 1958).

Mutual Intent.

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Ambiguous Contracts.

Whether a contract is ambiguous is a question of law. A contract is ambiguous when rational arguments can be made for different positions about its meaning. On appeal, the Supreme Court will independently review the contract to determine whether it is ambiguous. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

If the language of an insurance contract is ambiguous, the rules of construction in this chapter are applied to resolve the ambiguity. State Farm Mut. Auto. Ins. Co. v. LaRoque, 486 N.W.2d 235, 1992 N.D. LEXIS 147 (N.D. 1992).

Appeal.

The decision to admit parol evidence is a determination of law and is thus fully reviewable on appeal. First Nat'l Bank v. Burich, 367 N.W.2d 148, 1985 N.D. LEXIS 300 (N.D. 1985).

Attorney’s Fees Contract.

Where worker’s compensation claimant entered agreement for attorneys to represent her in action against third party tortfeasor, and the method of determining the attorneys’ fee was clearly set out in the agreement, the fact attorneys later entered a written agreement to represent the Worker’s Compensation Bureau for its statutory subrogated interest, did not render the agreement between claimant and her attorneys ambiguous, and claimant was bound to pay the fee according to the terms of the agreement. Jones v. Pringle & Herigstad, P.C., 546 N.W.2d 837, 1996 N.D. LEXIS 119 (N.D. 1996).

Bill of Sale.

In construing general description “all my farming machinery” used in bill of sale, the intent of the parties controls and may be gathered by reference to the circumstances under which the contract was made. Royal v. Aubol, 69 N.D. 419, 287 N.W. 603, 1939 N.D. LEXIS 167 (N.D. 1939).

A general description in a bill of sale is sufficient as between the parties when the intent of the parties may be gathered by reference to the circumstances under which it was made and the matter to which it relates. Lenihan v. Meyer, 111 N.W.2d 696, 1961 N.D. LEXIS 101 (N.D. 1961).

Bridge Contract.

In a dispute involving bridge donation, even if an agreement created a franchise, it was still a contract subject to the general statutory rules of contract interpretation, and the numerous obligations imposed on a company throughout the agreement were not eliminated; requiring the cities to perform by exercising an option before a 25-year term that the company was given to perform its obligations expired was an illogical and unreasonable interpretation of the agreement. A finding that the bridge was closed for 239 days because of flooding was not clearly erroneous, and an “Acts of God” provision operated to extend the terms of the agreement to February 5, 2014. City of Moorhead v. Bridge Co., 2015 ND 189, 867 N.W.2d 339, 2015 N.D. LEXIS 205 (N.D. 2015).

Building Contract.

The intention of the parties to a building contract at the time the contract was executed must control and be given effect as far as possible. Hutchinson v. Bohnsack Sch. Dist., 51 N.D. 165, 199 N.W. 484, 1924 N.D. LEXIS 159 (N.D. 1924).

When a written construction contract referred to specifications that were not annexed or otherwise identified and two sets of specifications were offered in evidence, it was for the jury to determine which one was the set of specifications referred to. Alm Constr. Co. v. Vertin, 118 N.W.2d 737, 1962 N.D. LEXIS 109 (N.D. 1962).

Chattel Mortgage.

The fact that an instrument is entitled a chattel mortgage indicates a general intent of the parties not to include real estate in the mortgage. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Deed.

Deeds are interpreted to ascertain and effectuate the parties’ mutual intentions. Stracka v. Peterson, 377 N.W.2d 580, 1985 N.D. LEXIS 442 (N.D. 1985).

If the deed is unambiguous, the court determines the intent of the parties from the instrument itself and only if there is ambiguity is extrinsic evidence considered. Stracka v. Peterson, 377 N.W.2d 580, 1985 N.D. LEXIS 442 (N.D. 1985).

Disputed language in a challenged warranty deed presented no genuine issue of material fact that the grantors intended to reserve to themselves 50 percent of the mineral interests in the conveyed property. The disputed language was intended to be a reservation of mineral interests rather than a limitation on the warranty. Johnson v. Shield, 2015 ND 200, 868 N.W.2d 368, 2015 N.D. LEXIS 216 (N.D. 2015).

Depository Bond.

In construing obligation of surety on depository bond effect should be given to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful. Keystone Sch. Dist. No. 7 v. Oster, 55 N.D. 245, 212 N.W. 928 (1927).

Divorce Settlement.

An agreement between the parties to a divorce suit as to the division of property, and the findings of fact, and conclusions of law, and decree must be taken together to give effect to every part, if practicable. Bailey v. Bailey, 53 N.D. 887, 207 N.W. 987, 1926 N.D. LEXIS 19 (N.D. 1926).

Farm Lease.

A farm lease must be construed to give effect to the intention of the parties as it existed at the time of contracting. Battagler v. Dickson, 76 N.D. 641, 38 N.W.2d 720, 1949 N.D. LEXIS 83 (N.D. 1949).

Goal of Court.

The primary goal of the court in interpreting and construing a contract is to give effect to the mutual intentions of the parties. In re Gateway Investors, Ltd., 113 B.R. 564, 1990 Bankr. LEXIS 869 (Bankr. D.N.D. 1990).

The primary goal of a court when interpreting a contract is to ascertain the mutual intentions of the contracting parties. A contract may be explained, by reference to the circumstances under which it was made, and the parties’ conduct in the course of performance after the contract’s formation can help determine the meaning of ambiguous language. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

The court’s goal when interpreting insurance policies, as when construing other contracts, is to give effect to the mutual intention of the parties as it existed at the time of contracting. Northwest G.F. Mut. Ins. Co. v. Norgard, 518 N.W.2d 179, 1994 N.D. LEXIS 135 (N.D. 1994).

Since application of principles under N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-04, 9-07-06, 9-07-09 and 9-07-12 to the dispute between the licensees and the company over whether the licensees were required under the current license agreements to disclose certain business information to the company and whether the company could unilaterally terminate the current license agreements showed that a genuine dispute existed over the parties’ duties and obligations, the licensees were not entitled to summary judgment on their declaratory judgment action and further proceedings were required. Riedlinger v. Steam Bros., 2013 ND 14, 826 N.W.2d 340, 2013 N.D. LEXIS 14 (N.D. 2013).

Insurance Contract Terms.

The district court properly construed the ambiguous terms “farm implements” and “motor vehicle” as excluding the insured’s pickup truck from coverage and did not err in failing to construe the language of the policy against the insurer and in favor of the insured pursuant to N.D.C.C. § 9-07-19 where the district court interpreted the contractual language by reference to the circumstances under which the contract was made and also gave effect to the ascertainable mutual intent of the parties at the time of contracting. Walle Mut. Ins. Co. v. Sweeney, 419 N.W.2d 176, 1988 N.D. LEXIS 36 (N.D. 1988).

Considering the technical meaning given to the term “accrue,” the supreme court agreed that, as a matter of law, the agent was entitled to deferred commissions. The insurer could have specified in the employment contract that commissions would not be “earned,” rather than “accrue,” after termination of employment, but it failed to do so. Myaer v. Nodak Mut. Ins. Co., 2012 ND 21, 812 N.W.2d 345, 2012 N.D. LEXIS 21 (N.D. 2012).

Assuming that a trailer was physically unhooked from a tractor at the moment the trailer exploded, the court construed that insurance policies pursuant to statute and agreed with the district court that the tractor-trailer owner was an “insured” to whom liability coverage provided by defendant insurer's policy applied with respect to a worker's claim that the owner's negligence caused the explosion Great West Cas. Co. v. Nat'l Cas. Co., 807 F.3d 952, 2015 U.S. App. LEXIS 21129 (8th Cir. N.D. 2015).

Lease Purpose.

Plain language of the written lease explicitly stated the owners leased their property to the tenant for a stated purpose, to use the premises to provide a high quality RV park, and the explicitly stated purpose involved more than making a profit; the generation of income under a certain operating agreement did not alleviate any potential breaches of material lease provisions, including using the property for its intended purposes, and the district court thus erred in interpreting the purpose of the lease. Abelmann v. SmartLease USA, L.L.C., 2014 ND 227, 856 N.W.2d 747, 2014 N.D. LEXIS 222 (N.D. 2014).

Lease of Railroad Right of Way.

A lease by a railroad company of a portion of its right of way upon condition that the company should not be liable for any damage to property situated thereon by reason of fire cause by “operation of a railway” did not relieve the company from liability for fire caused by sparks from stovepipe in a cook car. Gladstone Equity Exch. Co. v. Hines, 47 N.D. 454, 182 N.W. 763, 1921 N.D. LEXIS 125 (N.D. 1921).

Legal Effect Is Question of Law.

Construction of a written contract to determine its legal effect is a question of law. The intention of the parties is to be ascertained from the writing alone, if possible. Red River Human Servs. Found. v. Department of Human Servs., 477 N.W.2d 225, 1991 N.D. LEXIS 185 (N.D. 1991).

Mineral Interest Conveyances.

Insertion of the word “Royalty” in a printed deed form suited to the conveyance of a mineral interest created an ambiguity because rational contrary arguments could be made as to the meaning of the language in question. The grantor’s ambiguously expressed intentions were questions of fact to be determined with the aid of extrinsic evidence. Williams Co. v. Hamilton, 427 N.W.2d 822, 1988 N.D. LEXIS 191 (N.D. 1988).

Mutual Intent.

Contracts must be interpreted to give effect to the mutual intent of the parties. Jorgensen v. Crow, 466 N.W.2d 120, 1991 N.D. LEXIS 8 (N.D. 1991).

Generally, mutual intent must be ascertained from the written contract itself. Jorgensen v. Crow, 466 N.W.2d 120, 1991 N.D. LEXIS 8 (N.D. 1991).

A contract is to be interpreted to give effect to the mutual intention of the parties at the time of contracting. Pamida, Inc. v. Meide, 526 N.W.2d 487, 1995 N.D. LEXIS 8 (N.D. 1995).

Lessor did not breach a lease by refusing to renew it for a 5-year term because a lessee failed to maintain his medical license, which was a “necessary license” under the unambiguous terms of the lease; under N.D.C.C. § 9-07-03, the parties intended for the lessee to provide medical care from an office leased from inside of a nursing home, which was partially indicated by the fact that the suffix “M.D.” was placed after the lessee’s name in the lease document. Hsu v. Marian Manor Apts., Inc., 2007 ND 205, 743 N.W.2d 672, 2007 N.D. LEXIS 207 (N.D. 2007).

Parol evidence was properly considered under N.D.C.C. § 9-07-12 to determine the parties’ intent under N.D.C.C. § 9-07-03, rather than simply looking to the words of the contract under N.D.C.C. §§ 9-07-04 and 9-07-09, in a breach of contract suit alleging that a builder had failed to construct a home in accordance with the plans. There was evidence that the parties did not intend for the contract to be a complete and final statement of all terms and that they had discussed changes in the dimensions of the laundry room and basement; further, a settlement disposed of any claims the owners might have had. Barrett v. Gilbertson, 2013 ND 35, 827 N.W.2d 831, 2013 N.D. LEXIS 29 (N.D. 2013).

Bankruptcy court did not err in denying creditor claims for unauthorized taxes assessed through the debtor’s horse wagering service business and returned by the state; an alleged oral rebating agreement did not anticipate a retroactive change in taxes and thus lacked mutual intention to allocate the money. PW Enters. v. Bala (In re Racing Servs.), — F. Supp. 3d —, 617 B.R. 641, 2020 U.S. Dist. LEXIS 106642 (D.N.D. 2020), aff'd, 854 Fed. Appx. 777, 2021 U.S. App. LEXIS 22883 (8th Cir. N.D. 2021).

Non-Competition Agreement.

Terms that completely described the type of business restriction, the duration of the restriction, and the geographic limitation of the restriction, left no doubt there were no other essential non-competition terms left for agreement between the parties, and objectively evidenced the parties’ mutual intent to create an enforceable non-competition agreement. Lire, Inc. v. Bob's Pizza Inn Restaurants, 541 N.W.2d 432, 1995 N.D. LEXIS 236 (N.D. 1995).

Novation.

Novation is created by contract and is therefore subject to all rules governing contracts in general. Jedco Dev. Co. v. Bertsch, 441 N.W.2d 664, 1989 N.D. LEXIS 115 (N.D. 1989).

Oil and Gas Lease.

Reservation for an overriding royalty interest in the transfer of an oil and gas lease does not, without anything else, classify the transfer as a sublease rather than an assignment. Holman v. State, 438 N.W.2d 534, 1989 N.D. LEXIS 71 (N.D. 1989).

Royalty provision in the parties’ oil and gas lease was unambiguous and established a valuation point that was at the well, instead of at another place that was downstream where the oil entered a pipeline, because that was the intention of the parties as found in an interpretation of the language in the provision. Blasi v. Bruin E&P Partners, LLC, 2021 ND 86, 959 N.W.2d 872, 2021 N.D. LEXIS 90 (N.D. 2021).

Parol Evidence.

Parol evidence is admissible to reconcile, explain, and thereby show the true intent of the parties in executing the inconsistent provisions of a contract judicially found to be ambiguous. Severson v. Fleck, 251 F.2d 920, 1958 U.S. App. LEXIS 3635 (8th Cir. N.D. 1958).

If a contract is ambiguous, parol evidence is admissible to explain existing essential terms or to show the parties’ intent. Thompson v. Thompson, 391 N.W.2d 608, 1986 N.D. LEXIS 374 (N.D. 1986).

Previous Conduct of Parties.

Previous conduct of parties could be resorted to to determine that real estate agent had authority to fix price of land being sold, subject to landowner’s approval, and that landowner could not withhold approval if the price was reasonable. Young v. Metcalf Land Co., 18 N.D. 441, 122 N.W. 1101 (N.D. 1909).

Secret Intent.

Although the sellers alleged that it was never their intention to grant the bank priority in the paid-for parts inventory, and that as a matter of corporate policy they never in any case would subordinate their security interest in a dealer’s parts inventory, but they did not communicate this intent to the bank, it was the outward manifestations of assent which governed, not the secret intentions of the parties. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

Subsequent Acts of Parties.

Where a contract is ambiguous and it is impossible to ascertain the intention of the parties thereto from the writing alone, the subsequent acts of the parties showing the construction they put upon the agreement themselves may be looked to by the court. Bronson v. Chambers, 51 N.D. 737, 200 N.W. 906, 1924 N.D. LEXIS 71 (N.D. 1924); Baird v. Fuerst, 60 N.D. 592, 235 N.W. 594, 1931 N.D. LEXIS 207 (N.D. 1931); Hedrick v. Stockgrowers' Credit Corp., 64 N.D. 61, 250 N.W. 334, 1933 N.D. LEXIS 247 (N.D. 1933).

Surety Bond.

Existing law at the time of contract forms a part of the contract as though the law were expressly incorporated in the writing. Ireland's Lumber Yard v. Progressive Contractors, 122 N.W.2d 554, 1963 N.D. LEXIS 95 (N.D. 1963).

Teaching Contract.

When plaintiff teacher entered into a teaching contract with defendant school district for the school year, the terms of the contractual relationship were interpreted according to their mutual intent at the time of contracting in accordance with N.D.C.C. § 9-07-03. In plaintiff’s action for breach of contract, the parties agreed that no term in the contract explained their rights and duties when unpaid leave was granted for days when school was initially scheduled to be in session but later cancelled. Godon v. Kindred Pub. Sch. Dist., 2011 ND 121, 798 N.W.2d 664, 2011 N.D. LEXIS 115 (N.D. 2011).

In a teacher contract dispute, the “teacher shall” language in a grievance policy did not prohibit a teacher association from utilizing the grievance procedures set forth in an agreement when the grievance effected the terms and conditions of a majority of the teachers and concerned the interpretation of the agreement; a restrictive reading would have effectively ignored the purpose for the agreement as set forth by the parties. Moreover, nothing in the agreement prohibited the association from bringing a legal action after a grievance had been denied or negotiations had failed. Williston Educ. Ass'n v. Williston Pub. Sch. Dist. No. 1, 2016 ND 42, 876 N.W.2d 437, 2016 N.D. LEXIS 26 (N.D. 2016).

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, an inconsistent provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

Unambiguous Language.

When the clear language of a corporate lease did not by its terms require pro rata payment of the lessor’s liability insurance, the corporate tenant had not breached the lease by failing to pay for the insurance; the tenant’s stipulation at trial that it would pay was not an admission that it had breached the contract but merely an effort to settle the issue. VND, LLC v. Leevers Foods, Inc., 2003 ND 198, 672 N.W.2d 445, 2003 N.D. LEXIS 222 (N.D. 2003).

In a dispute over an agreement involving property management, contract between the parties explicitly provided a procedure for termination that was combined with an automatic renewal provision; thus, the district court properly found that the termination agreements were breached. Hendricks Prop. Mgmt. Corp. v. Birchwood Props. Ltd. P'ship, 2007 ND 181, 741 N.W.2d 461, 2007 N.D. LEXIS 184 (N.D. 2007).

In a breach of contract action arising from a storm sewer improvement project, the plain language of a provision for an extension of time if excavation was delayed by neglect of another contractor, when read in conjunction with a no damages for delay clause, evidenced the contracting parties’ intent, as contemplated by N.D.C.C. § 9-07-03, to limit the excavation contractor’s remedies to an extension of time for delays caused by any act or neglect by the city or an engineering contractor. Markwed Excavating, Inc. v. City of Mandan, 2010 ND 220, 791 N.W.2d 22, 2010 N.D. LEXIS 222 (N.D. 2010).

Where bankruptcy estate for debtor, a company that was engaged in the horse race betting industry, received a payment from the State of North Dakota representing a return of more than $15 million in taxes that were improperly collected, the amended claim of the debtor’s largest creditor was denied because there were no express terms in the parties’ contract that addressed this unusual situation; thus, there was no contract on the issue before the court. In re Racing Servs., 595 B.R. 334, 2018 Bankr. LEXIS 3748 (Bankr. D.N.D. 2018), aff'd, — F. Supp. 3d —, 617 B.R. 641, 2020 U.S. Dist. LEXIS 106642 (D.N.D. 2020).

Law Reviews.

“And Other Minerals” as Interpreted by the North Dakota Supreme Court, 52 N.D. L. Rev. 633 (1976).

Comment on Kief Farmers Coop. Elevator Co. v. Farmland Mut. Ins. Co., 534 N.W.2d 28 (N.D. 1995), 72 N.D. L. Rev. 721 (1996).

9-07-04. Intention ascertained from writing alone if possible.

When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone if possible, subject, however, to the other provisions of this chapter.

Source:

Civ. C. 1877, § 930; R.C. 1895, § 3897; R.C. 1899, § 3897; R.C. 1905, § 5343; C.L. 1913, § 5899; R.C. 1943, § 9-0704.

Derivation:

Cal. Civ. C., 1639.

Notes to Decisions

In General.

The intention of the parties to a written contract is to be ascertained from the writing alone, if possible. If executed documents are unambiguous, parol evidence is not admissible to contradict the terms of the written agreement; if a written contract is ambiguous, extrinsic evidence can be considered to clarify the parties’ intent. Pamida, Inc. v. Meide, 526 N.W.2d 487, 1995 N.D. LEXIS 8 (N.D. 1995).

Ambiguity Is Question of Law.

District court misapplied the law where it held that a street improvement contract was not ambiguous and sustained objections to proffered testimony about the meaning of the contract, but nevertheless instructed the jury on rules for interpreting the contract and that the failure to perform all or any part of what was warranted or required in the contract was a breach of contract without instructing the jury what the contract required. City of Bismarck v. Mariner Constr., Inc., 2006 ND 108, 714 N.W.2d 484, 2006 N.D. LEXIS 110 (N.D. 2006).

Ambiguous Contracts.

Whether a net revenue interest sharing contract was ambiguous was determined from the four corners of the instrument without extrinsic evidence. Burk v. Nance Petroleum Corp., 10 F.3d 539, 1993 U.S. App. LEXIS 29117 (8th Cir. N.D. 1993).

If the language of the contract is ambiguous, the court will consider extrinsic evidence of intent. 58 F.3d 380.

In a child’s negligence suit against a sponsor, it was error to grant the sponsor summary judgment based on a release signed by the child’s mother because (1) the releases’s alleged ambiguity was preserved, and (2) reasonable differences of opinion existed as to the whether the release referred only to medical charges or to negligence damages. Hillerson v. Bismarck Pub. Sch., 2013 ND 193, 840 N.W.2d 65, 2013 N.D. LEXIS 261 (N.D. 2013)

In a negligence case against an association based on a child’s near-drowning at a summer camp, a question of law existed as to the intent of the parties relating to a release signed by a child’s mother because it was unclear whether the release included damages from torts, specifically negligence. Hillerson v. Bismarck Pub. Schs., 838 N.W.2d 474, 2013 N.D. LEXIS 220 (N.D. 2013).

Ambiguous Deed.

If the deed is unambiguous, the court determines the intent of the parties from the instrument itself and only if there is ambiguity is extrinsic evidence considered. Stracka v. Peterson, 377 N.W.2d 580, 1985 N.D. LEXIS 442 (N.D. 1985).

If a deed is ambiguous, the parties’ conduct subsequent to the deed’s execution may be used to help determine the meaning of ambiguous language. Stracka v. Peterson, 377 N.W.2d 580, 1985 N.D. LEXIS 442 (N.D. 1985).

Appeal.

The decision to admit parol evidence is a determination of law and is thus fully reviewable on appeal. First Nat'l Bank v. Burich, 367 N.W.2d 148, 1985 N.D. LEXIS 300 (N.D. 1985).

Disputed language in a challenged warranty deed presented no genuine issue of material fact that the grantors intended to reserve to themselves 50 percent of the mineral interests in the conveyed property. The district court correctly ruled the disputed language was unambiguous. Johnson v. Shield, 2015 ND 200, 868 N.W.2d 368, 2015 N.D. LEXIS 216 (N.D. 2015).

Attorney’s Fees Contract.

Where worker’s compensation claimant entered agreement for attorneys to represent her in action against third party tortfeasor, and the method of determining the attorneys’ fee was clearly set out in the agreement, the fact attorneys later entered a written agreement to represent the worker’s compensation bureau for its statutory subrogated interest, did not render the agreement between claimant and her attorneys ambiguous, and claimant was bound to pay the fee according to the terms of the agreement. Jones v. Pringle & Herigstad, P.C., 546 N.W.2d 837, 1996 N.D. LEXIS 119 (N.D. 1996).

Bridge Contract.

In a dispute involving bridge donation, even if an agreement created a franchise, it was still a contract subject to the general statutory rules of contract interpretation, and the numerous obligations imposed on a company throughout the agreement were not eliminated; requiring the cities to perform by exercising an option before a 25-year term that the company was given to perform its obligations expired was an illogical and unreasonable interpretation of the agreement. A finding that the bridge was closed for 239 days because of flooding was not clearly erroneous, and an “Acts of God” provision operated to extend the terms of the agreement to February 5, 2014. City of Moorhead v. Bridge Co., 2015 ND 189, 867 N.W.2d 339, 2015 N.D. LEXIS 205 (N.D. 2015).

Construction Contract.

In an action by a contractor against a subdivision developer for damages arising out of installation of water and sewer facilities under a written contract, the intention of the parties must, if possible, be ascertained from the contract alone. Delzer Constr. Co. v. New Marian Homes Corp., 117 N.W.2d 851, 1962 N.D. LEXIS 98 (N.D. 1962).

Contract Specification.

In order for a mistake of fact to be significant, it must be material to the contract. The height of a particular tower, which was the subject of a contract, was not material to the contract, where the contract unambiguously required a party to erect a three hundred twenty-five-foot tower, notwithstanding the origin of that tower. If the tower was not a three hundred twenty-five-foot tower, it was that party’s obligation under the contract to secure a tower that met the contract specification. Because there had been no material mistake of fact, this section did not apply. Biteler's Tower Serv. v. Guderian, 466 N.W.2d 141, 1991 N.D. LEXIS 16 (N.D. 1991).

Depository Bond.

One signing a bond for a depository of public funds is a surety for the benefit of the debtor, and cannot be held beyond the expressed terms of his contract which will be interpreted as other contracts are interpreted. Mountrail County v. Farmers' State Bank, 53 N.D. 789, 208 N.W. 380, 1926 N.D. LEXIS 35 (N.D. 1926).

Divorce Settlement.

In construing agreement between parties to a divorce suit as to division of property, the findings of fact, conclusions of law, and the decree must be taken together to give effect to every part, if practicable. Bailey v. Bailey, 53 N.D. 887, 207 N.W. 987, 1926 N.D. LEXIS 19 (N.D. 1926).

Where property-settlement agreement was unambiguous and clear, intent of the divorced parties was irrelevant; thus, alimony was to continue to be paid to ex-wife by ex-husband’s widow where agreement read “said alimony payments to terminate upon remarriage or death of the [ex-wife] or until the further Order of the Court”, notwithstanding that the district court ordered the payments stopped. In re Estate of Gustafson, 287 N.W.2d 700, 1980 N.D. LEXIS 192 (N.D. 1980).

Farm Lease.

A written farm lease, under which lessor obligated himself to furnish the land and the seed, and lessee was to crop the land, and deliver the crop to the elevator and divide one half to each party, was a complete contract and could not be altered by parol evidence as to custom and usage. Reitman v. Miller, 78 N.D. 1003, 54 N.W.2d 477, 1952 N.D. LEXIS 92 (N.D. 1952).

Fraud, Mistake, or Accident.

If through fraud, mistake, or accident the contract as written fails to express the real intention of the parties, the court must regard the intention and disregard whatever in that contract is shown to be erroneous. Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946).

Ordinarily, to determine the intent of the parties, a court looks only to the deed and no further. However, parol evidence is admissible where through fraud, mistake or accident, the document fails to express the real intention of the parties. Gilbertson v. Gilbertson, 452 N.W.2d 79, 1990 N.D. LEXIS 40 (N.D. 1990).

Insurance Contract Terms.

The district court properly construed the ambiguous terms “farm implements” and “motor vehicle” as excluding the insured’s pickup truck from coverage and did not err in failing to construe the language of the policy against the insurer and in favor of the insured pursuant to N.D.C.C. § 9-07-19 where the district court interpreted the contractual language by reference to the circumstances under which the contract was made and also gave effect to the ascertainable mutual intent of the parties at the time of contracting. Walle Mut. Ins. Co. v. Sweeney, 419 N.W.2d 176, 1988 N.D. LEXIS 36 (N.D. 1988).

Assuming that a trailer was physically unhooked from a tractor at the moment the trailer exploded, the court construed that insurance policies pursuant to statute and agreed with the district court that the tractor-trailer owner was an “insured” to whom liability coverage provided by defendant insurer's policy applied with respect to a worker's claim that the owner's negligence caused the explosion. Great West Cas. Co. v. Nat'l Cas. Co., 807 F.3d 952, 2015 U.S. App. LEXIS 21129 (8th Cir. N.D. 2015).

Lease Purpose.

Plain language of the written lease explicitly stated the owners leased their property to the tenant for a stated purpose, to use the premises to provide a high quality RV park, and the explicitly stated purpose involved more than making a profit; the generation of income under a certain operating agreement did not alleviate any potential breaches of material lease provisions, including using the property for its intended purposes, and the district court thus erred in interpreting the purpose of the lease. Abelmann v. SmartLease USA, L.L.C., 2014 ND 227, 856 N.W.2d 747, 2014 N.D. LEXIS 222 (N.D. 2014).

Mutual Intent of Parties.

A contract must be interpreted to give effect to the mututal intent of the parties at the time of the contract so far as is ascertainable and lawful. Baird v. Fuerst, 60 N.D. 592, 235 N.W. 594, 1931 N.D. LEXIS 207 (N.D. 1931); Alm Constr. Co. v. Vertin, 118 N.W.2d 737, 1962 N.D. LEXIS 109 (N.D. 1962).

Lessor did not breach a lease by refusing to renew it for a 5-year term because a lessee failed to maintain his medical license, which was a “necessary license” under the unambiguous terms of the lease; under N.D.C.C. § 9-07-03, the parties intended for the lessee to provide medical care from an office leased from inside of a nursing home, which was partially indicated by the fact that the suffix “M.D.” was placed after the lessee’s name in the lease document. Hsu v. Marian Manor Apts., Inc., 2007 ND 205, 743 N.W.2d 672, 2007 N.D. LEXIS 207 (N.D. 2007).

Since application of principles under N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-04, 9-07-06, 9-07-09 and 9-07-12 to the dispute between the licensees and the company over whether the licensees were required under the current license agreements to disclose certain business information to the company and whether the company could unilaterally terminate the current license agreements showed that a genuine dispute existed over the parties’ duties and obligations, the licensees were not entitled to summary judgment on their declaratory judgment action and further proceedings were required. Riedlinger v. Steam Bros., 2013 ND 14, 826 N.W.2d 340, 2013 N.D. LEXIS 14 (N.D. 2013).

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Oil and Gas Lease.

Royalty provision in the parties’ oil and gas lease was unambiguous and established a valuation point that was at the well, instead of at another place that was downstream where the oil entered a pipeline, because that was the intention of the parties as found in an interpretation of the language in the provision. Blasi v. Bruin E&P Partners, LLC, 2021 ND 86, 959 N.W.2d 872, 2021 N.D. LEXIS 90 (N.D. 2021).

Option to Sell.

A provision that on a certain payment by a certain time a purchaser of land could sell, was an option which the purchaser could exercise, and a purchaser exercising an option to sell could show by parol an agreement to release him from all liablity. Baldwin v. Opsvig, 56 N.D. 698, 219 N.W. 112, 1928 N.D. LEXIS 189 (N.D. 1928).

Parol Evidence.

Parol evidence cannot vary or contradict the terms of a complete, written contract adopted as a definite expression of the parties’ agreement. A court may look to parol evidence of intent when the written contract is ambiguous, or when it does not reflect the parties’ intent because of fraud, mistake or accident. Jorgensen v. Crow, 466 N.W.2d 120, 1991 N.D. LEXIS 8 (N.D. 1991).

The parol evidence rule presupposes that the written contract incorporates the entire subject matter of the prior negotiations and the rule does not preclude the possibility that a contract is partly oral and partly written. Jorgensen v. Crow, 466 N.W.2d 120, 1991 N.D. LEXIS 8 (N.D. 1991).

Before a court examines the parties’ intentions under this section, it must determine whether the case involves a relevant mistake of fact. N.D.C.C. § 9-03-13 provides the definition for mistake of fact. Biteler's Tower Serv. v. Guderian, 466 N.W.2d 141, 1991 N.D. LEXIS 16 (N.D. 1991).

Demand notes and partnership agreement were so clear and unambiguous on the subjects of capital and debt that they precluded evidence about related oral negotiations inconsistent with the written documents. Pear v. Grand Forks Motel Assocs., 553 N.W.2d 774, 1996 N.D. LEXIS 222 (N.D. 1996).

Parol evidence was properly considered under N.D.C.C. § 9-07-12 to determine the parties’ intent under N.D.C.C. § 9-07-03, rather than simply looking to the words of the contract under N.D.C.C. §§ 9-07-04 and 9-07-09, in a breach of contract suit alleging that a builder had failed to construct a home in accordance with the plans. There was evidence that the parties did not intend for the contract to be a complete and final statement of all terms and that they had discussed changes in the dimensions of the laundry room and basement; further, a settlement disposed of any claims the owners might have had. Barrett v. Gilbertson, 2013 ND 35, 827 N.W.2d 831, 2013 N.D. LEXIS 29 (N.D. 2013).

Partnership Buy-Out Provision.

When a written agreement is ambiguous and the parties’ intent cannot be ascertained from the writing alone, the parties’ agreement consists of the written agreement, as explained, by extrinsic evidence. Thus, an ambiguity in a written partnership buy-out provision may be removed if the survivor is able to prove by clear and convincing extrinsic evidence that the parties had agreed to a buy-out price of less than fair market value. Bohn v. Johnson, 371 N.W.2d 781, 1985 N.D. LEXIS 364 (N.D. 1985).

Presumption.

When a contract is reduced to writing, the presumption is that the entire actual agreement of the parties is contained in it. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Questions of Law and Fact.

If the parties’ intentions can be ascertained from the writing alone, without reference to extrinsic evidence, the interpretation of the contract is entirely a question of law and the supreme court on appeal will independently examine and construe the contract to determine if the district court erred in its interpretation; however, if the parties’ intentions cannot be determined from the writing alone and reference must be made to extrinsic evidence, those questions in regard to which extrinsic evidence is adduced are questions of fact to be determined by the trier of fact. Ray Co. v. Johnson, 325 N.W.2d 250, 1982 N.D. LEXIS 355 (N.D. 1982).

If the intentions of the parties to a contract can be ascertained from the writing, the interpretation of the contract is a question of law; but if the court must use extrinsic evidence to determine the parties’ intentions in a written contract, those questions that cannot be resolved without the use of extrinsic evidence are questions of fact for the trier of fact. Zitzow v. Diederich, 337 N.W.2d 799, 1983 N.D. LEXIS 377 (N.D. 1983).

Whether or not a contract is ambiguous is a question of law. Production Credit Ass'n v. Foss, 391 N.W.2d 622, 1986 N.D. LEXIS 377 (N.D. 1986).

Signing of Blank Form.

Where guarantor alleged that he was fraudulently induced to enter into written agreement and that the lender filled out an incomplete form, after he had signed it in blank, in a manner which did not express the true agreement of the parties, parol evidence was admissible. Williston Coop. Credit Union v. Pesek, 363 N.W.2d 548, 1985 N.D. LEXIS 262 (N.D. 1985).

Subsequent Acts of Parties.

Where a contract is ambiguous and it is impossible to ascertain the intention of the parties thereto from the writing alone, the subsequent acts of the parties showing the construction they put upon the agreement themselves may be looked to by the court. Bronson v. Chambers, 51 N.D. 737, 200 N.W. 906, 1924 N.D. LEXIS 71 (N.D. 1924); Baird v. Fuerst, 60 N.D. 592, 235 N.W. 594, 1931 N.D. LEXIS 207 (N.D. 1931); Hedrick v. Stockgrowers' Credit Corp., 64 N.D. 61, 250 N.W. 334, 1933 N.D. LEXIS 247 (N.D. 1933); Battagler v. Dickson, 76 N.D. 641, 38 N.W.2d 720, 1949 N.D. LEXIS 83 (N.D. 1949).

Teaching Contract.

In a teacher contract dispute, the “teacher shall” language in a grievance policy did not prohibit a teacher association from utilizing the grievance procedures set forth in an agreement when the grievance effected the terms and conditions of a majority of the teachers and concerned the interpretation of the agreement; a restrictive reading would have effectively ignored the purpose for the agreement as set forth by the parties. Moreover, nothing in the agreement prohibited the association from bringing a legal action after a grievance had been denied or negotiations had failed. Williston Educ. Ass'n v. Williston Pub. Sch. Dist. No. 1, 2016 ND 42, 876 N.W.2d 437, 2016 N.D. LEXIS 26 (N.D. 2016).

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, an inconsistent provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

Unambiguous Contracts.

A contract is unambiguous if the parties’ intentions can be ascertained from the writing alone. OXY USA v. Hartford Ins. Group, 58 F.3d 380, 1995 U.S. App. LEXIS 15899 (8th Cir. N.D. 1995).

In a dispute over an agreement involving property management, contract between the parties explicitly provided a procedure for termination that was combined with an automatic renewal provision; thus, in interpreting the contract as a whole, the district court properly found that the termination agreements were breached. Hendricks Prop. Mgmt. Corp. v. Birchwood Props. Ltd. P'ship, 2007 ND 181, 741 N.W.2d 461, 2007 N.D. LEXIS 184 (N.D. 2007).

Debtor’s bankruptcy estate was not entitled to the liquidation proceeds of a cash-value life insurance policy that debtor purchased for an employee, as the plain language of a split-dollar/collateral-assignment agreement limited debtor’s rights. By specifically providing for rights only in the event of a surrender by the employee and not for a surrender generally or for some other type of triggering event, the most natural reading of the contract clause (applying North Dakota rules of statutory construction) made an act of surrender by the employee a necessary trigger for the debtor to realize the right assigned in that clause. Kaler v. Bala (In re Racing Servs.), 744 F.3d 543, 2014 U.S. App. LEXIS 3714 (8th Cir. 2014).

District court did not err in denying a rural water district reformation of two leases on land because there was no mutual mistake in the drafting of leases; the parties engaged in a mutually negotiated, arms-length, commercial transaction, and the district court weighed the evidence, found the commercial lease contracts clear and unambiguous, and found the district did not meet its burden of clear and convincing evidence for reformation. Motter v. Traill Rural Water Dist., 2017 ND 267, 903 N.W.2d 725, 2017 N.D. LEXIS 276 (N.D. 2017).

Workers’ Compensation Settlement.

Where Worker’s Compensation Bureau had been paying worker medical expenses on a fifty percent basis and parties entered into a stipulation requiring Workers’ Compensation Bureau to “continue to pay all reasonable medical expenses” related to the injury, the stipulation indicated the Bureau’s intention to continue payments on the same basis as before the stipulation and the Bureau did not err in paying fifty percent of the medical expenses under the parties’ stipulation. Kerzman v. North Dakota Workers Compensation Bureau, 1999 ND 44, 590 N.W.2d 888, 1999 N.D. LEXIS 48 (N.D. 1999).

Written Intentions of the Parties.

If the intention of the parties can be ascertained from the writing, the interpretation of the contract is a question of law, and the Supreme Court will independently examine the contract to determine whether the district court erred in its interpretation of it. Wallwork Lease & Rental Co. v. Le Bus, 411 N.W.2d 89, 1987 N.D. LEXIS 394 (N.D. 1987).

By definition, if a contract is ambiguous, its language supports different reasonable interpretations which cannot be reconciled by looking to the written document alone. If the parties’ intent can be ascertained from the writing alone, it is not ambiguous. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

District court properly granted summary judgment quieting title to certain mineral interests in the plaintiffs because the subject (1953) deed’s language was unambiguous and conveyed to the grantees the grantor’s future interest in the 50 percent mineral interests reserved by the original grantor since the deed’s exception only excepted the original grantor’s interest “as reserved by” the prior deed, held at the time of the 1953 deed, and construing the 1953 warranty deed as a whole, the grantor specifically excepted and reserved to himself an undivided 25 percent of the mineral interest, without reference to the potential contingent future interest in the original limited warranty deed. Muhlbradt v. Pederson, 2020 ND 187, 947 N.W.2d 922, 2020 N.D. LEXIS 186 (N.D. 2020).

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

Comment on Kief Farmers Coop. Elevator Co. v. Farmland Mut. Ins. Co., 534 N.W.2d 28 (N.D. 1995), 72 N.D. L. Rev. 721 (1996).

9-07-05. Real intention to govern in cases of fraud, mistake, or accident.

When through fraud, mistake, or accident a written contract fails to express the real intention of the parties, such intention is to be regarded and the erroneous parts of the writing disregarded.

Source:

Civ. C. 1877, § 931; R.C. 1895, § 3898; R.C. 1899, § 3898; R.C. 1905, § 5344; C.L. 1913, § 5900; R.C. 1943, § 9-0705.

Derivation:

Cal. Civ. C., 1640.

Cross-References.

Revision of contracts, see §§ 32-04-17 to 32-04-20.

Notes to Decisions

Fraud, Mistake, or Accident.

Where a written contract is complete in itself, is clear and unambiguous in its language and contains mutual contractual covenants agreed upon, such parts cannot be changed by parol testimony, nor new terms added thereto, in the absence of a clear showing of fraud, mistake, or accident. Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100, 1946 N.D. LEXIS 52 (N.D. 1946).

Reformation.
—In General.

The trial court had no authority to order reamortization of the loan under the guise of reformation, especially where the borrower had not asserted any grounds to support reformation of a written instrument. Federal Land Bank v. Overboe, 404 N.W.2d 445, 1987 N.D. LEXIS 296 (N.D. 1987).

—Burden of Proof.

Where partners contended that in signing contract they relied on plaintiff’s representation that certain words had been changed as the partners had requested, and where one of the partners testified that he had signed the final contract knowing that it still contained some of the disputed language, and where plaintiff’s negotiator denied any oral agreement to alter the contract and any representation relating to such alteration, defendants failed to bear the burden of proof required to win reformation of the contract. Oliver-Mercer Elec. Coop. v. Fisher, 146 N.W.2d 346, 1966 N.D. LEXIS 134 (N.D. 1966).

Suppression of Truth.

Suppression of that which is true, by one having knowledge of fact and who is party to contract, with intent to deceive other party thereto or to induce him to enter into contract, constitutes “actual fraud”; inducement and reliance may be inferred from facts and attending circumstances of transaction although fraud must be proved by evidence that is clear, satisfactory and convincing. Verry v. Murphy, 163 N.W.2d 721, 1968 N.D. LEXIS 88 (N.D. 1968).

9-07-06. Contract interpreted as a whole.

The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable. Each clause is to help interpret the others.

Source:

Civ. C. 1877, § 932; R.C. 1895, § 3899; R.C. 1899, § 3899; R.C. 1905, § 5345; C.L. 1913, § 5901; R.C. 1943, § 9-0706.

Derivation:

Cal. Civ. C., 1641.

Notes to Decisions

Ambiguous Subordination Agreement.

Where rational arguments could be made for different interpretations of a subordination agreement’s application to new inventory and the proceeds therefrom or to the proceeds only, the trial court properly concluded that the agreement was ambiguous. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

Application for Insurance.

Where an application for insurance is made the basis of a contract, and is attached to and made a part of a policy, the application and questions and answers thereto are as material as any other part of the contract. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Auto Insurance Contract.

Any ambiguity resulting from insurer’s failure to include with the products liability exclusion under description of hazards any reference to a completed operations exclusions was cleared up by the products and completed operations hazards exclusion endorsement which specifically stated that policy did not apply to the products hazard or completed operations hazard as defined therein. Haugen v. Auto-Owners Ins. Co., 191 N.W.2d 274, 1971 N.D. LEXIS 119 (N.D. 1971).

Bridge Contract.

In a dispute involving bridge donation, even if an agreement created a franchise, it was still a contract subject to the general statutory rules of contract interpretation, and the numerous obligations imposed on a company throughout the agreement were not eliminated; requiring the cities to perform by exercising an option before a 25-year term that the company was given to perform its obligations expired was an illogical and unreasonable interpretation of the agreement. A finding that the bridge was closed for 239 days because of flooding was not clearly erroneous, and an “Acts of God” provision operated to extend the terms of the agreement to February 5, 2014. City of Moorhead v. Bridge Co., 2015 ND 189, 867 N.W.2d 339, 2015 N.D. LEXIS 205 (N.D. 2015).

Building Contract.

All of the provisions of a building contract must be considered in determining its meaning and effect. Hutchinson v. Bohnsack Sch. Dist., 51 N.D. 165, 199 N.W. 484, 1924 N.D. LEXIS 159 (N.D. 1924).

Taken as a whole, the contract and its addendum showed that the parties intended that the construction of the defendant’s new home was to be financed by using her first house as collateral for a loan, and thus the defendant’s failure to secure financing using the first house as collateral was a breach of the contract. Haag v. Noetzelman, 1999 ND 157, 598 N.W.2d 121, 1999 N.D. LEXIS 175 (N.D. 1999).

Chattel Mortgage.

The whole of an instrument entitled a “chattel mortgage” could be considered in determining that the instrument was not also a real estate mortgage. Mortgage Bank & Inv. Co. v. Hanson, 3 N.D. 465, 57 N.W. 345, 1894 N.D. LEXIS 1 (N.D. 1894); Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Construction of Contract.

In the construction of a power plant, contract between defendant owner of plant and plaintiffs’ firm of engineers, providing for the remission of payments due, was required to be construed as a whole. Alden v. Central Power Electric Cooperative, Inc., 137 F. Supp. 924, 1956 U.S. Dist. LEXIS 3955 (D.N.D. 1956).

The intention of the parties to a contract must be gathered from the entire instrument and not from isolated clauses. Vanderhoof v. Gravel Prods., 404 N.W.2d 485, 1987 N.D. LEXIS 294 (N.D. 1987).

In a dispute over an agreement involving property management, contract between the parties explicitly provided a procedure for termination that was combined with an automatic renewal provision; thus, in interpreting the contract as a whole, the district court properly found that the termination agreements were breached. Hendricks Prop. Mgmt. Corp. v. Birchwood Props. Ltd. P'ship, 2007 ND 181, 741 N.W.2d 461, 2007 N.D. LEXIS 184 (N.D. 2007).

Since application of principles under N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-04, 9-07-06, 9-07-09 and 9-07-12 to the dispute between the licensees and the company over whether the licensees were required under the current license agreements to disclose certain business information to the company and whether the company could unilaterally terminate the current license agreements showed that a genuine dispute existed over the parties’ duties and obligations, the licensees were not entitled to summary judgment on their declaratory judgment action and further proceedings were required. Riedlinger v. Steam Bros., 2013 ND 14, 826 N.W.2d 340, 2013 N.D. LEXIS 14 (N.D. 2013).

Trial court should not have determined that the option of the option holders set forth in an option agreement no longer existed in a case where the option holders sued the third property owners for a declaration that the option holders still had a right to buy the property in dispute. Reading the agreement as a whole, as N.D.C.C. § 9-07-06 required, showed that the agreement did not state anything about the option terminating, and, thus, the option still existed because the language was clear and unambiguous regarding the option and meant there was no need under N.D.C.C. § 9-07-12 to consider the circumstances under which the option agreement was executed. Bakken v. Duchscher, 2013 ND 33, 827 N.W.2d 17, 2013 N.D. LEXIS 24 (N.D. 2013).

Debtor’s bankruptcy estate was not entitled to the liquidation proceeds of a cash-value life insurance policy that debtor purchased for an employee, as the plain language of a split-dollar/collateral-assignment agreement limited debtor’s rights. By specifically providing for rights only in the event of a surrender by the employee and not for a surrender generally or for some other type of triggering event, the most natural reading of the contract clause (applying North Dakota rules of statutory construction) made an act of surrender by the employee a necessary trigger for the debtor to realize the right assigned in that clause. Kaler v. Bala (In re Racing Servs.), 744 F.3d 543, 2014 U.S. App. LEXIS 3714 (8th Cir. 2014).

Depository Bond.

One signing a bond for a depository of public funds is a surety for the benefit of the debtor, and cannot be held beyond the expressed terms of his contract, which will be interpreted as other contracts are interpreted. Mountrail County v. Farmers' State Bank, 53 N.D. 789, 208 N.W. 380, 1926 N.D. LEXIS 35 (N.D. 1926).

Divorce Settlement.

The court has jurisdiction in a suit for divorce to include in the findings of fact, conclusions of law, and the decree, the agreement between parties as to the division of property. Bailey v. Bailey, 53 N.D. 887, 207 N.W. 987, 1926 N.D. LEXIS 19 (N.D. 1926).

Employment Contract.

Because the terms of an employment contract regarding compensation were ambiguous, a jury did not err when it interpreted the contract by looking at the entire document and the surrounding circumstances. Spagnolia v. Monasky, 2003 ND 65, 660 N.W.2d 223, 2003 N.D. LEXIS 77 (N.D. 2003).

Hold Harmless Clause.

A “hold harmless” clause contained in a gravel lease, which read: “Lessee to indemnify and hold lessor harmless from all injuries, damages and claims resulting or arising from lessee’s occupation of an operation on said premises” and included another clause, stating: “Lessee shall be liable and responsible for damages to cattle injured or killed due to its operations” did not apply to all possible claims of any nature whatsoever, and did not clearly and unambiguously evidence an intent by the parties to indemnify the lessors against the consequences of their own conduct. Vanderhoof v. Gravel Prods., 404 N.W.2d 485, 1987 N.D. LEXIS 294 (N.D. 1987).

Insurance Contract.

A definition of a term in an insurance contract may exclude coverage if the language of the contract, as a whole, is clear. State Farm Mut. Auto. Ins. Co. v. LaRoque, 486 N.W.2d 235, 1992 N.D. LEXIS 147 (N.D. 1992).

If there is a conflict between the provisions of an insurance policy and an endorsement, the endorsement prevails, and where endorsement clearly excluded coverage for acts done by the “insured with intent to cause personal injury,” the policy when read as a whole excluded coverage for intentional acts by the insured causing personal injury as well as property damage. Nodak Mut. Ins. Co. v. Heim, 1997 ND 36, 559 N.W.2d 846, 1997 N.D. LEXIS 33 (N.D. 1997).

An insured under a disability insurance policy was entitled to a new period of benefit payments for a subsequent disability resulting from an unrelated cause only when the previous cause of disability had ceased; therefore, insured, as a matter of law, was not entitled to additional disability benefits under the policy and the trial court properly granted insurer’s motion for summary judgment dismissing insured’s action. Ziegelmann v. TMG Life Ins. Co., 2000 ND 55, 607 N.W.2d 898, 2000 N.D. LEXIS 48 (N.D. 2000).

Lease of Building.

In construing original lease and supplemental agreement together, as required by this section, the circumstances and the language used showed that the entire contract contemplated and the parties intended that the tenant’s obligation to reconstruct a building on the leased premises was to be performed in a reasonable time after the payment of the insurance proceeds by the landlord to the tenant. Kermott v. Montgomery Ward & Co., 80 N.W.2d 841, 1957 N.D. LEXIS 98 (N.D. 1957).

When the clear language of a corporate lease did not by its terms require pro rata payment of the lessor’s liability insurance, the corporate tenant had not breached the lease by failing to pay for the insurance; the tenant’s stipulation at trial that it would pay was not an admission that it had breached the contract but merely an effort to settle the issue. VND, LLC v. Leevers Foods, Inc., 2003 ND 198, 672 N.W.2d 445, 2003 N.D. LEXIS 222 (N.D. 2003).

Lessor did not breach a lease by refusing to renew it for a 5-year term because a lessee failed to maintain his medical license, which was a “necessary license” under the unambiguous terms of the lease; under N.D.C.C. § 9-07-03, the parties intended for the lessee to provide medical care from an office leased from inside of a nursing home, which was partially indicated by the fact that the suffix “M.D.” was placed after the lessee’s name in the lease document. Hsu v. Marian Manor Apts., Inc., 2007 ND 205, 743 N.W.2d 672, 2007 N.D. LEXIS 207 (N.D. 2007).

Lease of Railroad Right of Way.

A lease by a railroad company of a portion of its right of way upon condition that the company should not be liable for any damage to property situated thereon by reason of fire caused by “operation of a railway” did not relieve the company from liability for fire caused by sparks from stovepipe in a cook car. Gladstone Equity Exch. Co. v. Hines, 47 N.D. 454, 182 N.W. 763, 1921 N.D. LEXIS 125 (N.D. 1921).

Liability of Guarantor.

Because reasonable arguments could be made for the parties’ different positions on the intent of defendants’ individual signatures on standby agreement, the agreement was ambiguous on whether or not defendants individually guaranteed debt of corporation to plaintiff. Moen v. Meidinger, 547 N.W.2d 544, 1996 N.D. LEXIS 134 (N.D. 1996).

Guaranty was absolute, and one of payment rather than one of collection, because the guaranty contained no limiting language, nor did it impose a condition precedent to the lessor’s ability to proceed directly against the president of a medical practice as guarantor; the guaranty provided that if the practice defaulted in its performance of lease obligations, the president would be individually liable for all expenses, costs, and damages the lessor would be entitled to collect from the practice. Big Pines, LLC v. Baker, 2021 ND 70, 958 N.W.2d 480, 2021 N.D. LEXIS 71 (N.D. 2021).

District court did not err in awarding a lessor attorney’s fees for the litigation against the president of a medical practice because a contract permitted recovery of all costs and fees incurred in attempting to realize upon a guaranty; the costs incurred during litigation to enforce the lease and the personal guaranty were costs incurred in attempting to realize upon the guaranty, which was one of payment, and the president was immediately liable upon the practice’s default. Big Pines, LLC v. Baker, 2021 ND 70, 958 N.W.2d 480, 2021 N.D. LEXIS 71 (N.D. 2021).

Non-Competition Agreement.

Terms that completely described the type of business restriction, the duration of the restriction, and the geographic limitation of the restriction, left no doubt there were no other essential non-competition terms left for agreement between the parties, and objectively evidenced the parties mutual intent to create an enforceable non-competition agreement. Lire, Inc. v. Bob's Pizza Inn Restaurants, 541 N.W.2d 432, 1995 N.D. LEXIS 236 (N.D. 1995).

Oil and Gas Lease.

Lessee under standard form of oil and gas lease was authorized to produce other minerals not associated with, and distinctly different from, oil and gas. MacMaster v. Onstad, 86 N.W.2d 36, 1957 N.D. LEXIS 164, 1957 N.D. LEXIS 165 (N.D. 1957).

The parties’ contract unambiguously provided that the defendant’s cost statements for the wells were conclusively presumed correct unless the plaintiff made a written exception and claim for adjustment within twenty-four months after the calendar month in which the statements were rendered. Grynberg v. Dome Petroleum Corp., 1999 ND 167, 599 N.W.2d 261, 1999 N.D. LEXIS 188 (N.D. 1999).

Summary judgment for defendant corporation in a lease dispute was affirmed because the disputed term “engaged in drilling or reworking operations” was not ambiguous and meant “engaged in drilling operations or reworking operations;” both the context and plain language of the habendum clause compelled that conclusion. Anderson v. Hess Corp., 649 F.3d 891, 2011 U.S. App. LEXIS 16820 (8th Cir. N.D. 2011).

Oil and gas lease partly expired because (1) the lease's drilling operations clause, continuing the lease as long as any drilling occurred on any part of the land, was modified by a Pugh clause, severing the property and providing the lease expired on which drilling operations did not occur at one-year intervals after the primary term ended, to give effect to all the lease's clauses, and (2) a well did not produce in paying quantities at one of these intervals. Tank v. Citation Oil & Gas Corp., 2014 ND 123, 848 N.W.2d 691, 2014 N.D. LEXIS 132 (N.D. 2014).

Option to Sell.

A provision that on a certain payment by a certain time a purchaser of land could sell was an option which the purchaser could exercise, and a purchaser exercising an option to sell can show by parol an agreement to release him from all liability. Baldwin v. Opsvig, 56 N.D. 698, 219 N.W. 112, 1928 N.D. LEXIS 189 (N.D. 1928).

Particular Meaning of Words.

Where parties to a written contract have attached to certain words a particular meaning, it must be presumed that the same meaning was intended wherever like words are used in such contract. Anderson v. First Nat'l Bank, 4 N.D. 182, 59 N.W. 1029, 1894 N.D. LEXIS 26 (N.D. 1894).

Public Contracts.

When the provisions of a contract relating to a storm sewer improvement project were considered together, as they had to be under N.D.C.C. § 9-07-06, the plain and unambiguous language did not include an exception for uncontemplated delays in a no damages for delay clause. Markwed Excavating, Inc. v. City of Mandan, 2010 ND 220, 791 N.W.2d 22, 2010 N.D. LEXIS 222 (N.D. 2010).

Purpose of Contract.

The object of construction of a contract is to ascertain and give effect to the intention of the parties. To accomplish that purpose the contract should be construed as a whole, all of its parts considered together and every clause, sentence or provision should be given effect consistent with the main purpose of the contract. Delzer Constr. Co. v. New Marian Homes Corp., 117 N.W.2d 851, 1962 N.D. LEXIS 98 (N.D. 1962).

Every clause, sentence, or provision should be given effect consistent with the main purpose of the contract. Vanderhoof v. Gravel Prods., 404 N.W.2d 485, 1987 N.D. LEXIS 294 (N.D. 1987).

The intention of the parties to a contract must be gathered from the entire instrument, not from isolated clauses, and every clause, sentence, and provision should be given effect consistent with the main purpose of the contract. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

Quitclaim Deeds.

Trial court properly quieted title to oil, gas, and mineral interests in the personal representative of a deceased property owner’s (DPO) estate, as quitclaim deeds executed in favor of the DPO’s son unambiguously reserved only a life estate in the surface of the property for the DPO and not the oil, gas, and other minerals. Rolla v. Tank, 2013 ND 175, 837 N.W.2d 907, 2013 N.D. LEXIS 178 (N.D. 2013).

Restrictive Provisions.

Where the district court concluded that the second clause of restrictive proviso precluding a discount store from selling certain grocery items was dependent upon the first, and therefore the covenant prohibited the discount store from selling all food and grocery items except “miscellaneous small food snack items, prepared sandwiches, or other items which are intended to be consumed upon the premises”, the court ignored that portion of the second clause which declared that the listed food items were only illustrative. Dan's Super Mkt. v. Wal-Mart Stores, 38 F.3d 1003, 1994 U.S. App. LEXIS 29690 (8th Cir. N.D. 1994).

Teaching Contract.

In a teacher contract dispute, the “teacher shall” language in a grievance policy did not prohibit a teacher association from utilizing the grievance procedures set forth in an agreement when the grievance effected the terms and conditions of a majority of the teachers and concerned the interpretation of the agreement; a restrictive reading would have effectively ignored the purpose for the agreement as set forth by the parties. Moreover, nothing in the agreement prohibited the association from bringing a legal action after a grievance had been denied or negotiations had failed. Williston Educ. Ass'n v. Williston Pub. Sch. Dist. No. 1, 2016 ND 42, 876 N.W.2d 437, 2016 N.D. LEXIS 26 (N.D. 2016).

Warranty Deed.

Disputed language in a challenged warranty deed presented no genuine issue of material fact that the grantors intended to reserve to themselves 50 percent of the mineral interests in the conveyed property. The disputed language was intended to be a reservation of mineral interests rather than a limitation on the warranty. Johnson v. Shield, 2015 ND 200, 868 N.W.2d 368, 2015 N.D. LEXIS 216 (N.D. 2015).

Workers’ Compensation Settlement.

Where Worker’s Compensation Bureau had been paying worker medical expenses on a fifty percent basis and parties entered into a stipulation requiring Workers’ Compensation Bureau to “continue to pay all reasonable medical expenses” related to the injury, the stipulation indicated the Bureau’s intention to continue payments on the same basis as before the stipulation and the Bureau did not err in paying fifty percent of the medical expenses under the parties’ stipulation. Kerzman v. North Dakota Workers Compensation Bureau, 1999 ND 44, 590 N.W.2d 888, 1999 N.D. LEXIS 48 (N.D. 1999).

Law Reviews.

Comment on Kief Farmers Coop. Elevator Co. v. Farmland Mut. Ins. Co., 534 N.W.2d 28 (N.D. 1995), 72 N.D. L. Rev. 721 (1996).

9-07-07. Several contracts part of one transaction interpreted together.

Several contracts relating to the same matters between the same parties and made as parts of substantially one transaction are to be taken together.

Source:

Civ. C. 1877, § 933; R.C. 1895, § 3900; R.C. 1899, § 3900; R.C. 1905, § 5346; C.L. 1913, § 5902; R.C. 1943, § 9-0707.

Derivation:

Cal. Civ. C., 1642.

Notes to Decisions

Application of Rule.

This rule applied where note, and chattel mortgage to secure the same, were given and received as collateral paper to an original indebtedness, all the paper being executed at the same time, and with reference to the same indebtedness. RED RIVER VALLEY NAT'L BANK v. BARNES, 8 N.D. 432, 79 N.W. 880, 1899 N.D. LEXIS 32 (N.D. 1899).

The requirement that several contracts are to be “taken together” does not mean that they must be joined but that they are to be taken together for the purpose of interpreting the transaction to which they relate or the several contracts themselves. First Nat'l Bank v. Flath, 10 N.D. 281, 86 N.W. 867, 1901 N.D. LEXIS 34 (N.D. 1901).

This section merely establishes a rule of interpretation. Embden State Bank v. Boyle, 50 N.D. 573, 196 N.W. 820, 1923 N.D. LEXIS 4 (N.D. 1923).

District court did not err in granting a mine operator’s summary judgment motion in a company’s breach of contract action because both the company and operator had knowledge of and assented to the incorporated terms referenced in purchase orders; the company performed services and invoiced the operator for the services provided under the two purchase orders, the operator paid the company the amount invoiced under the purchase orders, and the company accepted that amount. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Two purchase orders clearly and unambiguously incorporated the terms and conditions of contract, and any claims by a company of surprise or hardship were unavailing because it did not request a copy of the incorporated terms and conditions referenced in bold on the one-page purchase orders; the purchase orders made clear reference to the separate document, and the identity of the separate document was able to be ascertained. RTS Shearing, LLC v. BNI Coal, Ltd., 2021 ND 170, 965 N.W.2d 40, 2021 N.D. LEXIS 173 (N.D. 2021).

Dependence upon Other Contracts.

In a transaction where the execution of one contract depends upon the execution of other contracts—in this case, executing meaningful Gas Purchase Agreements required the Secretary’s guarantee of the plant’s financing, and to gain this guarantee the Secretary required the Pipelines to agree to the Pipeline Affiliates Agreement—the contracts must be interpreted collectively. Dakota Gasification Co. v. Natural Gas Pipeline Co., 964 F.2d 732, 1992 U.S. App. LEXIS 9046 (8th Cir. N.D. 1992), cert. denied, 506 U.S. 1048, 113 S. Ct. 965, 122 L. Ed. 2d 121, 1993 U.S. LEXIS 58 (U.S. 1993).

Related Contracts.

Where three oil and gas royalty contracts were assigned in the same transaction, and the rights of the assignee in only one of the contracts were in dispute, the trial court did not err in admitting the two noncontested contracts into evidence for the purpose of interpreting either the transaction to which they related or the several contracts themselves. Knox v. Krueger, 145 N.W.2d 904, 1966 N.D. LEXIS 117 (N.D. 1966).

Under North Dakota law, a court could construe a purchase agreement and assignment together in determining whether defendant conveyed a leasehold interest in property on which wells were located or a wellbore-only interest. As the documents were ambiguous, the court properly heard testimony regarding the parties’ intentions and expert testimony regarding custom and usage in the oil and gas industry and did not clearly err in finding that the assignment was intended as a wellbore-only assignment and thus, dismissing plaintiff’s quiet title claim. Armstrong v. Berco Res., LLC, 752 F.3d 716, 2014 U.S. App. LEXIS 9030 (8th Cir. N.D. 2014).

In a law firm’s action against clients to foreclose a mortgage, the district court did not err in determining the clients’ debt to the law firm because the parties’ loan agreements clearly contemplated that the clients’ indebtedness with interest could exceed the line of credit. Barna, Guzy & Steffen, Ltd. v. Johnson, 2018 ND 205, 916 N.W.2d 811, 2018 N.D. LEXIS 212 (N.D. 2018).

Sale of Real Estate.

Where note and mortgage, executed to secure payment for real property sold under a written agreement, provided that the conditions of same should be performed according to the terms of the written contract now existing between the maker and the payee of the note, such note, mortgage, and written contract had to be construed together so as to give effect to the provisions of the written contract. Lakeland Realty Co. v. Reese, 77 N.D. 904, 46 N.W.2d 696, 1951 N.D. LEXIS 119 (N.D. 1951).

Warranty deed would be construed together with agreement which was executed at the same time by the same parties and which referred specifically to the conveyance made by the deed. Trengen v. Mongeon, 206 N.W.2d 284, 1973 N.D. LEXIS 169 (N.D. 1973).

Tax receipts and agreement to pay for delivery of warranty deed may be entered in evidence to establish the validity of a quitclaim deed. Gajewski v. Bratcher, 221 N.W.2d 614, 1974 N.D. LEXIS 173, 1974 N.D. LEXIS 222 (N.D. 1974).

Collateral References.

Temporary insurance, considering application, receipt for first premium, etc., together in construing contract for, 2 A.L.R.2d 943.

9-07-08. Contract interpreted so it may be carried into effect.

A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.

Source:

Civ. C. 1877, § 934; R.C. 1895, § 3901; R.C. 1899, § 3901; R.C. 1905, § 5347; C.L. 1913, § 5903; R.C. 1943, § 9-0708.

Notes to Decisions

Liquidated Damages Clause.

Where the parties fulfilled their promises to agree about the buildings to be sold and, based upon the evidence, the trial court determined a reasonable sale price for the buildings at each phase of the development plan, a liquidated damages clause in an exclusive real estate listing agreement was not unenforceably vague as an agreement to agree. Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

Option to Sell.

A provision that on a certain payment by a certain time a purchaser of land could sell was an option which the purchaser could exercise, and a purchaser exercising an option to sell can show by parol an agreement to release him from all liability. Baldwin v. Opsvig, 56 N.D. 698, 219 N.W. 112, 1928 N.D. LEXIS 189 (N.D. 1928).

Sales by Real Estate Dealer.

Under a contract in writing between real estate dealer and corporation owning large tracts of land for the sale thereof, the dealer had the right to fix the selling price provided no tract was sold for less than the appraised value at the time of the contract. Young v. Metcalf Land Co., 18 N.D. 441, 122 N.W. 1101 (N.D. 1909).

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, an inconsistent provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

9-07-09. Words to be interpreted in ordinary sense.

The words of a contract are to be understood in their ordinary and popular sense rather than according to their strict legal meaning, unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.

Source:

Civ. C. 1877, § 935; R.C. 1895, § 3902; R.C. 1899, § 3902; R.C. 1905, § 5348; C.L. 1913, § 5904; R.C. 1943, § 9-0709.

Derivation:

Cal. Civ. C., 1644, 13.

Notes to Decisions

Ambiguous Contracts.

District court properly discounted attorney’s fees owed by a subcontractor to a general contractor under terms of the parties’ contract; the contract was found to be ambiguous as to whether the general contractor had to prevail on its claims against third parties in order to recover fees related to prosecuting those claims from the subcontractor, and under N.D.C.C. § 9-07-09 the ambiguity was interpreted against the contractor. John T. Jones Constr. Co. v. Hoot Gen. Constr. Co., 613 F.3d 778, 2010 U.S. App. LEXIS 15061 (8th Cir. Iowa 2010).

Since application of principles under N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-04, 9-07-06, 9-07-09 and 9-07-12 to the dispute between the licensees and the company over whether the licensees were required under the current license agreements to disclose certain business information to the company and whether the company could unilaterally terminate the current license agreements showed that a genuine dispute existed over the parties’ duties and obligations, the licensees were not entitled to summary judgment on their declaratory judgment action and further proceedings were required. Riedlinger v. Steam Bros., 2013 ND 14, 826 N.W.2d 340, 2013 N.D. LEXIS 14 (N.D. 2013).

Arbitration Agreement.

District court erred in compelling arbitration of all issues relating to either a limited liability company (LLC) or a partnership because the plain meaning of the arbitration clause in the LLC operating agreement did not extend its coverage to other agreements executed by the parties; the partnership agreement was executed almost fourteen months after the LLC operating agreement, and the parties to the agreements were not identical since the partners in the partnership were not LLC members. Kramlich v. Hale, 2017 ND 204, 901 N.W.2d 72, 2017 N.D. LEXIS 208 (N.D. 2017).

Automobile Insurance.

Death was not covered by automobile policy insuring against loss from injury sustained while driving or riding within automobile where insured was crushed by automobile which he had driven partially off approach grade and gotten stuck, while attempting to extricate it with borrowed tractor and chain. Andersen v. Standard Life & Accident Ins. Co., 149 N.W.2d 378, 1967 N.D. LEXIS 148 (N.D. 1967).

Bridge Contract.

In a dispute involving bridge donation, even if an agreement created a franchise, it was still a contract subject to the general statutory rules of contract interpretation, and the numerous obligations imposed on a company throughout the agreement were not eliminated; requiring the cities to perform by exercising an option before a 25-year term that the company was given to perform its obligations expired was an illogical and unreasonable interpretation of the agreement. A finding that the bridge was closed for 239 days because of flooding was not clearly erroneous, and an “Acts of God” provision operated to extend the terms of the agreement to February 5, 2014. City of Moorhead v. Bridge Co., 2015 ND 189, 867 N.W.2d 339, 2015 N.D. LEXIS 205 (N.D. 2015).

Chattel Mortgage.

A chattel mortgage does not include a mortgage on real estate. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Failure to Define Coverage Term.

When an insurer fails to define a coverage term, it is not entitled to a strict or limited definition that differs from the ordinary definition in order to avoid providing coverage. Kresse v. Home Ins. Co., 765 F.2d 753, 1985 U.S. App. LEXIS 21230 (8th Cir. N.D. 1985).

Interpretation Favorable to Insured.

When one interpretation of an insurance policy provision will impose liability on the insurer and another will not, the interpretation favorable to the insured will be adopted. Kresse v. Home Ins. Co., 765 F.2d 753, 1985 U.S. App. LEXIS 21230 (8th Cir. N.D. 1985).

Lease of Building.

Lessor did not breach a lease by refusing to renew it for a 5-year term because a lessee failed to maintain his medical license, which was a “necessary license” under the unambiguous terms of the lease; under N.D.C.C. § 9-07-03, the parties intended for the lessee to provide medical care from an office leased from inside of a nursing home, which was partially indicated by the fact that the suffix “M.D.” was placed after the lessee’s name in the lease document. Hsu v. Marian Manor Apts., Inc., 2007 ND 205, 743 N.W.2d 672, 2007 N.D. LEXIS 207 (N.D. 2007).

Oil and Gas Lease.

Lessee under standard form of oil and gas lease was authorized to produce other minerals not associated with, and distinctly different from, oil and gas. MacMaster v. Onstad, 86 N.W.2d 36, 1957 N.D. LEXIS 164, 1957 N.D. LEXIS 165 (N.D. 1957).

Summary judgment for defendant corporation in a lease dispute was affirmed because the disputed term “engaged in drilling or reworking operations” was not ambiguous and meant “engaged in drilling operations or reworking operations;” both the context and plain language of the habendum clause compelled that conclusion. Anderson v. Hess Corp., 649 F.3d 891, 2011 U.S. App. LEXIS 16820 (8th Cir. N.D. 2011).

Option to Sell.

A provision that on a certain payment by a certain time a purchaser of land could sell was an option which the purchaser could exercise, and a purchaser exercising an option to sell can show by parol an agreement to release him from all liability. Baldwin v. Opsvig, 56 N.D. 698, 219 N.W. 112, 1928 N.D. LEXIS 189 (N.D. 1928).

Parol Evidence.

Parol evidence was properly considered under N.D.C.C. § 9-07-12 to determine the parties’ intent under N.D.C.C. § 9-07-03, rather than simply looking to the words of the contract under N.D.C.C. §§ 9-07-04 and 9-07-09, in a breach of contract suit alleging that a builder had failed to construct a home in accordance with the plans. There was evidence that the parties did not intend for the contract to be a complete and final statement of all terms and that they had discussed changes in the dimensions of the laundry room and basement; further, a settlement disposed of any claims the owners might have had. Barrett v. Gilbertson, 2013 ND 35, 827 N.W.2d 831, 2013 N.D. LEXIS 29 (N.D. 2013).

Rainfall Damage.

Builder could not recover under risk insurance policy which excluded damage by rain for damage caused by accumulation of water within walls of foundation of unfinished warehouse during heavy rain storm since, in the ordinary sense, the damage resulted from the natural consequence of rainfall. 224 N.W.2d 805.

Words of Ordinary Meaning.

Where the contract is in words of ordinary meaning it cannot be shown that such terms were used in some other sense. Embden State Bank v. Boyle, 50 N.D. 573, 196 N.W. 820, 1923 N.D. LEXIS 4 (N.D. 1923).

Debtor’s bankruptcy estate was not entitled to the liquidation proceeds of a cash-value life insurance policy that debtor purchased for an employee, as the plain language of a split-dollar/collateral-assignment agreement limited debtor’s rights. By specifically providing for rights only in the event of a surrender by the employee and not for a surrender generally or for some other type of triggering event, the most natural reading of the contract clause (applying North Dakota rules of statutory construction) made an act of surrender by the employee a necessary trigger for the debtor to realize the right assigned in that clause. Kaler v. Bala (In re Racing Servs.), 744 F.3d 543, 2014 U.S. App. LEXIS 3714 (8th Cir. 2014).

Because “direct physical loss” was undefined in the insured's policy, the district court applied the ordinary meaning of the phrase to find the insured's costs of transporting and drying grain did not qualify as the type of loss or damage directly caused by the risk insured against; the district court did not err. Huether v. Nodak Mut. Ins. Co., 2015 ND 272, 871 N.W.2d 444, 2015 N.D. LEXIS 296 (N.D. 2015).

Words of Technical Meaning.

Considering the technical meaning given to the term “accrue,” the supreme court agreed that, as a matter of law, the agent was entitled to deferred commissions. The insurer could have specified in the employment contract that commissions would not be “earned,” rather than “accrue,” after termination of employment, but it failed to do so. Myaer v. Nodak Mut. Ins. Co., 2012 ND 21, 812 N.W.2d 345, 2012 N.D. LEXIS 21 (N.D. 2012).

9-07-10. Interpretation of technical words.

Technical words are to be interpreted as usually understood by persons in the profession or business to which they relate, unless clearly used in a different sense.

Source:

Civ. C. 1877, § 936; R.C. 1895, § 3903; R.C. 1899, § 3903; R.C. 1905, § 5349; C.L. 1913, § 5905; R.C. 1943, § 9-0710.

Derivation:

Cal. Civ. C., 1645.

Notes to Decisions

Deferred Commissions.

Considering the technical meaning given to the term “accrue,” the supreme court agreed that, as a matter of law, the agent was entitled to deferred commissions. The insurer could have specified in the employment contract that commissions would not be “earned,” rather than “accrue,” after termination of employment, but it failed to do so. Myaer v. Nodak Mut. Ins. Co., 2012 ND 21, 812 N.W.2d 345, 2012 N.D. LEXIS 21 (N.D. 2012).

Guaranty.

Guaranty was absolute, and one of payment rather than one of collection, because the guaranty contained no limiting language, nor did it impose a condition precedent to the lessor’s ability to proceed directly against the president of a medical practice as guarantor; the guaranty provided that if the practice defaulted in its performance of lease obligations, the president would be individually liable for all expenses, costs, and damages the lessor would be entitled to collect from the practice. Big Pines, LLC v. Baker, 2021 ND 70, 958 N.W.2d 480, 2021 N.D. LEXIS 71 (N.D. 2021).

9-07-11. What law governs. [Repealed]

Repealed by S.L. 1973, ch. 77, § 1.

9-07-12. Contract explained by reference to circumstances.

A contract may be explained by reference to the circumstances under which it was made and the matter to which it relates.

Source:

Civ. C., 1877, § 938; R.C. 1895, § 3905; R.C. 1899, § 3905; R.C. 1905, § 5351; C.L. 1913, § 5907; R.C. 1943, § 9-0712.

Derivation:

Cal. Civ. C., 1647.

Notes to Decisions

Ambiguous Contract.

Evidence as to the meaning of an ambiguous contract is admissible. Hazelton Boiler Co. v. Fargo Gas & Elec. Co., 4 N.D. 365, 61 N.W. 151, 1894 N.D. LEXIS 46 (N.D. 1894).

If the language of the contract is deemed ambiguous, it should be interpreted in the light of the circumstances under which it was made and the matter to which it relates. Powell v. International Harvester Co., 41 N.D. 220, 170 N.W. 559, 1918 N.D. LEXIS 151 (N.D. 1918).

Where a contract is ambiguous, and it is impossible to ascertain the intention of the parties thereto from the writing alone, the subsequent acts of the parties showing the construction they put upon the agreement themselves may be looked to by the court. Baird v. Fuerst, 60 N.D. 592, 235 N.W. 594, 1931 N.D. LEXIS 207 (N.D. 1931); Battagler v. Dickson, 76 N.D. 641, 38 N.W.2d 720, 1949 N.D. LEXIS 83 (N.D. 1949).

If a clause in a contract is of doubtful or ambiguous meaning, it is proper to search for its true meaning in the light of the extraneous facts and circumstances. Battagler v. Dickson, 76 N.D. 641, 38 N.W.2d 720, 1949 N.D. LEXIS 83 (N.D. 1949).

Evidence as to the meaning of an ambiguous contract is admissible and where a written construction contract incorporates specifications by reference and two different sets of specifications are offered in evidence it is for the jury to determine which one is the set of specifications referred to. Alm Constr. Co. v. Vertin, 118 N.W.2d 737, 1962 N.D. LEXIS 109 (N.D. 1962).

If a contract is ambiguous, parol evidence is admissible to explain existing essential terms or to show the parties’ intent. Thompson v. Thompson, 391 N.W.2d 608, 1986 N.D. LEXIS 374 (N.D. 1986).

Because reasonable arguments could be made for the parties’ different positions on the intent of defendants’ individual signatures on standby agreement, the agreement was ambiguous on whether or not defendants individually guaranteed debt of corporation to plaintiff, which left a question of fact to be determined with extrinsic evidence at a trial. Moen v. Meidinger, 547 N.W.2d 544, 1996 N.D. LEXIS 134 (N.D. 1996).

Bill of Sale.

In construing general description “all my farming machinery” used in bill of sale, the intent of the parties controlled, which intent could be gathered by reference to the circumstances under which the contract was made. Royal v. Aubol, 69 N.D. 419, 287 N.W. 603, 1939 N.D. LEXIS 167 (N.D. 1939).

A general description in a bill of sale is sufficient as between the parties when the intent of the parties may be gathered by reference to the circumstances under which it was made and the matter to which it relates. Lenihan v. Meyer, 111 N.W.2d 696, 1961 N.D. LEXIS 101 (N.D. 1961).

Conduct Subsequent to Execution of Deed.

If a deed is ambiguous, the parties’ conduct subsequent to the deed’s execution may be used to help determine the meaning of ambiguous language. Stracka v. Peterson, 377 N.W.2d 580, 1985 N.D. LEXIS 442 (N.D. 1985).

Construction Contract.

City, on accepting petition of developer for installation of water and sewer facilities in its addition, set up special improvement districts, planned the work and accepted bids on a unit price basis. Before the contract was made for performance of the work by the successful bidder, procedure was changed by agreement and developer, as a party to the contract, joined with city in a contract with the successful bidder, in which developer agreed to pay for that portion of the work required to serve its addition. The city agreed to pay for the oversize of the systems necessary to serve other areas. In an action by the contractor against the developer the contract was construable as a unit price contract since the developer assumed the obligation of the city for the cost of improvements to be made within its addition. Delzer Constr. Co. v. New Marian Homes Corp., 117 N.W.2d 851, 1962 N.D. LEXIS 98 (N.D. 1962).

Parol evidence was properly considered under N.D.C.C. § 9-07-12 to determine the parties’ intent under N.D.C.C. § 9-07-03, rather than simply looking to the words of the contract under N.D.C.C. §§ 9-07-04 and 9-07-09, in a breach of contract suit alleging that a builder had failed to construct a home in accordance with the plans. There was evidence that the parties did not intend for the contract to be a complete and final statement of all terms and that they had discussed changes in the dimensions of the laundry room and basement; further, a settlement disposed of any claims the owners might have had. Barrett v. Gilbertson, 2013 ND 35, 827 N.W.2d 831, 2013 N.D. LEXIS 29 (N.D. 2013).

Intent of Parties to Deed.

If the deed is unambiguous, the court determines the intent of the parties from the instrument itself and only if there is ambiguity is extrinsic evidence considered. Stracka v. Peterson, 377 N.W.2d 580, 1985 N.D. LEXIS 442 (N.D. 1985).

Mutual Intention of Parties.

A contract must be interpreted so as to give effect to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful and reasonable and capable of being carried into effect. Young v. Metcalf Land Co., 18 N.D. 441, 122 N.W. 1101 (N.D. 1909); Bronson v. Chambers, 51 N.D. 737, 200 N.W. 906, 1924 N.D. LEXIS 71 (N.D. 1924); Baird v. Fuerst, 60 N.D. 592, 235 N.W. 594, 1931 N.D. LEXIS 207 (N.D. 1931); Hedrick v. Stockgrowers' Credit Corp., 64 N.D. 61, 250 N.W. 334, 1933 N.D. LEXIS 247 (N.D. 1933).

The district court properly construed the ambiguous terms “farm implements” and “motor vehicle” as excluding the insured’s pickup truck from coverage and did not err in failing to construe the language of the policy against the insurer and in favor of the insured pursuant to N.D.C.C. § 9-07-19 where the district court interpreted the contractual language by reference to the circumstances under which the contract was made and also gave effect to the ascertainable mutual intent of the parties at the time of contracting. Walle Mut. Ins. Co. v. Sweeney, 419 N.W.2d 176, 1988 N.D. LEXIS 36 (N.D. 1988).

The primary goal of a court when interpreting a contract is to ascertain the mutual intentions of the contracting parties. A contract may be explained by reference to the circumstances under which it was made, and the parties’ conduct in the course of performance after the contract’s formation can help determine the meaning of ambiguous language. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

Lessor did not breach a lease by refusing to renew it for a 5-year term because a lessee failed to maintain his medical license, which was a “necessary license” under the unambiguous terms of the lease; under N.D.C.C. § 9-07-03, the parties intended for the lessee to provide medical care from an office leased from inside of a nursing home, which was partially indicated by the fact that the suffix “M.D.” was placed after the lessee’s name in the lease document. Hsu v. Marian Manor Apts., Inc., 2007 ND 205, 743 N.W.2d 672, 2007 N.D. LEXIS 207 (N.D. 2007).

Since application of principles under N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-04, 9-07-06, 9-07-09 and 9-07-12 to the dispute between the licensees and the company over whether the licensees were required under the current license agreements to disclose certain business information to the company and whether the company could unilaterally terminate the current license agreements showed that a genuine dispute existed over the parties’ duties and obligations, the licensees were not entitled to summary judgment on their declaratory judgment action and further proceedings were required. Riedlinger v. Steam Bros., 2013 ND 14, 826 N.W.2d 340, 2013 N.D. LEXIS 14 (N.D. 2013).

Oral Stipulation.

A separate oral stipulation may be shown as to any matter on which a written contract is silent, if not inconsistent with its terms, and if it is inferred that the parties did not intend the contract to be complete. Putnam v. Prouty, 24 N.D. 517, 140 N.W. 93, 1913 N.D. LEXIS 14 (N.D. 1913).

Reference to Circumstances.

A contract may be explained by reference to the circumstances under which it was made. Benson v. Post, 9 N.W. 684, 2 Dakota 220, 1880 Dakota LEXIS 7 (Dakota 1880), aff'd, 108 U.S. 418, 2 S. Ct. 799, 27 L. Ed. 774, 1883 U.S. LEXIS 1052 (U.S. 1883).

A contract is to be read in the light of the circumstances under which it was made. Parlin v. Hall, 2 N.D. 473, 52 N.W. 405, 1892 N.D. LEXIS 36 (N.D. 1892); Anderson v. First Nat'l Bank, 4 N.D. 182, 59 N.W. 1029, 1894 N.D. LEXIS 26 (N.D. 1894).

A contract may be explained by reference to the circumstances under which it was made and the matter to which it relates. Delzer Constr. Co. v. New Marian Homes Corp., 117 N.W.2d 851, 1962 N.D. LEXIS 98 (N.D. 1962).

Where a contract is ambiguous and it is impossible to ascertain the intention of the parties from the writing alone, it is proper to search for its true meaning by reference to the circumstances under which it was made and the matter to which it relates. Alm Constr. Co. v. Vertin, 118 N.W.2d 737, 1962 N.D. LEXIS 109 (N.D. 1962).

Where the contract is written, the intentions of the parties must be determined from the writing alone, if possible. But if a clause in a contract is of doubtful or ambiguous meaning, it is proper to search for its true meaning in the light of extraneous facts and circumstances. Berry v. Heinz, 139 N.W.2d 145, 1965 N.D. LEXIS 90 (N.D. 1965).

Trial court should not have determined that the option of the option holders set forth in an option agreement no longer existed in a case where the option holders sued the third property owners for a declaration that the option holders still had a right to buy the property in dispute. Reading the agreement as a whole, as N.D.C.C. § 9-07-06 required, showed that the agreement did not state anything about the option terminating, and, thus, the option still existed because the language was clear and unambiguous regarding the option and meant there was no need under N.D.C.C. § 9-07-12 to consider the circumstances under which the option agreement was executed. Bakken v. Duchscher, 2013 ND 33, 827 N.W.2d 17, 2013 N.D. LEXIS 24 (N.D. 2013).

Service Contract.

In an action on an express contract for services performed, evidence of the reasonable value of such services is admissible, where there is a dispute as to the compensation fixed by the contracts. Keck v. Kavanaugh, 45 N.D. 81, 177 N.W. 99, 1920 N.D. LEXIS 116 (N.D. 1920).

Unambiguous Language.

When the clear language of a corporate lease did not by its terms require pro rata payment of the lessor’s liability insurance, the corporate tenant had not breached the lease by failing to pay for the insurance; the tenant’s stipulation at trial that it would pay was not an admission that it had breached the contract but merely an effort to settle the issue. VND, LLC v. Leevers Foods, Inc., 2003 ND 198, 672 N.W.2d 445, 2003 N.D. LEXIS 222 (N.D. 2003).

9-07-13. Contract extends only to things to be covered.

However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.

Source:

Civ. C. 1877, § 939; R.C. 1895, § 3906; R.C. 1899, § 3906; R.C. 1905, § 5352; C.L. 1913, § 5908; R.C. 1943, § 9-0713.

Derivation:

Cal. Civ. C., 1648.

Notes to Decisions

Ambiguous Contract.

If a contract is ambiguous, parol evidence is admissible to explain existing essential terms or to show the parties’ intent. Thompson v. Thompson, 391 N.W.2d 608, 1986 N.D. LEXIS 374 (N.D. 1986).

Chattel Mortgage.

A chattel mortgage did not include a mortgage on real estate. Mortgage Bank & Inv. Co. v. Hanson, 3 N.D. 465, 57 N.W. 345, 1894 N.D. LEXIS 1 (N.D. 1894); Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Lease of Railroad Right of Way.

A lease by a railroad company of a portion of its right of way upon condition that the company should not be liable for any damage to property situated thereon by reason of fire caused by “operation of a railway” did not relieve the company from liability for fire caused by sparks from stovepipe in a cook car. Gladstone Equity Exch. Co. v. Hines, 47 N.D. 454, 182 N.W. 763, 1921 N.D. LEXIS 125 (N.D. 1921).

Liquidated Damages.

A provision for liquidated damages will not prevent recovery for actual damages for events which are not covered by the liquidated damages clause, unless the contract expressly provides that damages other than those enumerated shall not be recovered. Meyer v. Hansen, 373 N.W.2d 392, 1985 N.D. LEXIS 373 (N.D. 1985).

Vendor’s recovery for waste was not precluded by liquidated damages clause contained in the contract for deed, as regardless of how expansive the terms of a contract may be, its coverage can only extend to those events which the parties intended, and to conclude that the parties intended the liquidated damages provision to cover waste would require an unreasonable interpretation of the contract, which is prohibited by N.D.C.C. § 9-07-18. Meyer v. Hansen, 373 N.W.2d 392, 1985 N.D. LEXIS 373 (N.D. 1985).

Miscellaneous.

Where bankruptcy estate for debtor, a company that was engaged in the horse race betting industry, received a payment from the State of North Dakota representing a return of more than $15 million in taxes that were improperly collected, the amended claim of the debtor’s largest creditor was denied because there were no express terms in the parties’ contract that addressed this unusual situation; thus, there was no contract on the issue before the court. In re Racing Servs., 595 B.R. 334, 2018 Bankr. LEXIS 3748 (Bankr. D.N.D. 2018), aff'd, — F. Supp. 3d —, 617 B.R. 641, 2020 U.S. Dist. LEXIS 106642 (D.N.D. 2020).

Unaddressed Issue.

Bankruptcy court did not err in denying creditor claims for unauthorized taxes assessed through the debtor’s horse wagering service business and returned by the state; an alleged oral rebating agreement did not anticipate a retroactive change in taxes and thus lacked mutual intention to allocate the money. PW Enters. v. Bala (In re Racing Servs.), — F. Supp. 3d —, 617 B.R. 641, 2020 U.S. Dist. LEXIS 106642 (D.N.D. 2020), aff'd, 854 Fed. Appx. 777, 2021 U.S. App. LEXIS 22883 (8th Cir. N.D. 2021).

9-07-14. Interpreted as promisor believed promisee understood it.

If the terms of a promise in any respect are ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed at the time of making it that the promisee understood it.

Source:

Civ. C. 1877, § 940; R.C. 1895, § 3907; R.C. 1899, § 3907; R.C. 1905, § 5353; C.L. 1913, § 5909; R.C. 1943, § 9-0714.

Derivation:

Cal. Civ. C., 1649.

Notes to Decisions

Ambiguity Resolved by Extrinsic Evidence.

An ambiguity resolved by use of extrinsic evidence is a question of fact for the trier of fact to decide. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

“Doctrine of Reasonable Expectations”.

Under the “doctrine of reasonable expectations”, which provides that form contracts be construed to include terms which the promisee could reasonably expect to be included, a “farm liability policy” which excluded claims arising from the use of “any recreational motor vehicle or aircraft” was construed to cover a claim arising from an aerial crop spraying accident, because the exclusion, although intended to exclude all aircraft, could be reasonably construed to exclude only recreational aircraft. Mills v. Agrichemical Aviation, 250 N.W.2d 663, 1977 N.D. LEXIS 219 (N.D. 1977).

Doubt As to Terms.

If any doubt exists as to the meaning of the terms of an agreement, it should be interpreted against the party by whom contract was drawn. Lakeland Realty Co. v. Reese, 77 N.D. 904, 46 N.W.2d 696, 1951 N.D. LEXIS 119 (N.D. 1951).

Sale of Real Estate.

Where note and mortgage, executed to secure payment for real estate sold under a written agreement, provided that the conditions of same should be performed according to the terms of the written contract now existing between the maker and the payee of the note, such note, mortgage, and written contract had to be construed together so as to give effect to the provisions of the written contract. Lakeland Realty Co. v. Reese, 77 N.D. 904, 46 N.W.2d 696, 1951 N.D. LEXIS 119 (N.D. 1951).

Subordination Agreement.

The record amply supported the trial court’s finding, that sellers knew the bank would interpret a subordination agreement to give it priority in the paid-for parts inventory where the sellers were fully informed of the bank’s conditions for refinancing, their own witnesses testified that there were documents in their files that evidenced the bank’s request for subordination of their priority in the paid-for parts inventory, the sellers had sent a signed subordination agreement which the bank reasonably understood to grant the requested priority in the paid-for parts inventory, and never indicated to the bank that this subordination agreement was anything other than what the bank had requested. National Bank v. International Harvester Co., 421 N.W.2d 799, 1988 N.D. LEXIS 38 (N.D. 1988).

9-07-15. Clauses subordinate to general intent.

Particular clauses of a contract are subordinate to its general intent.

Source:

Civ. C. 1877, § 941; R.C. 1895, § 3908; R.C. 1899, § 3908; R.C. 1905, § 5354; C.L. 1913, § 5910; R.C. 1943, § 9-0715.

Derivation:

Cal. Civ. C., 1650.

Notes to Decisions

Teaching Contract.

In a teacher contract dispute, the “teacher shall” language in a grievance policy did not prohibit a teacher association from utilizing the grievance procedures set forth in an agreement when the grievance effected the terms and conditions of a majority of the teachers and concerned the interpretation of the agreement; a restrictive reading would have effectively ignored the purpose for the agreement as set forth by the parties. Moreover, nothing in the agreement prohibited the association from bringing a legal action after a grievance had been denied or negotiations had failed. Williston Educ. Ass'n v. Williston Pub. Sch. Dist. No. 1, 2016 ND 42, 876 N.W.2d 437, 2016 N.D. LEXIS 26 (N.D. 2016).

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, an inconsistent provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

9-07-16. Written part of contract controls printed part.

When a contract is partly written and partly printed, or when part of it is written or printed under the special directions of the parties and with a special view to their intention and the remainder is copied from a form originally prepared without special reference to the particular parties and particular contract in question, the written parts control the printed parts and the parts which are purely original control those which are copied from a form and if the two are absolutely repugnant the latter must be disregarded insofar as such repugnancy exists.

Source:

Civ. C. 1877, § 942; R.C. 1895, § 3909; R.C. 1899, § 3909; R.C. 1905, § 5355; C.L. 1913, § 5911; R.C. 1943, § 9-0716.

Derivation:

Cal. Civ. C., 1651.

Notes to Decisions

In General.

Where a provision was typewritten and obviously added to a contract, which otherwise was on a printed form, to the extent that there was a conflict, the added provision controlled over the form. Olson v. Peterson, 288 N.W.2d 294, 1980 N.D. LEXIS 183 (N.D. 1980).

Change of Annuity Beneficiary Form.

Where an owner of annuities signed change of beneficiary forms with the word “Irrevocable” handwritten on each of the forms, a subsequent attempt to change beneficiaries was ineffective without the consent of the irrevocable beneficiaries because the handwritten word “Irrevocable” overrode the boilerplate provision on the form that permitted the owner to change beneficiaries. Neumiller v. Am. Express Fin. Advisors, Inc., 2004 U.S. Dist. LEXIS 26326 (D.N.D. Dec. 20, 2004).

9-07-17. Repugnancies reconciled with intent.

Repugnancy in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clause subordinate to the general intent and purposes of the whole contract.

Source:

Civ. C. 1877, § 943; R.C. 1895, § 3910; R.C. 1899, § 3910; R.C. 1905, § 5356; C.L. 1913, § 5912; R.C. 1943, § 9-0717.

Derivation:

Cal. Civ. C., 1652.

Notes to Decisions

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, an inconsistent provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

9-07-18. Inconsistent words rejected.

Words in a contract which are inconsistent with its nature or with the main intention of the parties are to be rejected.

Source:

Civ. C. 1877, § 944; R.C. 1895, § 3911; R.C. 1899, § 3911; R.C. 1905, § 5357; C.L. 1913, § 5913; R.C. 1943, § 9-0718.

Derivation:

Cal. Civ. C., 1653.

Notes to Decisions

In General.

Particular clauses of a contract are subordinate to its general intent, and words wholly inconsistent with its nature or the main intention of the parties are to be rejected. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Latent Ambiguity.

A latent ambiguity is an uncertainty which arises not by the terms of the instrument itself, but it is created by some collateral matter not appearing in the instrument. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Liquidated Damages.

A provision for liquidated damages will not prevent recovery for actual damages for events which are not covered by the liquidated damages clause, unless the contract expressly provides that damages other than those enumerated shall not be recovered. Meyer v. Hansen, 373 N.W.2d 392, 1985 N.D. LEXIS 373 (N.D. 1985).

Vendor’s recovery for waste was not precluded by liquidated damages clause contained in the contract for deed, as regardless of how expansive the terms of a contract may be, its coverage can only extend to those events which the parties intended, and to conclude that the parties intended the liquidated damages provision to cover waste would require an unreasonable interpretation of the contract, which is prohibited by N.D.C.C. § 9-07-18. Meyer v. Hansen, 373 N.W.2d 392, 1985 N.D. LEXIS 373 (N.D. 1985).

Patent Ambiguity.

A patent ambiguity is an inherent uncertainty appearing on the face of the instrument, and arises at once on the reading of the instrument. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Secret Intention.

The secret intention of the parties, if different from the expressed intention, will not prevail, as the law looks to what the parties said as expressing their real intention. Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803, 1915 N.D. LEXIS 137 (N.D. 1915).

Trust.

In a dispute over a trust agreement, because the introductory language of one article and the general intent of the trust agreement showed that a husband and wife were to be the primary beneficiaries of the trust, a provision regarding other potential beneficiaries was rejected as inconsistent under N.D.C.C. § 9-07-18. Therefore, a motion for summary judgment was properly granted for the husband, who was acting as a trustee and a personal representative for the wife after her death, when he transferred property to himself and revoked the trust; moreover, a motion to reconsider filed by the potential beneficiaries was denied. Langer v. Pender, 2009 ND 51, 764 N.W.2d 159, 2009 N.D. LEXIS 35 (N.D. 2009).

9-07-19. Uncertainty interpreted against party causing it — Presumption as to cause.

In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist. The promisor is presumed to be such party, except in a contract between a public officer or body, as such, and a private party, and in such case it is presumed that all uncertainty was caused by the private party.

Source:

Civ. C. 1877, § 945; R.C. 1895, § 2912; R.C. 1899, § 3912; R.C. 1905, § 5358; C.L. 1913, § 5914; R.C. 1943, § 9-0719.

Derivation:

Cal. Civ. C., 1654.

Notes to Decisions

In General.

If the rules for interpreting a written contract do not remove uncertainty, the language of the contract is to be construed most strongly against the party who drafted the contract. Northwest G.F. Mut. Ins. Co. v. Norgard, 518 N.W.2d 179, 1994 N.D. LEXIS 135 (N.D. 1994).

Applicability.

This section is applicable only when N.D.C.C. §§ 9-07-01 through 9-07-18 fail to resolve the ambiguity; the strict construction rule contained within this section is a rule of last resort and is not applicable to frustrate any clear intentions of the parties. Walle Mut. Ins. Co. v. Sweeney, 419 N.W.2d 176, 1988 N.D. LEXIS 36 (N.D. 1988).

This section, which requires an ambiguous contract to be construed against any party who has created the ambiguity, irrespective of that party’s bargaining position or level of expertise, is a rule of last resort which shall be applied only when other rules of construction do not resolve the ambiguity. Continental Casualty Co. v. Kinsey, 499 N.W.2d 574, 1993 N.D. LEXIS 80 (N.D. 1993).

The trial court erred in applying this rule of last resort where extrinsic evidence resolved the ambiguity in the contract at issue. Kaler v. Kraemer, 1999 ND 237, 603 N.W.2d 698, 1999 N.D. LEXIS 263 (N.D. 1999).

In a quiet title action involving quitclaim deeds executed in favor of a deceased property owner’s son, the son’s reliance on various statutory construction rules was misplaced because they were a last resort and were not applicable when there were other means for ascertaining intent in order to resolve the dispute. Rolla v. Tank, 2013 ND 175, 837 N.W.2d 907, 2013 N.D. LEXIS 178 (N.D. 2013).

Building Contract.

A building contract that is ambiguous should be interpreted most strictly against the contractor where he drafted the contract. Shimek v. Vogel, 105 N.W.2d 677, 1960 N.D. LEXIS 91 (N.D. 1960).

Collecting Bank.

A collecting bank acts as an agent for the owner of an item for the purposes of presentment, payment, and collection, unless a contrary intent is apparent. Thus, any ambiguous language in the advice form is also to be construed against drafter as collecting bank’s principal. Wolverton Farmers Elevator v. First American Bank, 851 F.2d 223, 1988 U.S. App. LEXIS 9186 (8th Cir. N.D. 1988).

Equitable Relief Denied.

Court would not invoke its equitable powers to relieve buyer from liquidated damages clause in wheat futures contract which buyer itself had prepared where loss incurred resulted from buyer’s failure to mitigate its damages and no unjust enrichment, fundamental unfairness or miscarriage of law was shown. Cargill, Inc. v. Kavanaugh, 228 N.W.2d 133, 1975 N.D. LEXIS 191 (N.D. 1975).

Grain Contract.

A grain contract prepared by the purchaser which provided that the market price of a certain date should be used in determining damages, was to be construed most strongly against the party who prepared the contract, and a date more favorable to the purchaser could not be implied. Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d 494, 1974 N.D. LEXIS 166 (N.D. 1974).

Insurance.

Where luggage disappeared after being checked with an airline, and the disappearance was under circumstances sufficiently unknown, puzzling, and baffling, to arouse wonder, curiosity, or speculation, it was a “mysterious disappearance” covered by the theft provisions of an insurance policy. Conlin v. Dakota Fire Ins. Co., 126 N.W.2d 421, 1964 N.D. LEXIS 85 (N.D. 1964).

In action on life insurance policy covering child, contention by insurer that child had not lived to be “at least 14 days old” as required by policy was without merit since period was not to be computed as fourteen 24-hour days as contended by insurer, but from first minute of day on which person was born to same minute of corresponding day completing period; ambiguity in policy’s provisions was construed most strongly against party that caused uncertainty of meaning. Scott v. National Travelers Life Ins. Co., 171 N.W.2d 749, 1969 N.D. LEXIS 72 (N.D. 1969).

A provision in the constitution and bylaws of a beneficial association providing that treatment would be limited to six months in cases demonstrated to be incurable did not permit a member to receive treatment for six months for such incurable disease and, after discharge for a period, entitle him to receive further treatment for the same disease. However, even after such a member had received the maximum six months’ treatment for such incurable ailment, the association would have been responsible for further treatment for other diseases occurring during such period of hospitalization and treatment even though the member may have been receiving care for the incurable disease as well. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

Provision of “farm liability policy” excluding coverage of claims arising out of the use of a “recreational motor vehicle or aircraft” and intended to exclude coverage of accidents involving any aircraft (not only “recreational” ones) was construed so that policy covered claim arising out of aerial crop spraying accident. Mills v. Agrichemical Aviation, 250 N.W.2d 663, 1977 N.D. LEXIS 219 (N.D. 1977).

When an ambiguity exists, if one interpretation of the policy language will impose liability on the insurer and the other will not, the interpretation favorable to the insured will be adopted. Heitkamp v. Milbank Mut. Ins. Co., 383 N.W.2d 834, 1986 N.D. LEXIS 282 (N.D. 1986).

The ambiguity in the policy created a question of coverage which the factfinder resolved in favor of the insured, and that resolution is consistent with the North Dakota Supreme Court’s recognized rule of interpretation that ambiguities are to be construed, if at all possible, in favor of the insured. Heitkamp v. Milbank Mut. Ins. Co., 383 N.W.2d 834, 1986 N.D. LEXIS 282 (N.D. 1986).

The district court properly construed the ambiguous terms “farm implements” and “motor vehicle” as excluding the insured’s pickup truck from coverage and did not err in failing to construe the language of the policy against the insurer and in favor of the insured pursuant to this section where the district court interpreted the contractual language by reference to the circumstances under which the contract was made and also gave effect to the ascertainable mutual intent of the parties at the time of contracting. Walle Mut. Ins. Co. v. Sweeney, 419 N.W.2d 176, 1988 N.D. LEXIS 36 (N.D. 1988).

Where endorsement listed only two policy holders as the named insureds and the supplemental declaration sheet issued at the same time listed four policy holders, the endorsement and the supplemental declaration sheet were inconsistent, and the policy was ambiguous on the crucial question whether individual was a named insured for whom liability coverage was excluded. The ambiguity was construed strictly against defendant and, based on the endorsement language, the individual was not a named insured under the policy and, thus, the injury to him was covered. Johnson v. Center Mut. Ins. Co., 529 N.W.2d 568, 1995 N.D. LEXIS 38 (N.D. 1995).

Interest on Indebtedness.

While interest at the legal rate may be charged against an indebtedness, where the date of delivery has been postponed several times by the buyer, the appropriate date for the commencement of interest is the date on which the contract was finally repudiated. Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d 494, 1974 N.D. LEXIS 166 (N.D. 1974).

Lawsuit Settlement.

In dispute arising over meaning of stipulation of settlement entered into between same parties in another lawsuit, trial court properly entered judgment against party composing agreement; ambiguity existed as to meaning of phrase “no liabilities of the corporation other than in the usual course of business”, and this section required that any ambiguity was to be interpreted most strongly against maker of contract. Minette v. Associated Chinchilla Breeders, 173 N.W.2d 485, 1970 N.D. LEXIS 107 (N.D. 1970).

Oil and Gas Leases.

Construction of oil and gas leases containing ambiguities is in favor of the lessor and against the lessee for the reason that the lessee usually provides the lease form or dictates the terms thereof. West v. Alpar Resources, 298 N.W.2d 484, 1980 N.D. LEXIS 339 (N.D. 1980).

Public Contracts.

The rule that a contract made with the public must, in case of ambiguity, be construed most favorably to the public cannot be invoked to change the clear, unmistakable meaning of a contract whose provisions are unambiguous and plain. Granville v. Kovash, Inc., 118 N.W.2d 354, 1962 N.D. LEXIS 101, 1962 N.D. LEXIS 102 (N.D. 1962).

Ambiguity or uncertainty in a contract for municipal improvements must be presumed to have been caused by the private party, even though the private party had no part in causing the uncertainty. Granville v. Kovash, Inc., 118 N.W.2d 354, 1962 N.D. LEXIS 101, 1962 N.D. LEXIS 102 (N.D. 1962).

The rule that ambiguities in public contracts are to be interpreted against a private party does not apply to offers to contract. Bottineau Pub. Sch. Dist. v. Currie, 259 N.W.2d 650, 1977 N.D. LEXIS 194 (N.D. 1977).

In a breach of contract action arising from a storm sewer improvement project, the court declined to engraft an exception for uncontemplated delays into the plain and broad language of a no damages for delay clause in part because N.D.C.C. § 9-07-19 reflected a preference for construing contracts with public entities in favor of the public entity. Markwed Excavating, Inc. v. City of Mandan, 2010 ND 220, 791 N.W.2d 22, 2010 N.D. LEXIS 222 (N.D. 2010).

Security Agreement.

When terms of a security agreement are vague or imprecise, the terms are strictly construed against the drafter consistent with fundamental rules of contract construction. In re Wolsky, 68 B.R. 526, 1986 Bankr. LEXIS 5060 (Bankr. D.N.D. 1986).

Suretyship Agreement.

Suretyship agreement between creditor and gratuitous surety was held to limit the surety’s obligation to the principal amount owed the creditor at the time of signing the obligation; although the agreement contained an alleged open-ended provision, agreement was found to be misleading and ambiguous and was construed against the creditor. Watkins Prods. v. Anhorn, 193 N.W.2d 228, 1971 N.D. LEXIS 102 (N.D. 1971).

Well As Part of Land Purchase.

A purchaser drafting a contract for deed for the sale and purchase of land with a reservation of oil and gas who intends to purchase the ownership of an existing salt-water-disposal well and the right to proceeds flowing from the use of the well must do so explicitly in order that seller and purchaser contract with regard to the same thing. If that intent is not explicit, the purchaser takes the risk that any ambiguity with reference thereto will be construed against him pursuant to this section, with the result that such interest is not conveyed. Thompson v. Thompson, 391 N.W.2d 608, 1986 N.D. LEXIS 374 (N.D. 1986).

Collateral References.

Validity and construction of “no damage” clause with respect to delay in building or construction contract, 74 A.L.R.3d 187.

Law Reviews.

Oil and Gas Law: When It Comes to Restrictive Employment Covenants, Whose Idea of “Reasonable” Is Correct, the Oil Company’s or the Landman’s?, 81 N.D. L. Rev. 555 (2005).

9-07-20. Stipulations necessary to make contract reasonable implied.

Stipulations which are necessary to make a contract reasonable or conformable to usage are implied in respect to matters concerning which the contract manifests no contrary intention.

Source:

Civ. C. 1877, § 946; R.C. 1895, § 3913; R.C. 1899, § 3913; R.C. 1905, § 5359; C.L. 1913, § 5915; R.C. 1943, § 9-0720.

Derivation:

Cal. Civ. C., 1655.

Notes to Decisions

Time for Performance.

Where no time is set for the performance of a contract, a reasonable time is allowed. Braithwaite v. Aikin, 1 N.D. 455, 48 N.W. 354, 1891 N.D. LEXIS 13 (N.D. 1891); Acme Harvester Co. v. Axtell, 5 N.D. 315, 65 N.W. 680, 1895 N.D. LEXIS 34 (N.D. 1895); Young v. Metcalf Land Co., 18 N.D. 441, 122 N.W. 1101 (N.D. 1909).

9-07-21. Things incidental to contract — When and when not implied.

All things that in law or usage are considered as incidental to a contract or as necessary to carry it into effect are implied therefrom, unless some of them are mentioned expressly therein. In such case, all other things of the same class are deemed to be excluded.

Source:

Civ. C. 1877, § 947; R.C. 1895, § 3914; R.C. 1899, § 3914; R.C. 1905, § 5360; C.L. 1913, § 5916; R.C. 1943, § 9-0721.

Notes to Decisions

Reasonable Time of Performance.

Because a lessee was capable of closing within a reasonable time, and a decedent’s estate was unwilling to close on property, the lessee’s delay in performance was reasonable, and the district court’s finding that his was capable of closing on the property within a reasonable time from the execution of the agreement to purchase the property was not clearly erroneous; the lessee’s delay in performance was not unreasonable, and there was not a failure of consideration. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

9-07-22. Rules governing time of performance when not specified.

If no time is specified for the performance of an act required to be performed, a reasonable time is allowed. If the act in its nature is capable of being done instantly, as for example if it consists in the payment of money only, it must be performed immediately upon the thing to be done being exactly ascertained.

Source:

Civ. C. 1877, § 948; R.C. 1895, § 3915; R.C. 1899, § 3915; R.C. 1905, § 5361; C.L. 1913, § 5917; R.C. 1943, § 9-0722.

Notes to Decisions

Implied Terms.

What is implied in an express contract is as much a part of it as what is expressed. Mace v. Cole, 50 N.D. 866, 198 N.W. 816, 1924 N.D. LEXIS 41 (N.D. 1924).

Time for Performance.

If no time is specified by the contract for performance of an act, the law allows reasonable time under the circumstances. Braithwaite v. Aikin, 1 N.D. 455, 48 N.W. 354, 1891 N.D. LEXIS 13 (N.D. 1891).

Where the parties have failed to specify a time for performance, the law will allow a reasonable time; determination of what a reasonable time may be is a question of fact, depending upon the particular circumstances of each case. Huber v. Oliver County, 529 N.W.2d 179, 1995 N.D. LEXIS 32 (N.D. 1995).

Because a lessee was capable of closing within a reasonable time, and a decedent’s estate was unwilling to close on property, the lessee’s delay in performance was reasonable, and the district court’s finding that his was capable of closing on the property within a reasonable time from the execution of the agreement to purchase the property was not clearly erroneous; the lessee’s delay in performance was not unreasonable, and there was not a failure of consideration. Hartman v. Grager, 2021 ND 160, 2021 N.D. LEXIS 162 (N.D. 2021).

Unreasonable Delay.

Where two thousand dollar note to bank was due and payable on December 19, 1981, but it was not until approximately one and one-half years later that the bank finally obtained the title to the property which defendant had renovated with the proceeds of the loan, the obtaining of which title constituted consideration for the note, the trial court’s conclusion that the bank’s delay was unreasonable was not clearly erroneous. First Nat'l Bank v. Burich, 367 N.W.2d 148, 1985 N.D. LEXIS 300 (N.D. 1985).

Law Reviews.

Oil and Gas Law: When It Comes to Restrictive Employment Covenants, Whose Idea of “Reasonable” Is Correct, the Oil Company’s or the Landman’s?, 81 N.D. L. Rev. 555 (2005).

9-07-23. When time is essence of contract.

Time is of the essence of a contract if it is provided expressly by the terms of the contract or if such was the intention of the parties as disclosed thereby.

Source:

Civ. C. 1877, § 949; R.C. 1895, § 3916; R.C. 1899, § 3916; R.C. 1905, § 5362; C.L. 1913, § 5918; R.C. 1943, § 9-0723.

Notes to Decisions

Express Terms.

To make time the essence of a contract it must be so expressed. Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359, 1915 N.D. LEXIS 118 (N.D. 1915).

Where contract for the sale of real estate contained both a printed and handwritten provision stating “time is of the essence”, buyer was not entitled to specific performance of the contract where he failed to perform on the precise day specified in the contract. E. E. E., Inc. v. Hanson, 318 N.W.2d 101, 1982 N.D. LEXIS 262 (N.D. 1982).

District court did not err by finding that time was of the essence under N.D.C.C. § 9-07-23 in exercising the option to terminate the lease and that the landowners’ untimely notice constituted an anticipatory breach of the lease because the lease provided that the option to terminate had to be executed by providing written notice by September 1 of each year and notice was not provided until September 15. Langer v. Bartholomay, 2008 ND 40, 745 N.W.2d 649, 2008 N.D. LEXIS 40 (N.D. 2008).

Intention of Parties.

That time is of the essence of a contract need not be declared in so many words, it being sufficient to show the intention of the parties to that effect. Asplund v. Danielson, 56 N.D. 485, 217 N.W. 848, 1928 N.D. LEXIS 160 (N.D. 1928).

Where farmer entered contract with grain elevator to deliver corn and written contract specified “June delivery”, it was question for jury whether time was of the essence in this agreement, and trial court’s order for summary judgment was reversed. Farmers Elevator Co. v. David, 234 N.W.2d 26, 1975 N.D. LEXIS 122 (N.D. 1975).

In a settlement agreement, the designation of a specific time for a payment, with consequences for failure to make the payment by that time, unambiguously manifested an intent that time was of the essence for the settlement agreement. When one party failed to comply with the terms of the settlement agreement, the other party was entitled to have the full amount of the original judgment reinstated. Kuperus v. Willson, 2006 ND 12, 709 N.W.2d 726, 2006 N.D. LEXIS 14 (N.D. 2006).

Trial court did not err in finding that the owner of the nail salon did not establish that the construction company orally agreed that the work would be done before Thanksgiving 2013, or by a specific date and that the construction company's version of the completion date was more credible than the owner's version of the completion date because the evidence in the record supported the district court's findings; and the supreme court was not left with a definite and firm conviction that the trial court made a mistake in finding there was no agreement for a specific completion date for the project, and the supreme court concluded that the trial court's findings about the completion date were not clearly erroneous. Welch Constr. & Excavating, LLC v. Duong, 2016 ND 70, 877 N.W.2d 292, 2016 N.D. LEXIS 70 (N.D. 2016).

Collateral References.

Time for suit: validity of contractual time period, shorter than statute of limitations, for bringing action, 6 A.L.R.3d 1197.

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

CHAPTER 9-08 Unlawful and Voidable Contracts

9-08-01. Provisions that are unlawful.

Any provision of a contract is unlawful if it is:

  1. Contrary to an express provision of law;
  2. Contrary to the policy of express law, though not expressly prohibited; or
  3. Otherwise contrary to good morals.

Source:

Civ. C. 1877, § 953; R.C. 1895, § 3920; R.C. 1899, § 3920; R.C. 1905, § 5366; C.L. 1913, § 5922; R.C. 1943, § 9-0801.

Derivation:

Cal. Civ. C., 1667.

Notes to Decisions

Against Public Policy.

When a contract provision is inconsistent with fair and honorable dealing, contrary to sound policy and offensive to good morals, courts have the authority to declare the provision void as against public policy. Johnson v. Peterbilt of Fargo, 438 N.W.2d 162, 1989 N.D. LEXIS 70 (N.D. 1989).

Because allowing a person convicted of felony fraud in connection with real estate transactions to retain his real estate license and continue business during his appeal of conviction would be contrary to public policy, real estate commission had no authority to agree to refrain from disciplinary action pending resolution of broker’s appeal of his conviction. Muscatell v. North Dakota Real Estate Comm'n, 546 N.W.2d 374, 1996 N.D. LEXIS 120 (N.D. 1996).

Alleged contract between two couples to split lottery proceeds if either couple’s individually purchased tickets should prove to be winners was unenforceable in North Dakota courts because, as a matter of law, the alleged contract was contrary to the strong public policy in North Dakota against state-operated lotteries and high-stakes gambling. Meyer v. Hawkinson, 2001 ND 78, 626 N.W.2d 262, 2001 N.D. LEXIS 90 (N.D. 2001).

Bank Pledging Assets.

Agreement by state bank to pledge its assets in order to secure a general deposit was unlawful. Divide County v. Baird, 55 N.D. 45, 212 N.W. 236, 1926 N.D. LEXIS 42 (N.D. 1926).

Bank Purchasing Property.

A contract by a bank to purchase land, and to pay the mortgage thereon in violation of the statute, is not merely ultra vires, but is unlawful and void. Smith v. Rennix, 52 N.D. 935, 52 N.D. 938, 204 N.W. 843, 1925 N.D. LEXIS 154 (N.D. 1925); Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

Claimed Conflict of Interest.

North Dakota Supreme Court has not previously held that an agreement is unenforceable as the result of a party’s breach of an earlier or separate agreement with a third party, and the court declined to extend the statute to the circumstances of this case involving a claimed conflict of interest. Tornabeni v. Wold, 2018 ND 253, 920 N.W.2d 454, 2018 N.D. LEXIS 280 (N.D. 2018).

Criminal Conspiracy.

Any contract or agreement, express or implied, to knowingly conceal or compound an offense, to abstain from prosecuting therefor, or to withhold any evidence thereof is unlawful. School Dist. v. Collins, 41 N.W. 466, 6 Dakota 145, 1889 Dakota LEXIS 11 (Dakota 1889).

Employer and Employee.

A secret contract with another placing it in the employee’s power to wrong the principal, increasing compensation, or tempting action in bad faith toward the employer, is against public policy. Mees v. Grewer, 63 N.D. 74, 245 N.W. 813, 1932 N.D. LEXIS 138 (N.D. 1932).

Employment of Unqualified Teacher.

Every contract relating to the employment of a teacher who does not hold a lawful certificate of qualification is void. Goose River Bank v. Willow Lake Sch. Township, 1 N.D. 26, 44 N.W. 1002, 1890 N.D. LEXIS 5 (N.D. 1890); Hosmer v. Sheldon Sch. Dist., 4 N.D. 197, 59 N.W. 1035, 1894 N.D. LEXIS 27 (N.D. 1894).

Freedom to Contract.

When a court is faced with deciding whether a contract is against public policy, it must also be mindful of an individual’s right to enter into a contract. Johnson v. Peterbilt of Fargo, 438 N.W.2d 162, 1989 N.D. LEXIS 70 (N.D. 1989).

Horse Racing.

A contract for an unlawful horse race is unenforceable and void, for courts will not lend their aid to parties engaged in illegal transactions. Erickson v. North Dakota State Fair Ass'n, 54 N.D. 830, 211 N.W. 597, 1926 N.D. LEXIS 95 (N.D. 1926).

Illegal Contract Void.

An illegal contract is absolutely void and creates no obligation between the parties. Mees v. Grewer, 63 N.D. 74, 245 N.W. 813, 1932 N.D. LEXIS 138 (N.D. 1932).

Even if the parties intended to obtain arguably illegally production flexibility contract payments on the land through use of the farm rental contract and the agreement and release, there was nothing inherently illegal in either of those contracts. The contracts were not unlawful under N.D.C.C. § 9-08-01. Finstad v. Ransom-Sargent Water Users, Inc., 2014 ND 146, 849 N.W.2d 165, 2014 N.D. LEXIS 147 (N.D. 2014).

Insurance Contract.

A 90-day limitation period between the date of an injury and the date a covered loss occurred (loss of limb) was not unreasonable or against public policy. Martin v. Allianz Life Ins. Co. of N. Am., 1998 ND 8, 573 N.W.2d 823, 1998 N.D. LEXIS 13 (N.D. 1998).

Provisions of the parties’ local agent’s agreements were not inherently unlawful and the record did not indicate that the insurance agent was involved in any aspect of the insurance business after the date of his federal court convictions; the agent’s acceptance of commissions or benefits based on work he performed before the dates of his federal court convictions and the Insurance Commissioner’s cease and desist order did not constitute engaging in the business of insurance. Huber v. Farmers Union Serv. Ass'n of N.D., 2010 ND 151, 787 N.W.2d 268, 2010 N.D. LEXIS 155 (N.D. 2010).

Noxious Weeds, Failure to Destroy.

A landowner’s failure to destroy noxious weeds on his land is not an “unlawful” act. Langer v. Goode, 21 N.D. 462, 131 N.W. 258, 1911 N.D. LEXIS 112 (N.D. 1911).

Sale of Property.

A contract to sell property under an agreement that the title thereto would be obtained by foreclosure of a mortgage thereon is void on the ground of public policy. Peck v. Levinger, 50 N.W. 481, 6 Dakota 54, 1888 Dakota LEXIS 58 (Dakota 1888).

Sales Commission.

A contractual provision which states that no commission will be paid to a salesman, on sales where the item is delivered after the termination of the salesman’s employment, whether such termination is voluntary or otherwise is not void as a matter of public policy. Johnson v. Peterbilt of Fargo, 438 N.W.2d 162, 1989 N.D. LEXIS 70 (N.D. 1989).

Tax Evasion.

Where there was nothing inherently illegal in contract to purchase, feed, and sell cattle, one party’s guarantee to another party was not extinguished because of possibility that the other party had entered into the agreement as a facade merely to evade taxes. State Bank v. Rauh, 288 N.W.2d 299, 1980 N.D. LEXIS 180 (N.D. 1980).

Collateral References.

Post-mortem compensation, validity of contract for support as affected by provisions for, 1 A.L.R.2d 1178, 1270.

Validity of contractual waiver of statute of limitations, 1 A.L.R.2d 1445.

Public policy as affecting enforceability as between parties of agreement to purchase property at judicial or tax sale for their joint benefit, 14 A.L.R.2d 1267, 1293.

Validity of anti-assignment clause in contract, 37 A.L.R.2d 1251.

Validity of contract in violation of statute imposing criminal sanction but not specifically declaring contract invalid, 55 A.L.R.2d 481.

Validity of provision in contract against mechanic’s lien, 76 A.L.R.2d 1087.

Release or waiver of mechanic’s lien by general contractor as affecting rights of subcontractor or materialman, 75 A.L.R.3d 505.

Regulation of private detectives, private investigators, and security agencies, 86 A.L.R.3d 691.

What constitutes contract between husband or wife and third person premotive of divorce or separation, 93 A.L.R.3d 523.

Validity and effect, as between former spouses, of agreement releasing parent from payment of child support provided for in an earlier divorce decree, 100 A.L.R.3d 1129.

Validity of contractual provision limiting place or court in which action may be brought, 31 A.L.R.4th 404.

Modern status of views as to validity of premarital agreements contemplating divorce or separation, 53 A.L.R.4th 22.

Enforceability of premarital agreements governing support or property rights upon divorce or separation as affected by circumstances surrounding execution — modern status, 53 A.L.R.4th 85.

Enforceability of premarital agreements governing support or property rights upon divorce or separation as affected by fairness or adequacy of those terms — modern status, 53 A.L.R.4th 161.

Right to recover money lent for gambling purposes, 74 A.L.R.5th 369.

9-08-02. Contracts against the policy of the law.

All contracts which have for their object, directly or indirectly, the exempting of anyone from responsibility for that person’s own fraud or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.

Source:

Civ. C. 1877, § 954; R.C. 1895, § 3921; R.C. 1899, § 3921; R.C. 1905, § 5367; C.L. 1913, § 5923; R.C. 1943, § 9-0802.

Derivation:

Cal. Civ. C., 1668.

Cross-References.

Contracts against certain liabilities void, see § 8-07-07.

Contracts of indemnity, interpretation, see § 22-02-07.

Debtor’s contract valid against creditor in absence of fraud, see § 13-01-02.

Notes to Decisions

Applicability.

This section is inapplicable where the contract provision does not exempt one from liability, but delineates the scope of potential liability. Moen v. Norwest Bank of Minot, 647 F. Supp. 1333, 1986 U.S. Dist. LEXIS 17904 (D.N.D. 1986).

In a child’s negligence suit against a sponsor, a claim that N.D.C.C. § 9-08-02 barred the sponsor from exonerating itself from liability in a release was not considered because the complaint did not allege the sponsor’s intentional or willful conduct. Hillerson v. Bismarck Pub. Sch., 2013 ND 193, 840 N.W.2d 65, 2013 N.D. LEXIS 261 (N.D. 2013)

Insurance Policies.

This section and N.D.C.C. § 26.1-32-04 manifest a public policy precluding an insured from being indemnified for losses caused by the insured’s sexual molestation of a child, and an insurer has no duty to defend against any alleged negligent acts inextricably linked with the intentional molestation. Nodak Mut. Ins. Co. v. Heim, 1997 ND 36, 559 N.W.2d 846, 1997 N.D. LEXIS 33 (N.D. 1997).

This section, N.D.C.C. § 26.1-32-04, and public policy prevented plaintiff insurer from being liable for insurance coverage of losses sustained by defendant neighboring businesses as a result of arson at a nightclub; the arsonist’s intent extended to the damage to neighboring buildings, and allowing coverage would benefit the arsonist when the insurer defended the claim, thereby reducing the arsonist’s expenses. Capitol Indem. Corp. v. Evolution, Inc., 293 F. Supp. 2d 1067, 2003 U.S. Dist. LEXIS 21125 (D.N.D. 2003).

Because a jury’s findings that insureds acted in concert, as defined by N.D.C.C. § 32-03.2-02, when they wrongfully interfered with a business was res judicata as to whether their tortious conduct was intentional, their insurer had no duty to indemnify them. Coverage was precluded as a matter of law by intentional acts exclusions and by the public policy stated in N.D.C.C. §§ 9-08-02, 26.1-32-04; however, the jury’s findings did not relieve the insurer of the duty to defend, which was determined by the allegations in the underlying complaint. Tibert v. Nodak Mut. Ins. Co., 2012 ND 81, 816 N.W.2d 31, 2012 N.D. LEXIS 81 (N.D. 2012).

Pleading.

In a case arising from a near-drowning at a summer camp, an argument that an association was unable to exonerate itself from willful acts was not addressed on appeal because the complaint only pled a theory of negligence; case law should have given notice to specifically plead intentional or willful acts if that was what was being alleged. Hillerson v. Bismarck Pub. Schs., 838 N.W.2d 474, 2013 N.D. LEXIS 220 (N.D. 2013).

Public Contracts.

In a breach of contract action arising from a storm sewer improvement project, the court declined to engraft an exception for uncontemplated delays into the plain and broad language of a no damages for delay clause. Markwed Excavating, Inc. v. City of Mandan, 2010 ND 220, 791 N.W.2d 22, 2010 N.D. LEXIS 222 (N.D. 2010).

Responsibility for Future Acts.

A stipulation not to be held responsible for any acts or torts in the future is against public policy. Roll v. Keller, 336 N.W.2d 648, 1983 N.D. LEXIS 386 (N.D. 1983).

Law Reviews.

Punitive Damages and Insurance: Are Punitive Damages Insurable? The North Dakota Supreme Court Says Yes, Despite North Dakota’s Public Policy to the Contrary, 70 N.D. L. Rev. 637 (1994).

9-08-02.1. Contracts against liability for errors or omissions — Void.

Any provision in a construction contract which would make the contractor liable for the errors or omissions of the owner or the owner’s agents in the plans and specifications of such contract is against public policy and void.

Source:

S.L. 1969, ch. 124, § 1.

Collateral References.

Subcontractors, duty and liability of subcontractor to employee of another contractor using equipment or apparatus of former, 55 A.L.R.4th 725.

9-08-03. Penalties and penal clauses void.

Penalties imposed by contract for any nonperformance thereof are void.

Source:

Civ. C. 1877, § 955; R.C. 1895, § 3922; R.C. 1899, § 3922; R.C. 1905, § 5368; C.L. 1913, § 5924; R.C. 1943, § 9-0803.

Notes to Decisions

Attorney’s Fees.

A stipulation in a note for attorney’s fees, should a suit be instituted thereon, is valid. Farmers' Nat'l Bank v. Rasmussen, 46 N.W. 574, 1 Dakota 60, 1875 Dakota LEXIS 5 (Dakota 1875).

Contractor’s Bond.

Considering former N.D.C.C. § 40-22-31 and contractor’s bond in light of this section and N.D.C.C. § 9-08-04, the default referred to in subdivision 3 of former N.D.C.C. § 40-22-31 must amount to a complete failure of performance before the entire amount of the bond may be taken as a fixed and liquidated damage. Wahpeton v. Drake-Henne, Inc., 215 N.W.2d 897, 1973 N.D. LEXIS 92, 1973 N.D. LEXIS 93 (N.D. 1973), cert. denied, 419 U.S. 986, 95 S. Ct. 245, 42 L. Ed. 2d 194, 1974 U.S. LEXIS 3133 (U.S. 1974).

The “default” referred to in subsection (3) of former N.D.C.C. § 40-22-31, listing required provisions in contractors’ bonds, must amount to a complete failure of performance before the entire amount of the bond may be taken as fixed and liquidated damage. Wahpeton v. Drake-Henne, Inc., 215 N.W.2d 897, 1973 N.D. LEXIS 92, 1973 N.D. LEXIS 93 (N.D. 1973), cert. denied, 419 U.S. 986, 95 S. Ct. 245, 42 L. Ed. 2d 194, 1974 U.S. LEXIS 3133 (U.S. 1974).

Liquidated Damages Provision.

Remand was necessary in a contract action where no evidence had been submitted on the issue of damages, and the trial court had not ascertained the validity of the liquidated damages provision of the agreement. Federal Land Bank v. Woell, 415 N.W.2d 500, 1987 N.D. LEXIS 434 (N.D. 1987).

Presumed Damages Clause.

A party who seeks to fit within the exception in N.D.C.C. § 9-08-04 and trigger the presumed damages clause must provide certain foundational facts upon which the trial court may make findings. These foundational facts include: (1) the difficulty of measuring damages at the time of contract formation; (2) a reasonable attempt by the parties to fix damages; and (3) a reasonable relationship between the damages stipulated to and the amount that may be reasonably anticipated under the circumstances. Federal Land Bank v. Woell, 415 N.W.2d 500, 1987 N.D. LEXIS 434 (N.D. 1987).

Collateral References.

Provision in land contract for forfeiture of payments as one for liquidated damages or penalty, 6 A.L.R.2d 1401, 4 A.L.R.4th 993.

Validity, as provision for liquidated damages or penalty, of clause in promissory note or other evidence of indebtedness, for payment, as attorneys’ fees, expenses, or costs of collection, of specified percentage of note, 17 A.L.R.2d 288, 295.

Lessor’s breach of contract to lease or put lessee into possession, provision for liquidated damages or penalty in case of, 88 A.L.R.2d 1024, 1032.

9-08-04. Fixing damages for breach void — Exception.

Every contract by which the amount of damages to be paid, or other compensation to be made, for a breach of an obligation is determined in anticipation thereof is to that extent void, except that the parties may agree therein upon an amount presumed to be the damage sustained by a breach in cases in which it would be impracticable or extremely difficult to fix the actual damage.

Source:

Civ. C. 1877, §§ 956, 957; R.C. 1895, §§ 3923, 3924; R.C. 1899, §§ 3923, 3924; R.C. 1905, §§ 5369, 5370; C.L. 1913, §§ 5925, 5926; R.C. 1943, § 9-0804.

Derivation:

Cal. Civ. C., 1670, 1671.

Notes to Decisions

Attorney’s Fees.

A stipulation in a note for attorney’s fees, should a suit be instituted thereon, is valid. Farmers' Nat'l Bank v. Rasmussen, 46 N.W. 574, 1 Dakota 60, 1875 Dakota LEXIS 5 (Dakota 1875).

A stipulation in a mortgage for attorney’s fees, should a suit be instituted thereon, is valid. Danforth v. Charles, 46 N.W. 576, 1 Dakota 285, 1875 Dakota LEXIS 7 (Dakota 1875).

Automobile Sales Contract.

In making automobile sales contract the distributor and dealer had the right to agree upon liquidated damages where it was obvious that from the nature of the case it would be impracticable or extremely difficult to fix the actual damage caused by a breach thereof. Gile v. Interstate Motor Car Co., 27 N.D. 108, 145 N.W. 732, 1914 N.D. LEXIS 32 (N.D. 1914).

Burden of Proof.

A party seeking to enforce a contract provision which stipulates the amount of damages recoverable upon breach bears the burden of proving that the clause is valid as an exception to the general prohibition of this section. City of Fargo v. Case Dev. Co., 401 N.W.2d 529, 1987 N.D. LEXIS 252 (N.D. 1987); Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

Construction.

The modern trend appears to be to uphold reasonable liquidated damages clauses in other than adhesion contracts; although this section has not been amended to clearly reflect the modern trend, the supreme court nevertheless construes it to be receptive to the interests of those who, in good faith, endeavor to avoid the traditional recourse to the court system by negotiating liquidated damages provisions. Fisher v. Schmeling, 520 N.W.2d 820, 1994 N.D. LEXIS 191 (N.D. 1994).

Contractor’s Bond.

Considering former N.D.C.C. § 40-22-31 and contractor’s bond in light of this section and N.D.C.C. § 9-08-03, the default referred to in subdivision 3 of former N.D.C.C. § 40-22-31 must amount to a complete failure of performance before the entire amount of the bond may be taken as a fixed and liquidated damage. Wahpeton v. Drake-Henne, Inc., 215 N.W.2d 897, 1973 N.D. LEXIS 92, 1973 N.D. LEXIS 93 (N.D. 1973), cert. denied, 419 U.S. 986, 95 S. Ct. 245, 42 L. Ed. 2d 194, 1974 U.S. LEXIS 3133 (U.S. 1974).

The “default” referred to in subsection (3) of former N.D.C.C. § 40-22-31, listing required provisions in contractors’ bond, must amount to a complete failure of performance before the entire amount of the bond may be taken as fixed and liquidated damage. Wahpeton v. Drake-Henne, Inc., 215 N.W.2d 897, 1973 N.D. LEXIS 92, 1973 N.D. LEXIS 93 (N.D. 1973), cert. denied, 419 U.S. 986, 95 S. Ct. 245, 42 L. Ed. 2d 194, 1974 U.S. LEXIS 3133 (U.S. 1974).

Delinquent Mortgage Installment.

An agreement to pay liquidated damages for the failure of a mortgagor to pay out of a certain crop an installment due on a mortgage is void. Hocksprung v. Young, 27 N.D. 322, 146 N.W. 547, 1914 N.D. LEXIS 50 (N.D. 1914).

Findings Required to Establish Valid Liquidated Damages Clause.
—In General.

In order to uphold a liquidated damages contract clause as valid, there must be a finding that the damages stemming from a breach of contract are impractical or extremely difficult to ascertain at the time the contract was entered, there was a reasonable endeavor by the parties to fix their compensation, and the amount stipulated as liquidated damages bears a reasonable relation to the probable damages and is not disproportionate to any damages reasonably anticipated. Eddy v. Lee, 312 N.W.2d 326, 1981 N.D. LEXIS 407 (N.D. 1981).

A party who seeks to fit within the exception in this section and trigger the presumed damages clause must provide certain foundational facts upon which the trial court may make findings. These foundational facts include: (1) the difficulty of measuring damages at the time of contract formation; (2) a reasonable attempt by the parties to fix damages; and (3) a reasonable relationship between the damages stipulated to and the amount that may be reasonably anticipated under the circumstances. Federal Land Bank v. Woell, 415 N.W.2d 500, 1987 N.D. LEXIS 434 (N.D. 1987).

In order to raise the rebuttable presumption in this section that the amount set forth as liquidated damages constitutes the actual loss or damage sustained by breach of the contract, the party wishing to rely upon it must introduce credible evidence: (1) that at the time the contract was made the damages in the event of breach were incapable or very difficult of accurate estimation; (2) that there was a reasonable endeavor by the parties to fix their compensation; and (3) that the amount stipulated bears a reasonable relation to the probable damages and is not disproportionate to any damages reasonably to be anticipated. Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

A contract provision, to be upheld as a valid liquidated damages clause, must not only meet the requirements of this section, but also must fulfill the requirements imposed by case law. Dosland v. Netland, 424 N.W.2d 141, 1988 N.D. LEXIS 131 (N.D. 1988).

The statutory and case law requirements which must be fulfilled in order for a contract provision to be upheld as a valid liquidated-damages clause are that (1) the damages stemming from a breach of contract are impracticable or extremely difficult to ascertain at the time the contract was entered; (2) there was a reasonable endeavor by the parties to fix their compensation; and (3) the amount stipulated bears a reasonable relation to the probable damages and is not disproportionate to any damages reasonably to be anticipated. Hagan v. Havnvik, 421 N.W.2d 56, 1988 N.D. LEXIS 72 (N.D. 1988).

Three foundational facts are critical to the inquiry whether a particular provision is a valid liquidated damages clause or a void penalty: 1) Were the damages upon breach very difficult to estimate at the time the contract was entered?; 2) Was there a reasonable endeavor by the parties to fix compensation?; and 3) Does the amount stipulated bear a reasonable relationship to the damages reasonably to be anticipated upon breach? City of Fargo v. Case Dev. Co., 401 N.W.2d 529, 1987 N.D. LEXIS 252 (N.D. 1987).

Liquidated damage provisions which apply to varying degrees of breach should be upheld if they are reasonable as to the actual breach which has occurred. City of Fargo v. Case Dev. Co., 401 N.W.2d 529, 1987 N.D. LEXIS 252 (N.D. 1987).

Under this section, a liquidated damages provision need not state a sum certain, but may provide for damages to be calculated by the use of an agreed method of computing loss with the aid of extrinsic evidence. Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

—Supporting Evidence.

Where experienced parties had multiple opportunities to examine the contract, including the liquidated damages clause, and did in fact suggest changes which were incorporated into the parties’ final agreement, the evidence supported the trial court’s finding that the liquidated damages clause was the result of a reasonable endeavor by the parties to fix compensation. City of Fargo v. Case Dev. Co., 401 N.W.2d 529, 1987 N.D. LEXIS 252 (N.D. 1987).

There was evidence to support the trial court’s finding that the amount of liquidated damages in an exclusive real estate listing agreement was reasonably related to the probable damages and not disproportionate to any damages reasonably anticipated, where the trial court found the amount of damages stipulated to be $232,780, a sum equal to the sales commissions due under the contract, and there was testimony that the broker would have received $352,000 in management fees had the developer performed the contract. Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

Liquidated damages clause in contract to restore a classic car which penalized contractor $100 for each day he was late in completing work and which authorized car owner to seek to have work finished by a third party and deduct the additional costs from the contract amount was the result of bona fide negotiations for the prompt completion of the car renovation, was not part of an adhesion contract, and was enforceable as written. Circle B Enters. v. Steinke, 1998 ND 164, 584 N.W.2d 97, 1998 N.D. LEXIS 181 (N.D. 1998).

Presumption of Damage Amount.

This section’s provision that “parties may agree therein upon an amount presumed to be the damage sustained by a breach in cases where it would be impracticable or extremely difficult to fix the actual damage” contains only a rebuttable presumption. Eddy v. Lee, 312 N.W.2d 326, 1981 N.D. LEXIS 407 (N.D. 1981).

Public Contracts.

The requirement that potential damages be difficult to ascertain is more liberally construed in cases involving public contracts. City of Fargo v. Case Dev. Co., 401 N.W.2d 529, 1987 N.D. LEXIS 252 (N.D. 1987).

Question of Fact.

Whether a foundational fact necessary to establish validity of liquidated damages exists is a question of fact subject to the clearly erroneous standard of review. Coldwell Banker-First Realty v. Meide & Son, 422 N.W.2d 375, 1988 N.D. LEXIS 78 (N.D. 1988).

In a property management dispute, a partnership and corporations argued that amount of liquidated damages did not bear a reasonable relation to probable damages and was disproportionate to any damages reasonably anticipated; however, the individuals behind the partnership and the corporations had multiple attorneys available to them, and they were experienced and knowledgeable business people; thus, the evidence supported the finding that the liquidated damages clauses were the result of a reasonable endeavor by the parties to fix compensation. Hendricks Prop. Mgmt. Corp. v. Birchwood Props. Ltd. P'ship, 2007 ND 181, 741 N.W.2d 461, 2007 N.D. LEXIS 184 (N.D. 2007).

Real Estate Purchase Agreement.

Where the earnest money clause in a real-estate purchase agreement provided for liquidated damages “without prejudice or other rights and legal remedies”, the earnest money clause was ambiguous and extrinsic evidence was necessary to ascertain the intent of the parties, making summary judgment inappropriate. Dosland v. Netland, 424 N.W.2d 141, 1988 N.D. LEXIS 131 (N.D. 1988).

Remand.

Remand was necessary in a contract action where no evidence had been submitted on the issue of damages, and the trial court had not ascertained the validity of the liquidated damages provision of the agreement. Federal Land Bank v. Woell, 415 N.W.2d 500, 1987 N.D. LEXIS 434 (N.D. 1987).

Restoration of Agreement to Status Quo.

Where no amount of damages for breach of contract is fixed in advance, rather, the provision appears to be a reasonable attempt to restore the agreement to status quo in the event the documents were destroyed, the provision is not void as against public policy. Moen v. Norwest Bank of Minot, 647 F. Supp. 1333, 1986 U.S. Dist. LEXIS 17904 (D.N.D. 1986).

Sale of Business.

Where a contract for the purchase and sale of a business contained several separate covenants of different degrees of importance and provided that a sum certain was to be paid for the breach of any or all of the covenants, the sum named, although denominated liquided damages, was a penalty and void under the provisions of this section. Mevorah v. Goodman, 79 N.D. 443, 57 N.W.2d 600, 1953 N.D. LEXIS 54 (N.D. 1953).

Teacher’s Employment Contract.

Where teacher breached employment contract, liquidated damages clause was upheld since amount of actual damages was extremely difficult to ascertain and amount stipulated bore reasonable relationship to probable damages; fact that same clause was used in all teacher contracts did not establish lack of attempt to fix compensatory damages. Bowbells Pub. Sch. Dist. v. Walker, 231 N.W.2d 173, 1975 N.D. LEXIS 164 (N.D. 1975).

Where teacher breached employment contract, liquidated damages clause was upheld, since amount of actual damages was extremely difficult to ascertain, even though school district found replacement for teacher at lower salary. Bottineau Pub. Sch. Dist. v. Zimmer, 231 N.W.2d 178, 1975 N.D. LEXIS 163 (N.D. 1975).

Use and Occupation of Land.

Parties asserting conflicting claims of ownership to a tract of land did not attempt to provide for a penalty or stipulated damages in agreeing upon the value of the use and occupancy of the premises. Halstead v. Missouri Slope Land & Inv. Co., 48 N.D. 220, 184 N.W. 284, 1921 N.D. LEXIS 26 (N.D. 1921); Halstead v. Missouri Slope Land & Inv. Co., 48 N.D. 1001, 188 N.W. 163, 1922 N.D. LEXIS 131 (N.D. 1922).

Void Clause.

The trial court’s finding that damages could easily be determined on default of payment in a contract for deed was not clearly erroneous; therefore, a liquidated damages clause in the contract was void under the provisions of this section. Hagan v. Havnvik, 421 N.W.2d 56, 1988 N.D. LEXIS 72 (N.D. 1988).

Collateral References.

Landlord’s breach of covenant to repair, damages fixed by contract as measure of damages for, 28 A.L.R.2d 446.

Liquidated damages as recoverable for tenant’s failure to surrender possession of rented premises, 32 A.L.R.2d 582, 611.

Validity and enforceability of provision that employer shall be liable for stipulated damages on breach of employment contract, 40 A.L.R.4th 285.

Liability of contractor who abandons building project before completion for liquidated damages for delay, 15 A.L.R.5th 376.

Law Reviews.

Summary of significant decisions rendered by North Dakota Supreme Court in 1988 relating to contracts damages, 64 N.D. L. Rev. 240 (1988).

Summary of significant decisions rendered by the North Dakota Supreme Court in 1989 relating to damages, 65 N.D. L. Rev. 562 (1989).

9-08-05. Restricting enforcement of rights void.

Every stipulation or condition in a contract by which any party thereto is restricted from enforcing that party’s rights under the contract by the usual legal proceedings in the ordinary tribunals or which limits the time within which that party thus may enforce that party’s rights is void, except as otherwise specifically permitted by the laws of this state.

Source:

Civ. C. 1877, § 958; R.C. 1895, § 3925; R.C. 1899, § 3925; R.C. 1905, § 5371; C.L. 1913, § 5927; R.C. 1943, § 9-0805.

Cross-References.

Personal service contracts, time limit on, see § 34-01-02.

Notes to Decisions

Collective Bargaining.

The exhaustion of administrative remedies under collective bargaining agreement was not a prerequisite to court action by a railroad employee to recover damages for wrongful discharge. Rose v. Great N. R. Co., 151 F. Supp. 806, 1957 U.S. Dist. LEXIS 3634 (D.N.D. 1957), aff'd, 268 F.2d 674, 1959 U.S. App. LEXIS 4774 (8th Cir. N.D. 1959); Sjaastad v. Great N. R. Co., 155 F. Supp. 307, 1957 U.S. Dist. LEXIS 2930 (D.N.D. 1957).

Contracts Executed Without State.

A provision restricting action on a contract executed without the state and delivered within the state to a time less than that provided by the state’s statutes is void. Storing v. National Sur. Co., 56 N.D. 14, 215 N.W. 875, 1927 N.D. LEXIS 67 (N.D. 1927).

Extent of Restrictions.

The language of this statute confines its prohibition of limitation to enforcement of rights, and is especially intended to cut off all limitations of time for commencement of actions. Hartwell v. Northern Pac. Express Co., 41 N.W. 732, 5 Dakota 463, 1889 Dakota LEXIS 5 (Dakota 1889).

Insurance Contracts.

A stipulation in an insurance policy limiting the time within which an action may be brought thereon is void. Johnson v. Dakota Fire & Marine Ins. Co., 1 N.D. 167, 45 N.W. 799, 1890 N.D. LEXIS 21 (N.D. 1890).

A provision limiting the time within which one may enforce his rights under an insurance policy to six months after rejection of his claim is void. Dinnie v. United Commercial Travelers, 41 N.D. 42, 169 N.W. 811, 1918 N.D. LEXIS 133 (N.D. 1918).

Bylaws may not be construed as an agreement by the insured to accept as final the adjustment of the board of directors. Graham v. Alliance Hail Ass'n, 47 N.D. 425, 182 N.W. 463, 1921 N.D. LEXIS 113 (N.D. 1921).

This section has no application to failure of insured to file proof of loss in accordance with provisions of fire insurance policy. Siegel v. Ohio Millers' Mut. Fire Ins. Co., 29 F.2d 988, 1928 U.S. App. LEXIS 2859 (8th Cir. N.D. 1928).

Teacher’s Contract.

The provisions of this section, which declare void any stipulation or condition ousting the jurisdiction of the courts, must be considered in interpreting teacher’s contract of employment, in an action for breach of contract. Seher v. Woodlawn Sch. Dist., 79 N.D. 818, 59 N.W.2d 805, 1953 N.D. LEXIS 78 (N.D. 1953).

Collateral References.

Stipulation relieving bank from, or limiting its liability for disregard of, stop payment order, 1 A.L.R.2d 1155.

Venue: sufficiency of contractual designation of place of performance to fix venue at that place, under statute authorizing or requiring such venue, 97 A.L.R.2d 934.

Hospital: validity and construction of contract exemption hospital or doctor from liability for negligence to patient, 6 A.L.R.3d 704.

Time for suit: validity of contractual time period, shorter than statute of limitations, for bringing action, 6 A.L.R.3d 1197.

Death: validity and effect of agreement that debt or legal obligation contemporaneously or subsequently incurred shall be canceled by death of creditor or obligee, 11 A.L.R.3d 1427.

Validity and construction of “no damage” clause with respect to delay in building or construction contract, 74 A.L.R.3d 187.

9-08-06. In restraint of business void — Exceptions.

A contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void, except:

  1. A person that sells the goodwill of a business and the person’s partners, members, or shareholders may agree with the buyer to refrain from carrying on a similar business within a reasonable geographic area and for a reasonable length of time, if the buyer or any person deriving title to the goodwill from the buyer carries on a like business in that area.
  2. Partners, members, or shareholders, upon or in anticipation of a dissolution of a partnership, limited liability company, or corporation; upon or in anticipation of a dissociation of a partner or member; or as part of an agreement addressing the dissociation or sale of a partner, member, or shareholder’s ownership interest, may agree that all or any number of them will not carry on a similar business within a reasonable geographic area where the partnership, limited liability company, or corporation business has been transacted, or within a specified part of the area.

Source:

Civ. C. 1877, §§ 959 to 961; R.C. 1895, §§ 3926 to 3928; R.C. 1899, §§ 3926 to 3928; R.C. 1905, §§ 5372 to 5374; C.L. 1913, §§ 5928 to 5930; R.C. 1943, § 9-0806; 2019, ch. 87, § 1, effective August 1, 2019.

Derivation:

Cal. Civ. C., 1673 to 1675.

DECISIONS UNDER PRIOR LAW

Construction.

Because of the common derivation of this section and Cal. Bus. & Prof. Code § 16600 from the Field Code, California court decisions construing the provision, while not binding, are entitled to respectful consideration, may be persuasive, and should not be ignored. Werlinger v. Mutual Serv. Casualty Ins. Co., 496 N.W.2d 26, 1993 N.D. LEXIS 29 (N.D. 1993).

Exercise of Lawful Profession.

This section contemplates prohibiting restraints on a person’s exercise of a lawful profession, trade, or business as an employer as well as an employee. Spectrum Emergency Care v. St. Joseph's Hosp. & Health Ctr., 479 N.W.2d 848, 1992 N.D. LEXIS 20 (N.D. 1992).

Future Employment.

This section protects a person’s ability to negotiate and contract for future employment while under a contract which attempts to prohibit such conduct. Spectrum Emergency Care v. St. Joseph's Hosp. & Health Ctr., 479 N.W.2d 848, 1992 N.D. LEXIS 20 (N.D. 1992).

Noncompetition Clause.
—Too Broad in Territorial Application.

Where noncompetition agreement as part of business purchase transaction went beyond the territorial scope permitted by this section, the agreement was not completely void, but its enforceability was limited to the county where the property and business were located and conducted. Hawkins Chem. v. McNea, 321 N.W.2d 918, 1982 N.D. LEXIS 325 (N.D. 1982).

Where a noncompetition agreement purported to restrict competition statewide, this section invalidated the agreement in all but one county; therefore, the seller’s competition in another county did not constitute a breach, and the buyer was not entitled to setoff of liquidated damages against his default of payment. Herman v. Newman Signs, 417 N.W.2d 179, 1987 N.D. LEXIS 450 (N.D. 1987).

Covenant would not be construed as restricting competition through the bidding process alone, by restricting competition for all jobs based upon where the bidding process takes place, but would be construed so competition could not occur in the county where the work was to be physically performed. Earthworks v. Sehn, 553 N.W.2d 490, 1996 N.D. LEXIS 205 (N.D. 1996).

—Valid

A contract for the dissolution of a partnership, in which one party agreed not to engage in the same business in the same city for two years, was based on a sufficient consideration and was valid. Siegel v. Marcus, 18 N.D. 214, 119 N.W. 358, 1909 N.D. LEXIS 1 (N.D. 1909).

Nonsolicitation clause in agreement between insurance agent and insurance company which only obligated agent to refrain for one year from soliciting those current policyholders of company credited to his account at time he left was not an unenforceable restraint of trade. Kovarik v. American Family Ins. Group, 108 F.3d 962, 1997 U.S. App. LEXIS 5790 (8th Cir. N.D. 1997).

—Void.

Provision of contract that dentist, when leaving the service of his employer, another dentist, would not engage in the practice of dentistry in any form in certain communities for a period of two years, was void. Olson v. Swendiman, 62 N.D. 649, 244 N.W. 870, 1932 N.D. LEXIS 229 (N.D. 1932).

Where a Colorado corporation brought an action in the United States district court of North Dakota to enjoin former employees from competing with the plaintiff in contravention of covenants in their employment contracts, North Dakota law was controlling, notwithstanding a provision in the contracts that they should be governed by Colorado law, and therefore, by operation of this section, the covenants not to compete were void. 246 F. Supp. 333, 1965 U.S. Dist. LEXIS 7154.

A noncompetition clause in a contract between an insurance company and an agent, providing that termination compensation would be withheld in the event that the agent contracted with a competitor within a year of service with the insurance company was an unlawful restraint of trade, void under this section (overruling Geiss v. Northern Ins. Agency, 153 N.W.2d 688 (N.D. 1967)).Werlinger v. Mutual Serv. Casualty Ins. Co., 496 N.W.2d 26, 1993 N.D. LEXIS 29 (N.D. 1993).

Financial companies were denied a preliminary injunction on their breach of contract claim against a former financial manager and the new employers’ motion to dissolve a temporary restraining order was granted where the financial companies failed to produce any evidence that the manager or any of the new agents of the new employers had replaced any of the financial companies’ policies or accounts, there was no clear evidence that the manager had improperly solicited the financial companies’ agents to work for the new employers or that the manager had urged any former clients to discontinue use of the financial companies’ insurance business, and the restrictive covenants were overbroad and portions were void as restraints of trade under this section. Pruco Secs. Corp. v. Montgomery, 264 F. Supp. 2d 862, 2003 U.S. Dist. LEXIS 9251 (D.N.D. 2003).

Noncompete agreement was unenforceable under N.D.C.C. § 9-08-06 to the extent it limited the former sales representative from exercising a lawful profession, trade, or business in North Dakota. Osborne v. Brown & Saenger, Inc., 2017 ND 288, 904 N.W.2d 34, 2017 N.D. LEXIS 290 (N.D. 2017).

Profession, Trade, or Business.

Under this section every contract restraining the exercise of a lawful profession, trade, or business is void unless it comes under one of the exceptions. Olson v. Swendiman, 62 N.D. 649, 244 N.W. 870, 1932 N.D. LEXIS 229 (N.D. 1932).

Purpose.

The intention of this section is to promote commercial activity by restricting the ability of individuals to form agreements which limit commercial exchange, or more specifically, limit agreements not to compete. Herman v. Newman Signs, 417 N.W.2d 179, 1987 N.D. LEXIS 450 (N.D. 1987).

Construing this section using the plural, i.e., “specified counties,” nullifies the intent of this section to confine covenants not to complete to a limited area, and falls within the exception of N.D.C.C. § 1-01-35, which states that words used in the singular in the Century Code include the plural “except when a contrary intention plainly appears.” Herman v. Newman Signs, 417 N.W.2d 179, 1987 N.D. LEXIS 450 (N.D. 1987).

Sale of Business.
—In General.

An agreement to refrain from doing business without the sale of the good will of such business is void. Mapes v. Metcalf, 10 N.D. 601, 88 N.W. 713, 1901 N.D. LEXIS 80 (N.D. 1901).

One selling his business can agree with the buyer to refrain only from carrying on a similar business within a specified county or city. Strobeck v. McWilliams, 42 N.D. 30, 171 N.W. 865, 1919 N.D. LEXIS 115 (N.D. 1919).

If it does not appear that the good will of a business is sold as a part of the transaction, an oral agreement to refrain from engaging in such business is in restraint of trade and is void. Brottman v. Schela, 52 N.D. 137, 202 N.W. 132, 1924 N.D. LEXIS 122 (N.D. 1924).

The language employed in this section cannot be construed to permit a seller to bind himself to refrain from engaging in such business in a larger area than one county or one city, or a part of either county or city. Mandan-Bismarck Livestock Auction v. Kist, 84 N.W.2d 297, 1957 N.D. LEXIS 130 (N.D. 1957).

If the seller of the good will of a business promises not to engage in a similar business in more than one county or city, that is, in a larger area than is permitted by this section, the promise is unenforceable only in the area in excess of the permissible area of restraint. Igoe v. Atlas Ready-Mix, 134 N.W.2d 511, 1965 N.D. LEXIS 142 (N.D. 1965).

—Competition.

A sale of a business does not imply an agreement, on the part of the vendor, not to enter into competition with the vendee. Hayashi v. Ihringer, 79 N.D. 625, 58 N.W.2d 788, 1953 N.D. LEXIS 68 (N.D. 1953).

The clear import of this section is that a sale of good will does not imply a contract not to compete, but that such a contract may be expressly agreed to in cases where good will is sold. Hayashi v. Ihringer, 79 N.D. 625, 58 N.W.2d 788, 1953 N.D. LEXIS 68 (N.D. 1953).

Where a party sells a business, including good will, it is competent for the seller only to agree not to conduct a similar business within a specified county or city or a part of either. Mandan-Bismarck Livestock Auction v. Kist, 84 N.W.2d 297, 1957 N.D. LEXIS 130 (N.D. 1957).

The provision in a contract that seller agreed not to engage in the livestock business in two counties was void and in violation of this section. Mandan-Bismarck Livestock Auction v. Kist, 84 N.W.2d 297, 1957 N.D. LEXIS 130 (N.D. 1957).

Terms that completely described the type of business restriction, the duration of the restriction, and the geographic limitation of the restriction, left no doubt there were no other essential non-competition terms left for agreement between the parties, and objectively evidenced the parties’ mutual intent to create an enforceable non-competition agreement. Lire, Inc. v. Bob's Pizza Inn Restaurants, 541 N.W.2d 432, 1995 N.D. LEXIS 236 (N.D. 1995).

When a party sells a business, and as part of the sale, agrees not to engage in the same or similar business in the same area for a particular and reasonable length of time, good will, although not specifically mentioned, is a subject of the sale and passes as an incident of the transfer. Earthworks v. Sehn, 553 N.W.2d 490, 1996 N.D. LEXIS 205 (N.D. 1996).

Stockholder Selling Stock.

A stockholder’s sale of all his stock in a corporation with an agreement not to engage in a competing business may involve the sale of the good will. Bessel v. Bethke, 56 N.D. 1, 215 N.W. 868, 1927 N.D. LEXIS 64 (N.D. 1927).

Collateral References.

Enforceability of covenant against competition, ancillary to sale or other transfer of business, practice or property, as affected by generation of restriction, 45 A.L.R.2d 77, 13 A.L.R.4th 661.

Enforceability of covenant against competition, ancillary to sale or other transfer of business, practice or property, as affected by territorial extent of restriction, 46 A.L.R.2d 119, 13 A.L.R.4th 661.

Conflict of laws as to validity, enforceability, and effect of ancillary restrictive covenant not to compete, in contract of employment or for sale of business, 70 A.L.R.2d 1292.

Illegal acts or practices, right to enjoin business competitor from, 90 A.L.R.2d 7.

Validity, construction, and effect of lessor’s covenant against use of his other property in competition with the lessee-covenantee, 97 A.L.R.2d 4, 119.

Infant: enforceability of covenant not to compete in infant’s employment contract, 17 A.L.R.3d 863.

Retirement plan: validity, construction, and effect of provision forfeiting or suspending benefits in event of competitive employment as part of retirement or pension plan, 18 A.L.R.3d 1246.

Land: covenant restricting use of land, made for purpose of guarding against competition, as running with land, 25 A.L.R.3d 897.

Covenant not to compete: sufficiency of consideration for employee’s covenant not to compete, entered into after inception of employment, 51 A.L.R.3d 825.

Validity and construction of contractual restrictions on right of medical practitioner to practice, incident to sale of practice, 62 A.L.R.3d 918.

Validity and construction of contractual restrictions on right of medical practitioner to practice, incident to partnership agreement, 62 A.L.R.3d 970.

Validity and construction of contractual restrictions on right of medical practitioner to practice, incident to employment agreement, 62 A.L.R.3d 1014.

Enforceability of covenant not to complete involving radio or television personality, 36 A.L.R.4th 1139.

Provisions of insurance company’s contract with independent insurance agent restricting competitive placements by agent as illegal restraint of trade under state law, 42 A.L.R.4th 1072.

Covenants to reimburse former employer for lost business, 52 A.L.R.4th 139.

Enforceability of sale-of-business agreement not to compete against nonsigner or nonowning signer, 60 A.L.R.4th 294.

Anticompetitive covenants: aerial spray dust business, 60 A.L.R.4th 965.

Enforceability, by purchaser or successor of business, of covenant not to compete entered into by predecessor and its employees, 12 A.L.R.5th 847.

Illegality as basis for denying remedy of specific performance for breach of contract, 58 A.L.R.5th 387.

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

Good Will, 4 Dak. L. Rev. 15 (1932).

North Dakota Supreme Court Review, 78 N.D. L. Rev. 579 (2002).

Oil and Gas Law: When It Comes to Restrictive Employment Covenants, Whose Idea of “Reasonable” Is Correct, the Oil Company’s or the Landman’s?, 81 N.D. L. Rev. 555 (2005).

9-08-07. In restraint of marriage void.

Every contract in restraint of the marriage of any person, other than a minor, is void.

Source:

Civ. C. 1877, § 962; R.C. 1895, § 3929; R.C. 1899, § 3929; R.C. 1905, § 5375; C.L. 1913, § 5931; R.C. 1943, § 9-0807.

Derivation:

Cal. Civ. C., 1676.

Cross-References.

Contracts to alter marital relations, see § 14-07-07.

9-08-08. Settlement of damages for personal injuries voidable.

Every settlement or adjustment of any claim for relief for damages on account of any personal injuries received, whether death ensues or not to the person injured, and every contract of retainer or employment to prosecute such an action, is voidable if made within thirty days after the injury or if made while the person so injured is under disability from the effect of the injury so received and within six months after the date of the injury.

Source:

S.L. 1917, ch. 179, § 1; 1925 Supp., § 5941a1; R.C. 1943, § 9-0808; S.L. 1985, ch. 82, § 10.

Notes to Decisions

Constitutionality.

The act relating to the settlement of a cause of action for personal injuries does not deny liberty of contract. Peterson v. Panovitz, 62 N.D. 328, 243 N.W. 798, 1932 N.D. LEXIS 183 (N.D. 1932).

Additional Remedy.

This section does not operate as a statute of limitations for N.D.C.C. § 9-09-04 but rather provides an additional remedy; therefore, an action brought under N.D.C.C. § 9-09-04 is subject only to statute of limitations contained in N.D.C.C. § 28-01-16. Mitzel v. Schatz, 175 N.W.2d 659, 1970 N.D. LEXIS 84 (N.D. 1970).

Burden of Proof.

An injured person must show by a fair preponderance of the evidence that the facts bring him within the statute making a settlement for personal injuries voidable under specified circumstances. Knowlen v. Lahr Motor Sales Co., 59 N.D. 404, 230 N.W. 213, 1930 N.D. LEXIS 156 (N.D. 1930).

Release of Claim.

A release of a claim for damages for personal injuries, within thirty days after the injury, is voidable. Karas v. McAdoo, 46 N.D. 344, 179 N.W. 710, 1920 N.D. LEXIS 35 (N.D. 1920).

Validity of Release.

In a tort action surrounding the derailment of a freight train and the subsequent release of anyhdrous ammonia gases into the air, there was no question that a named plaintiff who had successfully had a release of liability form he signed overturned because it was signed within the statutory “cooling off” period set forth in N.D.C.C. § 9-08-08 could serve as an adequate representative of those potential class members who signed releases in that period, but proposed class members who signed releases outside the “cooling-off period ,” had purportedly already obtained the relief the named plaintiffs sought; the validity of the releases signed after the “cooling-off period” was not an essential part of the named plaintiff’s claims. As such, the named plaintiffs were not adequate representatives of the proposed class members who entered into releases with CPR after the “cooling-off period.” Mehl v. Canadian Pac. Ry., 227 F.R.D. 505, 2005 U.S. Dist. LEXIS 8172 (D.N.D. 2005), dismissed, 417 F. Supp. 2d 1104, 2006 U.S. Dist. LEXIS 10017 (D.N.D. 2006).

Collateral References.

Validity, construction, and effect of agreement exempting operator of amusement facility from liability for personal injury or death of patron, 54 A.L.R.5th 513.

Law Reviews.

Extension of Scope of Rescission of Contracts of Settlement, 25 Bar Briefs, State Bar Ass’n of N.D. 250 (1949).

9-08-09. Rescission of contract for damages for personal injuries.

Any person sustaining personal injuries, or in case of the person’s death, the person’s personal representative, may elect at any time within six months after the date of such injury to avoid any settlement, adjustment, or contract made in connection therewith within the time mentioned in section 9-08-08, by a notice in writing to that effect. The bringing of an action to recover damages for such injuries avoids any such settlement or adjustment. Whenever an action is commenced within the period of time herein limited to recover such damages, the amount received by the injured person, or the injured person’s representative, in case of the injured person’s death, in any such settlement or adjustment is not a bar to the prosecution of the action but may be set up as an offset or counterclaim to the amount of damages recoverable, if any, or applied toward payment of any judgment recovered in any such action if such amount so received by the injured person or the injured person’s representative has not been pleaded specifically as an offset or counterclaim.

Source:

S.L. 1917, ch. 179, § 2; 1925 Supp., § 5941a2; R.C. 1943, § 9-0809.

Notes to Decisions

Constitutionality.

The act relating to the settlement of a cause of action for personal injuries does not deny liberty of contract. Peterson v. Panovitz, 62 N.D. 328, 243 N.W. 798, 1932 N.D. LEXIS 183 (N.D. 1932).

Additional Remedy.

This section does not operate as statute of limitations for N.D.C.C. § 9-09-04 but rather provides an additional remedy; therefore, an action brought under N.D.C.C. § 9-09-04 is subject only to statute of limitations contained in N.D.C.C. § 28-01-16. Mitzel v. Schatz, 175 N.W.2d 659, 1970 N.D. LEXIS 84 (N.D. 1970).

Release for Property Damages and Personal Injuries.

In action for personal injuries, trial court properly concluded that release executed for both property damage and personal injuries could be divided and part relating to personal injuries rescinded due to mistake of fact going to extent of plaintiff’s injuries and even though release purported to cover known and unknown injuries. Mitzel v. Schatz, 175 N.W.2d 659, 1970 N.D. LEXIS 84 (N.D. 1970); Wock v. Kuhn, 221 N.W.2d 65, 1974 N.D. LEXIS 192 (N.D. 1974).

CHAPTER 9-09 Extinction, Rescission, Alteration, and Cancellation

9-09-01. Extinction of contracts.

A contract may be extinguished in like manner with any other obligation and also by rescission, alteration, or cancellation to the extent and in the manner provided by this title.

Source:

Civ. C. 1877, §§ 963, 964; R.C. 1895, §§ 3930, 3931; R.C. 1899, §§ 3930, 3931; R.C. 1905, §§ 5376, 5377; C.L. 1913, §§ 5932, 5933; R.C. 1943, § 9-0901.

Derivation:

Cal. Civ. C. 1682, 1688.

Notes to Decisions

Abandonment.

A written contract for the sale of real estate may be annulled by parol or abandoned by the parties thereto. Haugen v. Skjervheim, 13 N.D. 616, 102 N.W. 311, 1905 N.D. LEXIS 3 (N.D. 1905).

Compliance with Statute.

To rescind the written contract, a party must satisfy the statutory requirements for rescission found beginning in this section through N.D.C.C. § 9-09-04. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Effect of Rescission.

Rescission is the unmaking of a contract. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

Fraud.

A purchaser induced to enter into a contract for the exchange of real estate by fraud, on discovery, may rescind the contract. Raasch v. Goulet, 57 N.D. 674, 223 N.W. 808 (1929), overruled on other grounds, Ziebarth v. Kalenze, 238 N.W.2d 261 (N.D. 1976)

Governed by Equitable Principles.

Rescission of a contract, whether the object of a suit in equity or an action at law, is governed by equitable principles. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

Noncompliance.
—Effect on Rescission.

Noncompliance with N.D.C.C. §§ 9-09-01 to 9-09-04 by purchaser under executory contract for sale of realty waives any right to rescission; purchaser rescinding contract for deed must offer to account for rents collected or to pay for reasonable value of use and occupation of premises. Mader v. Hintz, 186 N.W.2d 897, 1971 N.D. LEXIS 190 (N.D. 1971).

Rescission Action and Equity Action.

A rescission action at law is essentially an action for restitution based upon a party’s prior unilateral rescission, whereas an action in equity seeks to have the court terminate the contract and order restoration. Omlid v. Sweeney, 484 N.W.2d 486, 1992 N.D. LEXIS 94 (N.D. 1992).

Waiver of Rights.

The mutual rights and obligations of the parties to a written contract for the purchase and sale of real estate may be waived and the contract annulled and extinguished by parol. Mahon v. Leech, 11 N.D. 181, 90 N.W. 807, 1902 N.D. LEXIS 198 (N.D. 1902).

A party to a written contract for the sale of land may waive his rights thereunder by parol and may annul, abandon, and extinguish the same by parol. Wadge v. Kittleson, 12 N.D. 452, 97 N.W. 856, 1903 N.D. LEXIS 60 (N.D. 1903).

9-09-02. Rescission — When permitted.

A party to a contract may rescind the same in the following cases only:

  1. If the consent of the party rescinding or of any party jointly contracting with the party rescinding was given by mistake or obtained through duress, menace, fraud, or undue influence exercised by or with the connivance of the party as to whom the party rescinding rescinds or of any other party to the contract jointly interested with such party;
  2. If through the fault of the party as to whom the party rescinding rescinds the consideration for the rescinding party’s obligation fails in whole or in part;
  3. If such consideration becomes entirely void from any cause;
  4. If such consideration before it is rendered to the party rescinding fails in a material respect from any cause; or
  5. By consent of all of the other parties.

Source:

Civ. C. 1877, § 965; R.C. 1895, § 3932; R.C. 1899, § 3932; R.C. 1905, § 5378; C.L. 1913, § 5934; R.C. 1943, § 9-0902.

Derivation:

Cal. Civ. C., 1689.

Cross-References.

Compensatory relief by revision, rescission, and cancellation, see §§ 32-04-17 to 32-04-25.

Rescission by incapacitated person, see § 14-01-02.

When lessee may terminate lease, see § 47-16-17.

Notes to Decisions

Breach of Warranty.

A vendee who rescinds for breach of warranty may sue for the amount of the unpaid negotiable note given for the purchase price. Canham v. Plano Mfg. Co., 3 N.D. 229, 55 N.W. 583, 1893 N.D. LEXIS 17 (N.D. 1893).

An offer to rescind a contract for sale for breach of warranty, coupled with conditions as to the payment of freight and storage and the return of only a portion of the property purchased, is not an unconditional offer to rescind. Poirier Mfg. Co. v. Kitts, 18 N.D. 556, 120 N.W. 558, 1909 N.D. LEXIS 18 (N.D. 1909).

Building Contract.

Where a party refuses to perform a contract for the erection of a building before the other party enters upon the performance thereof, the latter party cannot perform the contract and thereupon recover the contract price, his remedy being suit for damages for breach of contract. Davis v. Bronson, 2 N.D. 300, 50 N.W. 836, 1891 N.D. LEXIS 54 (N.D. 1891).

Cancellation of Deed.

Landowners could not obtain reconveyance of interest in minerals granted by a mineral deed where they were not entitled to rescind or cancel the deed. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

The right to have canceled by the federal courts a deed conveying land in North Dakota is governed by this section and N.D.C.C. § 9-03-13, as construed by the supreme court of this state. Bailes v. Advance-Rumley Thresher Co., 263 F. 676, 1920 U.S. App. LEXIS 2081 (8th Cir. N.D. 1920).

Compliance with Statute.

To rescind a written contract, a party must satisfy the statutory requirements for rescission found in N.D.C.C. §§ 9-09-01 through 9-09-04. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Compromise.

A compromise procured by fraud may be rescinded by the defrauded party. Swan v. Great N. Ry., 40 N.D. 258, 168 N.W. 657, 1918 N.D. LEXIS 78 (N.D. 1918).

Contractual Stipulation.

Contractual stipulation affecting subject matter of lawsuit was subject to being set aside for failure of consideration because of adversary’s failure to comply with conditions of stipulation. Lawrence v. Lawrence, 217 N.W.2d 792, 1974 N.D. LEXIS 226 (N.D. 1974).

Damages for Deceit.

A rescinding party is not allowed to claim or recover damages for any deceit that may have been involved in the transaction, and he therefore cannot maintain his act to recover the consideration paid by him as one for damages in fraud. Woodhull v. Minot Clinic, 259 F.2d 676, 1958 U.S. App. LEXIS 4771 (8th Cir. N.D. 1958).

Divorce Settlements.

When considering whether a settlement agreement between divorcing parties should be enforced, district courts should make two findings: (1) whether the agreement is free from mistake, duress, menace, fraud or undue influence and (2) whether the agreement is unconscionable. Weber v. Weber, 1999 ND 11, 589 N.W.2d 358, 1999 N.D. LEXIS 5 (N.D. 1999).

District court did not err in finding that a settlement agreement was not unconscionable because, inter alia, the agreement was a fair and reasonable disposition of the property of the parties, there was no evidence that the husband had entered the agreement by mistake, or that his signature was obtained by fraud, duress, menace, or undue influence, and, although the parties’ agreement mentioned reconciliation, the plain language of the agreement contemplated it would govern if the parties decided to pursue a divorce. Kramer v. Kramer, 2006 ND 64, 711 N.W.2d 164, 2006 N.D. LEXIS 61 (N.D. 2006).

District court did not err in finding that a settlement agreement was not unconscionable merely because the husband was not represented by counsel when he signed the written agreement dividing their marital property; this was not, by itself, sufficient justification for relief from a judgment. Furthermore, there was some evidence that the husband had contacted an attorney about the agreement and was pleased that the wife’s attorney could prepare the agreement for half of what the other attorney had quoted. Kramer v. Kramer, 2006 ND 64, 711 N.W.2d 164, 2006 N.D. LEXIS 61 (N.D. 2006).

Under N.D.C.C. § 14-05-24, the property settlement agreement in a divorce case could not be considered unconscionable under N.D.C.C. § 9-09-02(1) either when adopted by the trial court or when the ex-wife’s remainder interest and the new appraised property values were considered in the property distribution because (1) the parties were represented by counsel throughout those proceedings, and negotiations over the settlement agreement spanned 18 months, (2) the wife presented evidence that the value of one-half of her remainder interest in the property under Internal Revenue Service rules, using property tax values the ex-husband originally used in the settlement agreement, would be $ 43,290, and (3) even if the full fee simple value of $ 250,000 were added and the husband earned six percent interest on his financial accounts from the time the values of those accounts were listed in the settlement agreement, she would have received 54% and he would have received 46% of the marital property, which was not inequitable; thus, the trial court did not err in denying the husband’s motion for a new trial. Christian v. Christian, 2007 ND 196, 742 N.W.2d 819, 2007 N.D. LEXIS 194 (N.D. 2007).

Equitable Principles Applicable.

Rescission of a contract, whether the object of a suit in equity or an action at law, is governed by equitable principles. Heinsohn v. William Clairmont, Inc., 364 N.W.2d 511, 1985 N.D. LEXIS 268 (N.D. 1985).

Exchange of Real Estate.

A purchaser induced to enter into a contract for the exchange of real estate by fraud, on discovery, may rescind the contract. Raasch v. Goulet, 57 N.D. 674, 223 N.W. 808 (1929), overruled on other grounds, Ziebarth v. Kalenze, 238 N.W.2d 261 (N.D. 1976)

Exercise of Statutory Power.

In an action for separation from bed and board where the court found that the agreement of separation was a “forced agreement” obtained “without permitting her the benefit of counsel” and that the plaintiff had “repudiated” it, it was a finding that the agreement had been rescinded pursuant to the statutes. Bourrett v. Bourrett, 99 N.W.2d 325, 1959 N.D. LEXIS 116 (N.D. 1959).

Exercise of the statutory rescinding power in an applicable situation abrogates and undoes the contract from the beginning, so that the transaction is thereby caused to be left without remaining form or subtance. And it is not open to a party to escape that obliterating consequence, for when he once elects, he must abide by his decision. Woodhull v. Minot Clinic, 259 F.2d 676, 1958 U.S. App. LEXIS 4771 (8th Cir. N.D. 1958).

Because the remedy of rescission is not held in high esteem by the courts, the power of a court to rescind an executed conveyance should never be lightly exercised. Heinsohn v. William Clairmont, Inc., 364 N.W.2d 511, 1985 N.D. LEXIS 268 (N.D. 1985).

Failure of Consideration.

The total failure of consideration on the part of one contracting party entitles the other to a rescission. Block v. Donovan, 13 N.D. 1, 99 N.W. 72, 1903 N.D. LEXIS 74 (N.D. 1903), aff'd, 13 N.D. 1, 99 N.W. 72, 1904 N.D. LEXIS 20 (N.D. 1904).

The failure of consideration in any material respect from any cause gives a buyer of goods the right to rescind the contract. State Bank of Lehr v. Sukut, 50 N.D. 397, 196 N.W. 100 (1923).

A vendee may rescind an executory land contract for failure of consideration, if the vendor refuses to convey after the vendee’s performance or offer to perform. Skinner v. Scholes, 59 N.D. 181, 229 N.W. 114, 1930 N.D. LEXIS 132 (N.D. 1930).

A breach of contract amounting to a failure of consideration must be a substantial breach in order to warrant rescission of the contract. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

There must be a substantial breach of contract before there can be a basis for rescission in equity. Robertson Cos. v. Kenner, 311 N.W.2d 194, 1981 N.D. LEXIS 391 (N.D. 1981).

Fraud or Mistake.

A legal right of action to recover moneys paid under mistake arises out of the obligation imposed by law, and not out of contract. Chrysler Light & Power Co. v. Belfield, 58 N.D. 33, 224 N.W. 871, 1929 N.D. LEXIS 178 (N.D. 1929).

A stockholder surrendering a portion of his stock in reliance on an officer’s agreement to do likewise, is not entitled to rescind as against the corporation for the fraud of the officer. SHORES v. DAKOTA-MONTANA OIL CO., 61 N.D. 71, 237 N.W. 172, 1931 N.D. LEXIS 246 (N.D. 1931).

A party to a contract may rescind the same if consent thereto was given by mistake or obtained through duress, menace, fraud, or undue influence exercised by or with the connivance of the party as to whom he rescinds. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

The specific relief of rescission of a written contract may be adjudged if the consent of the party rescinding was obtained through fraud. Lanz v. Naddy, 82 N.W.2d 809, 1957 N.D. LEXIS 119 (N.D. 1957).

A mistake is not ground for rescission unless it is a mistake of the kind delineated in N.D.C.C. §§ 9-03-13 and 9-03-14. Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Where plaintiff signed release mistakenly believing that he was releasing only his claim for damage to his car and was unaware of his possible claim for loss of consortium, plaintiff’s misunderstanding was not a mistake of fact or law as defined by statute and consequently mistake was not a ground for rescission under subdivision 1. Lange v. Cusey, 379 N.W.2d 775, 1985 N.D. LEXIS 452 (N.D. 1985).

Grounds for Rescission.

This section sets forth the only cases in which a party may rescind a contract. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

Where plaintiff borrower moved into her home and discovered that the septic system was inadequate, plaintiff’s attempts to rescind the financing contract with the bank and the North Dakota Housing Finance Agency were inappropriate as the appropriate remedy was against the home’s seller; the purchase of the home and the financing of that purchase were separate and distinct transactions. Furthermore, any alleged mutual mistake as to the condition of the property purchased with the proceeds of the promissory note did not go to the essence of the parties’ agreement, but was merely collateral to the loan transaction; plaintiff borrowed the money she sought on the terms to which she agreed, and received exactly what she contracted for with the Bank and NDHFA. Indus. Comm'n v. Noack, 2006 ND 195, 721 N.W.2d 698, 2006 N.D. LEXIS 197 (N.D. 2006).

Mental Incapacity.

This section does not include mental incapacity as a ground for rescission. Volk v. Volk, 121 N.W.2d 701 (N.D. 1963), decided prior to the enactment of the Uniform Probate Code.

Mistake of Law.

Vendor was not entitled to rescind land sale contract with mineral reservation on the basis of lack of free and informed consent due to a mistake of law concerning the procedure to reserve the minerals where the mistake of law did not affect the substance of the vendor’s consent to the contract, but simply frustrated his attempt to reserve all minerals. Hovden v. Lind, 301 N.W.2d 374, 1981 N.D. LEXIS 262 (N.D. 1981).

Offer to Restore Status Quo.

To be effective, the offer to restore the status quo should include an offer to remit any rent collected or the reasonable value of using the premises during the period of occupancy and cannot be conditioned upon payment of damages. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Reasonable Diligence Required.

Rescission is proper only if the party seeking rescission uses reasonable diligence to rescind promptly upon discovery of the fraud and to restore to the other party anything of value which was received under the contract. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Release of Liability.

Although N.D.C.C. § 9-08-09 sets a limitation of six months for the avoidance of an insurance settlement agreement, avoidance may be subsequently accomplished under the general rescission statute. Wock v. Kuhn, 221 N.W.2d 65, 1974 N.D. LEXIS 192 (N.D. 1974).

Remedies.

A person who has been induced to enter into a contract by fraud may rescind the contract or, that person may affirm the contract, retain its benefits and obtain damages for injuries from the fraud. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Rescission Action at Law.

A rescission action at law is essentially an action for restitution based upon a party’s prior unilateral rescission, whereas an action in equity seeks to have the court terminate the contract and order restoration. Omlid v. Sweeney, 484 N.W.2d 486, 1992 N.D. LEXIS 94 (N.D. 1992).

Rescission Not Permitted.

Finding against the husband was appropriate under N.D.C.C. §§ 14-05-24(1) and 9-09-02(1) because the husband was competent and understood the settlement agreement when he signed it; he also failed to show that the agreement was unconscionable. The wife testified that the husband had not consumed any alcohol for three days and he was coherent and not impaired when he signed the agreement. Vann v. Vann, 2009 ND 118, 767 N.W.2d 855, 2009 N.D. LEXIS 136 (N.D. 2009).

Consideration for mineral rights did not fail or become void pursuant to N.D.C.C. § 9-09-02(2) and (3) merely because the mineral rights owner refused to cash a check tendered as payment in performance of a mineral deed; thus, the mineral rights owner was not entitled to rescission of the contract. Motschman v. Bridgepoint Mineral Acquisition Fund, LLC, 2011 ND 46, 795 N.W.2d 327, 2011 N.D. LEXIS 46 (N.D. 2011).

Restoration of Status Quo.

Restoration of the status quo as a requirement for rescission is based upon the essentially equitable nature of rescission. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Sale of Land.

Under a written executory contract for the sale of land the vendee derives in law no interest in the land or in the title and in a proper case may rescind the contract without reconveyance. Miller v. Shelburn, 15 N.D. 182, 107 N.W. 51, 1906 N.D. LEXIS 26 (N.D. 1906).

Sale of Machinery.

A purchaser of machinery who fails to rescind within time nevertheless may recover from the seller damages sustained by breach of contract. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931).

Timeliness.

One seeking to rescind on the ground that the contract was induced by fraudulent representations must rescind promptly upon discovery of the fact warranting rescission. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931).

Brothers were not entitled to set aside and have declared null and void a certain deed to eight, instead of four, mineral acres, executed by them and given to attorney as a contingent fee for legal service in getting wells drilled on their property, discovered two days after deed was signed, where they waited twenty months before they commenced action. Knoshaug v. Pollman, 245 F.2d 271, 1957 U.S. App. LEXIS 4833 (8th Cir. N.D. 1957).

Timeliness of rescission is a question of fact to be concluded from the circumstances of each particular case. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Timeliness of rescission is not necessarily to be determined by the amount of time lapsed before the attempted rescission, the important considerations being whether or not the period has been long enough to prejudice the other party. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Unilateral Mistake.

A unilateral mistake may entitle a party affected thereby to rescind the contract. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

Equitable relief by way of rescission will be given from a unilateral mistake relating to a material feature of a contract of such grave consequence that the contract would be unconscionable. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

Validity of Mortgage.

Where at the time the parties executed May, 1987 settlement agreement, promissory note, and warranty deed, they erroneously believed that April, 1984 collateral real estate mortgage was valid and enforceable, the parties’ mutual mistake as to the status of the collateral real estate mortgage was clearly material to the formation of the agreement. Viewed either as a mutual mistake of fact under N.D.C.C. § 9-03-13(2) or of law under N.D.C.C. § 9-03-14(1), the parties’ erroneous belief as to the validity of the collateral real estate mortgage warranted rescission of the May, 1987 settlement agreement, note, and deed as a matter of law. Gust v. Peoples & Enderlin State Bank, 447 N.W.2d 914, 1989 N.D. LEXIS 209 (N.D. 1989).

Waiver.

A party failing to promptly exercise the right of rescission upon discovery of the facts necessary for rescission waives that right. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Collateral References.

Contracting party’s right of redress or fraud as affected by his own breach of contract before discovering the fraud, 13 A.L.R.2d 1248.

False representations as to income, profits, or productivity of property as fraud, 27 A.L.R.2d 14.

What constitutes reservation of right to rescind contract, as against third-party beneficiary, 44 A.L.R.2d 1270.

Conflict of laws in determining whether facts and circumstances operate to terminate, breach, rescind, or repudiate a contract, 50 A.L.R.2d 254.

Executors: asserted right to rescission or cancellation of contract with decedent as claim which must be presented to his personal representative, 73 A.L.R.2d 883.

Necessity of real-estate purchaser’s election between remedy of rescission and remedy of damages for fraud, 40 A.L.R.4th 627.

Law Reviews.

Product Defectiveness and Duty of Disclosure: Comment on Holcomb v. Zinke, 365 N.W.3d 507, 62 N.D. L. Rev. 83 (1986).

9-09-03. Rescission permitted notwithstanding provisions against.

A stipulation that errors of description shall not avoid a contract or shall be the subject of compensation, or both, does not take away the right of rescission for fraud, nor for mistake when such mistake is in a matter essential to the inducement of the contract and is not capable of exact and entire compensation.

Source:

Civ. C. 1877, § 966; R.C. 1895, § 3933; R.C. 1899, § 3933; R.C. 1905, § 5379; C.L. 1913, § 5935; R.C. 1943, § 9-0903.

Derivation:

Cal. Civ. C., 1690.

Notes to Decisions

Basis for Rescission Action at Law.

A rescission action at law is essentially an action for restitution based upon a party’s prior unilateral rescission, whereas an action in equity seeks to have the court terminate the contract and order restoration. Omlid v. Sweeney, 484 N.W.2d 486, 1992 N.D. LEXIS 94 (N.D. 1992).

Compliance with Statute.

To rescind a written contract, a party must satisfy the statutory requirements for rescission found in N.D.C.C. §§ 9-09-01 through 9-09-04. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Time for Rescission.

A purchaser of machinery who fails to rescind within time nevertheless may recover from the seller damages sustained by breach of contract. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931).

One seeking to rescind on the ground that the contract was induced by fraudulent representations must rescind promptly upon discovery of the fact warranting rescission. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931).

Collateral References.

Necessity of real-estate purchaser’s election between remedy of rescission and remedy of damages for fraud, 40 A.L.R.4th 627.

9-09-04. Rules governing rescission.

Rescission, when not effected by consent or pursuant to sections 9-08-08 and 9-08-09, can be accomplished only by the use, on the part of the party rescinding, of reasonable diligence to comply with the following rules:

  1. The party rescinding shall rescind promptly upon discovering the facts which entitle that party to rescind, if that party is free from duress, menace, undue influence, or disability and is aware of that party’s right to rescind; and
  2. The party rescinding shall restore to the other party everything of value which the party rescinding has received from the other party under the contract or must offer to restore the same upon condition that such party shall do likewise, unless the latter is unable or positively refuses to do so.

Source:

Civ. C. 1877, § 967; R.C. 1895, § 3934; R.C. 1899, § 3934; R.C. 1905, § 5380; C.L. 1913, § 5936; R.C. 1943, § 9-0904.

Derivation:

Cal. Civ. C., 1691.

Notes to Decisions

Accrual of Action.

Under N.D.C.C. § 28-01-16, an action for rescission based on failure of consideration accrues when the facts which constitute the failure of consideration have been, or in the exercise of reasonable diligence should have been, discovered by the party applying for relief. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Principles relating to whether a plaintiff has waived rights of rescission also apply when determining when cause of action for rescission has accrued: action for rescission accrues when plaintiff has notice of facts and circumstances which would put a person of ordinary prudence and intelligence on inquiry. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Assignment of Right.

Plaintiff who failed to point to any evidence supporting either an oral or written assignment of the right to sue for rescission could not sue for rescission. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Aware of Right to Rescind.

The phrase “aware of his right to rescind” adds very little in determining whether or not the party under the circumstances acted reasonably to rescind. A party has a duty to find out what the facts actually are and then act promptly to find out what legal rights result from those facts; failure to do so may constitute a waiver of the right to rescind. Berg v. Hogan, 322 N.W.2d 448, 1982 N.D. LEXIS 322 (N.D. 1982).

Basis for Rescission Action at Law.

A rescission action at law is essentially an action for restitution based upon a party’s prior unilateral rescission, whereas an action in equity seeks to have the court terminate the contract and order restoration. Omlid v. Sweeney, 484 N.W.2d 486, 1992 N.D. LEXIS 94 (N.D. 1992).

District court properly held that the mineral owners were entitled to a jury trial because their rescission claim was an action at law, and they provided written notice of rescission to the lessee and made an offer to restore. Golden Eye Res., LLC v. Ganske, 2014 ND 179, 853 N.W.2d 544, 2014 N.D. LEXIS 181 (N.D. 2014).

Building Contract.

Where a party refuses to perform a contract for the erection of a building before the other party enters upon the performance thereof, the latter party cannot perform the contract and thereupon recover the contract price, his remedy being a suit for damages for breach of contract. Davis v. Bronson, 2 N.D. 300, 50 N.W. 836, 1891 N.D. LEXIS 54 (N.D. 1891).

Choice of Procedures.

A party who elects to rescind a contract on the ground that he was fraudulently induced to enter into it may bring an action in equity setting forth his election to rescind and ask the court to declare a termination of the contract; or he may bring an action at law based upon his election to rescind and his restoration or offer to restore as required by this section. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

Compliance Mandatory.

Compliance with the requirements of this section is a condition precedent to the maintenance of an action to rescind. 352 N.W.2d 198, 1984 N.D. LEXIS 360.

To rescind the written contract, a party must satisfy the statutory requirements for rescission found in section 9-09-01 through this section. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Conduct Indicating Election of Damages Remedy over Rescission.

Where demolition contractor discovered large, unexpected blocks of concrete and hazardous materials while demolishing a steam plant but completed demolition, accepted contract payment and sued for damages, his acts were consistent with affirming the contract and bringing an action for damages. This conduct showed that he chose damages remedy rather than rescission. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Division of Contract.

In action for personal injuries, trial court properly concluded that release executed for both property damage and personal injuries could be divided and part relating to personal injuries rescinded due to mistake of fact going to extent of plaintiff’s injuries and even though release purported to cover known and unknown injuries. Mitzel v. Schatz, 175 N.W.2d 659, 1970 N.D. LEXIS 84 (N.D. 1970).

Entire Contract.

An attempted rescission of a contract for the purchase of a tractor and plows must go to the entire contract. Allis-Chalmers Mfg. Allis-Chalmers Mfg. Co. v. Frank, 57 N.D. 295, 221 N.W. 75, 1928 N.D. LEXIS 126, 1928 N.D. LEXIS 127 (July 27, 1928).

Equitable Estoppel.

Plaintiff may not invoke the doctrine of equitable estoppel against a defendant unless the plaintiff exercises due diligence in commencing the appropriate legal proceeding after the circumstances giving rise to estoppel have ceased to be operational, that is, after plaintiff has notice, actual or constructive, that he must resort to legal recourse and may no longer rely upon agreements, promises, representations to the contrary, or conduct or deceptive practices which may have lulled him into a sense of security. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

The doctrine of equitable estoppel may operate to preclude the application of a statute of limitations as a defense by one whose actions mislead another, thereby inducing him to not file a claim within the statute of limitations. Thus, a delay may be excusable where, provided it is not unreasonably protracted, it is induced by defendant’s promises, suggestions, or assurances which, if carried into effect, would result in a solution or adjustment without litigation. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Equitable Principles.

Rescission of a contract, whether the object of a suit in equity or an action at law, is governed by equitable principles. Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955), distinguished, Adams v. Little Mo. Minerals Ass’n, 143 N.W.2d 659 (N.D. 1966), decided prior to the enactment of the Uniform Probate Code; distinguished, Adams v. Little Mo. Minerals Ass'n, 143 N.W.2d 659, 1966 N.D. LEXIS 179 (N.D. 1966).

Rescission of a contract, whether the object of a suit in equity or an action at law, is governed by equitable principles. Volk v. Volk, 121 N.W.2d 701, 1963 N.D. LEXIS 84 (N.D. 1963).

Exchange of Real Estate.

A purchaser induced to enter into a contract for the exchange of real estate by fraud, on discovery, may rescind the contract. Raasch v. Goulet, 57 N.D. 674, 223 N.W. 808 (1929), overruled on other grounds, Ziebarth v. Kalenze, 238 N.W.2d 261 (N.D. 1976)

Grounds for Rescission.

Plaintiff who bought his original lot in 1963, intending to use the lot for residential purposes, knew in 1972 that a plat had not been recorded for the property and that he could not obtain a building permit to use his lot for residential purposes because of the minimum lot-size requirement. Thus, plaintiff was aware of grounds for rescission as early as 1972. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Mineral Deed.

Landowners could not obtain reconveyance of interest in minerals granted by a mineral deed where they were not entitled to rescind or cancel the deed. Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

Brothers were not entitled to set aside and have declared null and void a certain deed to eight, instead of four, mineral acres, executed by them and given to attorney as a contingent fee for legal services in getting wells drilled on their property, discovered two days after deed was signed, where the brothers waited twenty months before they commenced action. Knoshaug v. Pollman, 245 F.2d 271, 1957 U.S. App. LEXIS 4833 (8th Cir. N.D. 1957).

Negotiable Instruments.

Where a purchaser of property gives his note therefor and afterwards rescinds the contract of sale on the ground of breach of warranty, he may recover the amount of the note and interest without first paying the same, if the note was negotiated before maturity to an innocent purchaser for value. Fahey v. Esterley Harvesting Mach. Co., 3 N.D. 220, 55 N.W. 580, 1893 N.D. LEXIS 15 (N.D. 1893).

Notice of Rescission.

In order to effect a rescission of a contract for the purchase of real estate, the obligation rested on the purchaser to give notice of rescission and make an offer to restore in compliance with the provisions of this section. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

Contractor failed to raise a genuine issue of material fact whether it gave the company notice of rescission; the trial court did not err in granting summary judgment dismissal of the contractor’s quantum meruit claim where the letters sent by the contractor to the company did not convey a clear, unambiguous and unequivocal intention to rescind the contracts, N.D.C.C. § 9-09-04. Schipper Constr., Inc. v. Am. Crystal Sugar Co., 2008 ND 226, 758 N.W.2d 744, 2008 N.D. LEXIS 205 (N.D. 2008).

Partial Affirmance of Contract, Effect.

Upon the discovery of a deceit, a contracting party may rescind or affirm, but an affirmance in part validates the entire contract. Beare v. Wright, 14 N.D. 26, 103 N.W. 632, 1905 N.D. LEXIS 36 (N.D. 1905).

Performance of Conditions Precedent.

On the theory of breach of warranty and rescission, the purchaser must perform all conditions precedent on his part to be performed. Fahey v. Esterley Harvesting Mach. Co., 3 N.D. 220, 55 N.W. 580, 1893 N.D. LEXIS 15 (N.D. 1893).

Ratification of Contract.

A party, who with knowledge of facts entitling him to rescission of a contract or conveyance, afterward, without fraud or duress, ratifies the same, has no claim to the relief of cancellation. Daniel v. Hamilton, 61 N.W.2d 281, 1953 N.D. LEXIS 97 (N.D. 1953).

Borrowers, having elected to ratify a contract for a loan and mortgages, are bound thereby, notwithstanding the invalidity of a common agreement because the agents acted in a dual capacity. Fitzgerald v. Union Cent. Life Ins. Co., 42 F.2d 76, 1930 U.S. App. LEXIS 4210 (8th Cir. N.D.), cert. denied, 282 U.S. 838, 51 S. Ct. 38, 75 L. Ed. 744, 1930 U.S. LEXIS 122 (U.S. 1930).

Reasonable Diligence.

Summary judgment dismissing claim to rescind personal injury settlement was proper where party seeking rescission waited six years to bring rescission action and completely failed to address reasonable diligence requirements of this section in responding to summary judgment motion. Swenson v. Raumin, 1998 ND 150, 583 N.W.2d 102, 1998 N.D. LEXIS 164 (N.D. 1998).

Repudiation of Settlement.

One desiring to rescind a contract of settlement for personal injuries upon the ground of misrepresentation, fraud, or mistake, upon discovery thereof must announce his decision to repudiate the settlement, and if thereafter he continues to treat and use the property as his own, knowing the facts, he is bound by the contract. Gilmore v. Western Elec. Co., 42 N.D. 206, 172 N.W. 111, 1919 N.D. LEXIS 130 (N.D. 1919).

Res Judicata.

Where an action for rescission for reason of fraud and undue influence in the inception of a contract was settled in an earlier action, parties to the same contract were barred by res judicata from raising these issues in a later action. American Life & Casualty Ins. Co. v. Otis Hann Co., 124 N.W.2d 830, 1963 N.D. LEXIS 126 (N.D. 1963).

Restoration of Value Received.

An offer to return the property involved must be made before rescission. McMahon v. Plummer, 50 N.W. 480, 6 Dakota 42, 1888 Dakota LEXIS 57 (Dakota 1888).

Where a party repudiates the contract or seeks to rescind the same, he must restore to the other party any fruits of the transaction in his possession or within his control as a condition precedent to rescission. Anderson v. First Nat'l Bank, 4 N.D. 182, 59 N.W. 1029, 1894 N.D. LEXIS 26 (N.D. 1894).

Rescission of a sale contract, where a party takes possession of land thereunder, cannot be effectively made without returning or offering to return the lands received under the contract. Moline Plow Co. v. Bostwick, 15 N.D. 658, 109 N.W. 923, 1906 N.D. LEXIS 93 (N.D. 1906).

No party may successfully invoke the aid of equity for the rescission of a contract unless he is willing to restore the other party to the possession he enjoyed at the time the contract was made. Rosenwater v. Selleseth, 33 N.D. 254, 156 N.W. 540, 1916 N.D. LEXIS 68 (N.D. 1916).

Where one brings an action to rescind a contract, and to procure a cancellation thereof or of some instrument connected therewith, a precedent condition to the right to maintain such action is that he restore all value he received under such contract, and that the party against whom such action is brought must be placed in status quo. Donovan v. Dickson, 37 N.D. 404, 164 N.W. 27 (1917); Uhrig v. J. I. Case Threshing Mach. Co., 64 N.D. 189, 250 N.W. 922, 1933 N.D. LEXIS 265 (N.D. 1933).

Where a person with full understanding of the character and nature of the instrument executes a release, and receives a consideration therefor, there is no more reason why he should be excused from returning or tendering a return of the consideration received than in other cases where a rescission is sought. Swan v. Great N. Ry., 40 N.D. 258, 168 N.W. 657, 1918 N.D. LEXIS 78 (N.D. 1918).

One rescinding a contract must act promptly upon discovering the facts entitling him to the rescission, and the consideration received must be restored. Fekjar v. Iowa State Live Stock Ins. Co., 44 N.D. 389, 177 N.W. 455, 1920 N.D. LEXIS 101 (N.D. 1920).

To rescind a contract procured by fraud the party rescinding must restore or offer to restore to the other party the consideration moving from him on condition that such party shall do likewise, unless the latter is unable or positively refuses to do so. Rokusek v. National Union Fire Ins. Co., 50 N.D. 123, 195 N.W. 300, 1923 N.D. LEXIS 88 (N.D. 1923).

One who purchased machinery under a single indivisible contract could not rescind the contract where he failed to return a portion of the machinery. Uhrig v. J. I. Case Threshing Mach. Co., 64 N.D. 189, 250 N.W. 922, 1933 N.D. LEXIS 265 (N.D. 1933).

Compliance with subsections 1 and 2 of this section is a condition precedent to an action to rescind, but where the party seeking to rescind has received nothing of value, there is nothing to restore and subsection 2 does not apply. Volk v. Volk, 121 N.W.2d 701 (N.D. 1963), decided prior to the enactment of the Uniform Probate Code.

Plaintiff suing to rescind a personal injury release was not obligated to repay money he received as settlement for property damage, since a general release is severable as to personal injury and property damage. Wock v. Kuhn, 221 N.W.2d 65, 1974 N.D. LEXIS 192 (N.D. 1974).

The rule on restoration does not apply where the party seeking to rescind has received nothing of value. Gerhardt v. Fleck, 256 N.W.2d 547, 1977 N.D. LEXIS 156 (N.D. 1977).

In seeking rescission of a contract for deed under this section, purchaser could not condition his offer to return the premises upon seller’s payment of purchaser’s damages, including loss of anticipated profits. 352 N.W.2d 198, 1984 N.D. LEXIS 360.

In seeking to rescind contract for deed, purchaser’s offer to restore only the premises, without offering to restore the rents collected or the reasonable value of the use of the premises for the period the purchaser occupied the building, failed to satisfy the restoration of value requirement of this section. 352 N.W.2d 198, 1984 N.D. LEXIS 360.

Vendor was not entitled to rescind contract for deed where she neither restored nor offered to restore to purchaser everything of value which she received from him under contract for deed. Blair v. Boulger, 358 N.W.2d 522, 1984 N.D. LEXIS 422 (N.D. 1984), cert. denied, 471 U.S. 1095, 105 S. Ct. 2314, 85 L. Ed. 2d 834, 1985 U.S. LEXIS 1736 (U.S. 1985).

Restoration of the preceding status quo is a requirement for rescission. West v. Carlson, 454 N.W.2d 307, 1990 N.D. LEXIS 80 (N.D. 1990).

Where a borrower moved into her home and discovered that the septic system was inadequate, the borrower’s attempts to rescind the contract with the bank and the North Dakota Housing Finance Agency (NDFHA) were inappropriate as the appropriate remedy was against the home’s seller; borrower failed to follow the procedures for rescission under N.D.C.C. § 9-09-04(2) where her notice of rescission offered to restore the premises to the Bank and NDFHA as she only received money from these parties and, therefore, in order to rescind the note and mortgage against the Bank and NDHFA, she would have to restore the money they provided in order to place the parties in their original position and restore the status quo. Indus. Comm'n v. Noack, 2006 ND 195, 721 N.W.2d 698, 2006 N.D. LEXIS 197 (N.D. 2006).

District court abused its discretion in granting a motion for relief from judgment based on a clerical mistake or error because, although the district court might have intended to put the parties back into their original positions before invalidated real property transactions, the relief requested was beyond the record evidence in the initial trial and sought a substantive change to the judgment. The district court ordered the reimbursement of fees and the payment of rental value. Erickson v. Olsen, 2016 ND 33, 875 N.W.2d 535, 2016 N.D. LEXIS 42 (N.D. 2016).

Set-Off.

Where, although there was no evidence on the question of reasonable rental value of the premises, the trial court ascertained that value to be equal to the value of repairs and replacements and additional evidence on the question of reasonable value would have produced little change, if any, in the amount of the set-off, the de minimis character of the question of reasonable rental value warranted affirmance without remand. Holcomb v. Zinke, 365 N.W.2d 507, 1985 N.D. LEXIS 276 (N.D. 1985).

Time for Rescission.

A rescission must be effected promptly. Raymond v. Edelbrock, 15 N.D. 231, 107 N.W. 194 (1906); Annis v. Burnham, 15 N.D. 577, 108 N.W. 549, 1906 N.D. LEXIS 69 (N.D. 1906).

The rule of prompt rescission is subject to the qualification that it does not operate where legal excuse or justification for the delay is shown. Annis v. Burnham, 15 N.D. 577, 108 N.W. 549, 1906 N.D. LEXIS 69 (N.D. 1906); Bauer v. National Union Fire Ins. Co., 51 N.D. 1, 198 N.W. 546, 1924 N.D. LEXIS 138 (N.D. 1924); Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955); Lanz v. Naddy, 82 N.W.2d 809, 1957 N.D. LEXIS 119 (N.D. 1957).

A purchaser of machinery who fails to rescind within time nevertheless may recover from the seller damages sustained by breach of contract. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931).

One seeking to rescind on the ground that the contract was induced by fraudulent representations must rescind promptly upon discovery of the fact warranting rescission. Kramer v. K. O. Lee & Son Co., 61 N.D. 28, 237 N.W. 166, 1931 N.D. LEXIS 239 (N.D. 1931); Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

A party seeking to rescind must act promptly upon discovering facts which entitle him to cancellation of the contract. American Life & Casualty Ins. Co. v. Otis Hann Co., 124 N.W.2d 830, 1963 N.D. LEXIS 126 (N.D. 1963).

N.D.C.C. §§ 9-08-08 and 9-08-09 do not operate as statute of limitation for this section, but rather such sections provide an additional remedy; therefore, an action brought under this section is subject only to statute of limitations contained in N.D.C.C. § 28-01-16. Mitzel v. Schatz, 175 N.W.2d 659, 1970 N.D. LEXIS 84 (N.D. 1970).

Rescission of contract for purchase of realty would not be allowed where: (1) erroneous description of property had been inserted in contract by mutual mistake and could be corrected by reformation; (2) purchasers did not offer to account for rents collected or to pay reasonable value of use and occupation of premises; and (3) purchasers waived requirement that abstract of title showing good and marketable title be furnished by failing to demand it until they had been in possession for more than eight years. However, since purchasers had paid more than two-thirds of principal and interest on purchase price and had made improvements and paid taxes, vendors were allowed a reasonable time to remedy defects in title and purchasers allowed additional time in which to tender full performance of contract. Mader v. Hintz, 186 N.W.2d 897, 1971 N.D. LEXIS 190 (N.D. 1971).

Borrowers, if desiring to rescind a contract to make a loan on mortgage security, must act with reasonable promptness. Fitzgerald v. Union Cent. Life Ins. Co., 42 F.2d 76, 1930 U.S. App. LEXIS 4210 (8th Cir. N.D.), cert. denied, 282 U.S. 838, 51 S. Ct. 38, 75 L. Ed. 744, 1930 U.S. LEXIS 122 (U.S. 1930).

The determination of prompt rescission does not depend alone upon the lapse of time, but also upon the circumstances of each particular case; whether or not notice of rescission is timely is a question of fact. Robertson Cos. v. Kenner, 311 N.W.2d 194, 1981 N.D. LEXIS 391 (N.D. 1981).

Under this section, rescission is proper only if the party seeking rescission uses reasonable diligence to rescind promptly and to return everything of value which was received under the contract. West v. Carlson, 454 N.W.2d 307, 1990 N.D. LEXIS 80 (N.D. 1990).

An action for rescission brought under this section is subject to the six-year statute of limitations contained in N.D.C.C. § 28-01-16(1). However, a party who fails to promptly exercise the right of rescission upon discovery of the facts necessary to rescind waives that right. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Waiver of Right.

The right to rescind on the ground of fraud is waived by unexcused delay. Bauer v. National Union Fire Ins. Co., 51 N.D. 1, 198 N.W. 546, 1924 N.D. LEXIS 138 (N.D. 1924); Fedorenko v. Rudman, 71 N.W.2d 332, 1955 N.D. LEXIS 118 (N.D. 1955).

Where a grantee, after discovery of a breach of the covenant of seizin, remained in possession of the premises, and applied for a loan, and defied all the grantor’s efforts to remove him, he lost the right to rescind. Anderson v. Olson, 65 N.D. 550, 260 N.W. 407, 1935 N.D. LEXIS 140 (N.D. 1935).

Lessors waived right to rescind oil, gas, and mineral leases by not acting promptly as required by subsection 1 of this section after payment of their drafts, issued to pay the rentals provided by their leases, was refused, and by their subsequent negotiations with the lessees relative to the payment thereof. Daniel v. Hamilton, 61 N.W.2d 281, 1953 N.D. LEXIS 97 (N.D. 1953).

Where a party to a contract ordered the other to cease performance but continued to pay for the services of the nonperforming party, a successor to the rights of the ordering party could not sue for rescission of the contract on the basis of nonperformance when the successor knew of the order to cease performance and also continued to pay for the service. American Life & Casualty Ins. Co. v. Otis Hann Co., 124 N.W.2d 830, 1963 N.D. LEXIS 126 (N.D. 1963).

Plaintiffs waived their right to rescind agreement based upon defendant’s breach where plaintiffs did not act to rescind until more than two and one-half years after they were aware of the facts constituting the breach and during that two and one-half years they acted in various ways which were inconsistent with a rescission of the agreement. Lindemann v. Lindemann, 336 N.W.2d 112, 1983 N.D. LEXIS 303 (N.D. 1983).

The determination of whether or not a party has waived the right to rescind an agreement by failure to act promptly is a question of law for the court to determine. Lindemann v. Lindemann, 336 N.W.2d 112, 1983 N.D. LEXIS 303 (N.D. 1983).

A waiver of the right to rescind under this section can occur even when the action is commenced well within the running of the six-year statute of limitations. Schmidt v. Grand Forks Country Club, 460 N.W.2d 125, 1990 N.D. LEXIS 176 (N.D. 1990).

Law Reviews.

Recent Developments in North Dakota Contract Law, 60 N.D. L. Rev. 227 (1984).

9-09-05. Alteration of oral contract.

A contract not in writing may be altered in any respect by consent of the parties in writing without a new consideration, or by oral consent of the parties with a new consideration, and is extinguished thereby to the extent of the alteration.

Source:

Civ. C. 1877, § 968; R.C. 1895, § 3935; R.C. 1899, § 3935; R.C. 1905, § 5381; C.L. 1913, § 5937; R.C. 1943, § 9-0905.

Derivation:

Cal. Civ. C., 1697.

9-09-06. Alteration of written contract.

A contract in writing may be altered by a contract in writing or by an executed oral agreement and not otherwise. An oral agreement is executed within the meaning of this section whenever the party performing has incurred a detriment which that party was not obligated by the original contract to incur.

Source:

Civ. C. 1877, § 969; R.C. 1895, § 3936; R.C. 1899, § 3936; R.C. 1905, § 5382; C.L. 1913, § 5938; R.C. 1943, § 9-0906.

Derivation:

Cal. Civ. C., 1698.

Cross-References.

Revision of contract, see §§ 32-04-17 to 32-04-20.

Notes to Decisions

Building Contract.

A written agreement for the construction of a building was altered by an executed oral agreement for extra compensation. Ley v. Gulke, 58 N.D. 727, 227 N.W. 222, 1929 N.D. LEXIS 275 (N.D. 1929).

A provision in a building contract that all extra work shall be ordered by the architect or owner in writing may be waived, and the written contract itself may be altered by an executed oral agreement. Van Nice v. Christian Reformed Church, 59 N.D. 564, 231 N.W. 604, 1930 N.D. LEXIS 174 (N.D. 1930).

Definition of Alteration.

Alteration is a process wherein the parties make “[a] change in the provisions of a contract.” Biteler's Tower Serv. v. Guderian, 466 N.W.2d 141, 1991 N.D. LEXIS 16 (N.D. 1991).

Estoppel.

Where seller, in conversation with buyer, stated that delivery date for grain was completely immaterial to him, he was estopped to claim breach of contract by buyer in failing to call for delivery on or prior to extended contract date, and the estoppel thus created was sufficient to remove the bar of statute of frauds. Nelson v. Glasoe, 231 N.W.2d 766, 1975 N.D. LEXIS 176 (N.D. 1975).

Executed Oral Agreement.

A provision in a written contract to the effect that no changes in the work should be made unless provided for in writing and signed by both parties is waived to the extent of changes made pursuant to an executed oral agreement. Shimek v. Vogel, 105 N.W.2d 677, 1960 N.D. LEXIS 91 (N.D. 1960).

Buyer’s oral offer to extend time allowed for delivery of wheat under a written contract did not constitute an executed oral agreement so as to modify the written contract where the buyer did not incur any detriment under the oral offer that it was not obligated to incur under the written contract. Cargill, Inc. v. Kavanaugh, 228 N.W.2d 133, 1975 N.D. LEXIS 191 (N.D. 1975).

Whether within this section or N.D.C.C. § 41-02-16, contract for sale of cattle pursuant to which cattle were to be picked up on certain date was not modified by an executed oral agreement extending time for delivery by virtue of parties’ agreement that seller was to be reimbursed for his maintenance and feed costs beyond delivery date and seller’s ambiguous testimony that he gave buyer chance to pick up cattle after delivery date because the weather had been bad. Ziebarth v. Kalenze, 238 N.W.2d 261, 1976 N.D. LEXIS 185 (N.D. 1976).

Oral agreement requiring builder to pour a cement cap over a floor in an attempt to get the floor to comply with the specifications of the original written construction contract was not an executed oral agreement within the meaning of this section because the builder incurred no detriment by the oral agreement that it was not obligated by the original contract to incur. Storebo v. Foss, 325 N.W.2d 223, 1982 N.D. LEXIS 348 (N.D. 1982).

A written contract may be modified by an executed oral agreement, and testimony relating to an oral agreement modifying a written contract is admissible. Mitchell v. Barnes, 354 N.W.2d 680, 1984 N.D. LEXIS 370 (N.D. 1984).

A provision in a written contract which requires any changes to the contract to be in writing may be waived by an executed oral agreement. Biteler's Tower Serv. v. Guderian, 466 N.W.2d 141, 1991 N.D. LEXIS 16 (N.D. 1991).

In a case in which a terminated employee sued the company that had employed him for breach of contract based on the company’s failure to assign a life insurance policy to him within 30 days of his termination, the district court properly dismissed the breach of contract claim because the employee had requested a delay in completing the transfer of the insurance policy for his personal tax purposes. The company suffered a legal detriment by having to delay assignment of the policy to accommodate the employee’s request, a detriment the company was not obligated by the original contract to incur. Sanders v. Gravel Prods., 2008 ND 161, 755 N.W.2d 826, 2008 N.D. LEXIS 162 (N.D. 2008).

Lease.

A written lease complete in itself may be altered by a subsequent independent oral agreement and such oral agreement, if executed, is binding upon the parties. Reitman v. Miller, 78 N.D. 1003, 54 N.W.2d 477, 1952 N.D. LEXIS 92 (N.D. 1952).

District court properly granted a lessee summary judgment and dismissed an assignee's claims that an oil and gas lease terminated due the land manager's letter because the letter did not constitute a written contract required to modify the lease since it did not contain the elements for a valid contract; the letter did not establish a written agreement to modify the lessee's rights, and the lessors did not sign or otherwise communicate acceptance of the purported offer. Valentina Williston, LLC v. Gadeco, LLC, 2016 ND 84, 878 N.W.2d 397, 2016 N.D. LEXIS 84 (N.D. 2016).

Manner of Alteration.

A contract in writing may be altered only by a contract in writing, or by an executed oral agreement. J. I. Case Threshing Mach. Co. v. Loomis, 31 N.D. 27, 153 N.W. 479, 1915 N.D. LEXIS 177 (N.D. 1915).

Modification Improper.

Under a contract between an oil company and a drilling company which contained a provision that any modifications be in writing, whereby drilling company agreed to drill three oil wells by a certain date or pay oil company damages, since drilling company gave up no legal right, and suffered no detriment, there was consequently no executed oral agreement waiving the written modification requirement and the drilling company was obligated to pay damages. Texaco, Inc. v. Mercury Exploration Co., 994 F.2d 463, 1993 U.S. App. LEXIS 12411 (8th Cir. N.D. 1993).

Document was not a valid contract, and it did not supplement or alter the terms of an agreement because the document appeared to contain at least one different term in the price of real property; because the agreement was a written contract, it could only be altered by a subsequent written contract or by an executed oral agreement, and no executed oral agreement was presented to the district court or argued on appeal. Hartman v. Grager, 2021 ND 160, 964 N.W.2d 482, 2021 N.D. LEXIS 162 (N.D. 2021).

Modification Proper.

Because no term in plaintiff’s teaching contract with defendant school district explained their rights and duties when unpaid leave was granted for days when school was cancelled, the parties’ contractual relationship was altered under N.D.C.C. § 9-09-06 when the school district granted the teacher unpaid leave to allow her to travel to Greece. Godon v. Kindred Pub. Sch. Dist., 2011 ND 121, 798 N.W.2d 664, 2011 N.D. LEXIS 115 (N.D. 2011).

Modified Contract Executed.

The parties to a contract by consent may orally modify or waive the terms thereof if the modified contract is executed. Reeves & Co. v. Bruening, 13 N.D. 157, 100 N.W. 241, 1904 N.D. LEXIS 28 (N.D. 1904).

A modification of a written contract is effected if the parol modified agreement is executed. Benesh v. Travelers' Ins. Co., 14 N.D. 39, 103 N.W. 405, 1905 N.D. LEXIS 17 (N.D. 1905).

An oral alteration of a written contract, different in all its terms, is not binding unless the contract as changed has been executed. Annis v. Burnham, 15 N.D. 577, 108 N.W. 549, 1906 N.D. LEXIS 69 (N.D. 1906).

Parol evidence rule does not apply to intermediate parties to note where maker has alleged fraud and failure of consideration as defense to its validity; thus, evidence offered to prove that execution and delivery of note was procured by fraud and that consideration for note had failed was competent and admissible under well recognized exceptions to parol evidence rule. Verry v. Murphy, 163 N.W.2d 721, 1968 N.D. LEXIS 88 (N.D. 1968).

Negotiable Instruments.

The time of payment of a promissory note cannot be extended by an oral agreement if the oral promise to extend is based upon the debtor’s promise to pay the consideration for the extension at a future time. Foster v. Furlong, 8 N.D. 282, 78 N.W. 986, 1899 N.D. LEXIS 4 (N.D. 1899).

An executory parol agreement to receive property in payment will not discharge a note. First Nat'l Bank v. Burdick, 51 N.D. 508, 200 N.W. 44, 1923 N.D. LEXIS 8 (N.D. 1923).

Parol Agreement.

The modification of a written contract by a parol agreement must be clear and satisfactory. Buttz v. Colton, 43 N.W. 717, 6 Dakota 306, 1888 Dakota LEXIS 45 (Dakota 1888).

Prior Oral Agreement.

Oral agreement made at time bid for transporting children by school bus was opened and accepted which oral agreement was to effect that bidder would be moving from his residence prior to the commencement of the school year and that he would therefore not be driving the last four miles of the school bus route, was ineffective to alter written contract signed by bidder and delivered to school board four months subsequent to acceptance of the bid; school board was entitled to reduce the compensation proportionately according to the written contract when the route was officially shortened by four miles due to the bidder’s inability to claim a legal residence at his farm. Rettig v. Taylor Pub. Sch. Dist., 211 N.W.2d 743, 1973 N.D. LEXIS 118 (N.D. 1973).

Sale of Real Estate.

A written contract for the sale of real estate cannot be modified by an unexecuted oral agreement although the modification pertains only to the performance of the contract. Cughan v. Larson, 13 N.D. 373, 100 N.W. 1088, 1904 N.D. LEXIS 55 (N.D. 1904).

In an action for damages for a breach of contract to purchase real property, it may not be shown that the vendee agreed to accept a warranty deed with existing defects in the title. McCulloch v. Bauer, 24 N.D. 109, 139 N.W. 318, 1912 N.D. LEXIS 20 (N.D. 1912).

A written contract for the purchase of land at a certain price, with interest at a fixed rate, is not altered by a parol assent to a purported account stated, in which the interest is calculated at a different rate. Thompson v. Baker, 52 N.D. 366, 203 N.W. 195, 1925 N.D. LEXIS 37 (N.D. 1925).

District court properly granted summary judgment to a seller, its trustee, and the ultimate purchaser in a buyer's action for breach of contract, equitable and promissory estoppel, and tortious interference with a business contract because the seller did not breach any agreement it had with the buyer where the buyer's exercise of a purchase option extinguished the right of first refusal provision, the buyer did nothing to accept the right of first offer, which was triggered by the seller's decision to sell the property, the buyer was statutorily precluded from orally modifying the written purchase agreement. Constellation Dev., LLC v. Western Trust Co., 2016 ND 141, 882 N.W.2d 238, 2016 N.D. LEXIS 141 (N.D. 2016).

Subsequent Oral Agreement.

A written agreement may be abrogated by a subsequent oral agreement fully executed. Fletcher v. Nelson, 6 N.D. 94, 69 N.W. 53, 1896 N.D. LEXIS 15 (N.D. 1896).

A written contract cannot be altered by an unexecuted parol agreement, but the parties to a written contract may enter into a new parol agreement, separate and distinct from the old contract, unless such agreement is required to be in writing. Quinlivan v. Dennstedt Land Co., 39 N.D. 606, 168 N.W. 51, 1918 N.D. LEXIS 53 (N.D. 1918).

Where members of farm marketing organization signed an agreement with it whereby they agreed to contribute to a “block” of wheat which the organization would attempt to sell for not less than $3.10 per bushel, participating member who was notified of the “sale” of the block for $3.28 per bushel, but discovered there had been no sale, only an application of the grain to the organization’s pre-existing contract obligations, and thereafter refused to deliver any wheat until he was assured he would receive $3.28 per bushel as specified, then orally agreed to deliver after such assurance was given, was not barred by this section from asserting the oral modification in defense of a suit for breach of the written agreement; the first agreement merely formed the basis of the second, and was not itself a valid, binding contract, so this section did not apply. National Farmers Organization, Inc. v. Maddock, 536 F.2d 1223, 1976 U.S. App. LEXIS 8557 (8th Cir. N.D. 1976).

9-09-07. Destruction or cancellation by consent.

The destruction or cancellation of a written contract or of the signature of the parties liable thereon with intent to extinguish the obligation thereof extinguishes it as to all of the parties consenting to the act.

Source:

Civ. C. 1877, § 970; R.C. 1895, § 3937; R.C. 1899, § 3937; R.C. 1905, § 5383; C.L. 1913; § 5939; R.C. 1943, § 9-0907.

Derivation:

Cal. Civ. C., 1699.

9-09-08. Cancellation or destruction of contract — Effect.

The intentional destruction, cancellation, or material alteration of a written contract by a party entitled to any benefit under it, or with that party’s consent, extinguishes all the executory obligations of the contract in that party’s favor against parties who do not consent to the act. When a contract is executed in duplicate, an alteration or destruction of one copy while the other exists is not within the provisions of this section.

Source:

Civ. C. 1877, §§ 971, 972; R.C. 1895, §§ 3938, 3939; R.C. 1899, §§ 3938, 3939; R.C. 1905, §§ 5384, 5385; C.L. 1913, §§ 5940, 5941; R.C. 1943, § 9-0908.

Derivation:

Cal. Civ. C., 1700, 1701.

Notes to Decisions

Filling Blanks in Instrument.

A person who delivers an instrument with blanks therein which are afterwards filled in an unauthorized manner, nevertheless, may be bound thereby if, in good faith reliance thereon, a third person has acted justifiably in such a way as to be prejudiced if the instrument is held to be invalid. J. R. Watkins Co. v. Keeney, 52 N.D. 280, 201 N.W. 833, 1924 N.D. LEXIS 105 (N.D. 1924).

Promissory Note.

If, after the delivery of a promissory note to the payee, the note is materially altered without the consent of the maker, the alteration, if fraudulently made, will operate to extinguish the note as a legal obligation, and the debt evidenced thereby. First Nat'l Bank v. Laughlin, 4 N.D. 391, 61 N.W. 473, 1894 N.D. LEXIS 49 (N.D. 1894).

Supersedeas Bond.

Obligations of parties on supersedeas bond could not be changed by alterations made by attorneys for both parties after the execution of the bond and after it had been served and filed as a court record. FISCHER v. LEBEDOFF, 62 N.D. 584, 244 N.W. 310, 1932 N.D. LEXIS 218 (N.D. 1932).

Surety Bond.

Where sureties sign a contract fixing their liability and thereafter, without their knowledge or consent, and after the execution and delivery of the contract, the amount of the liability is changed, there is a material alteration which releases the sureties from all liability. J. R. Watkins Medical Co. v. Payne, 47 N.D. 100, 180 N.W. 968, 1920 N.D. LEXIS 81 (N.D. 1920).

The filling of blanks in a surety bond by the creditor, when not expressly or impliedly authorized, so as to contain the amount of the existing indebtedness owing by the principal to the creditor, constitutes a material alteration which avoids the instrument. J. R. Watkins Co. v. Keeney, 52 N.D. 280, 201 N.W. 833, 1924 N.D. LEXIS 105 (N.D. 1924).

CHAPTER 9-10 Obligations Imposed by Law

9-10-01. Injury to the property or person of another.

Every person is bound without contract to abstain from injuring the person or property of another or infringing upon any of that person’s rights.

Source:

Civ. C. 1877, § 973; R.C. 1895, § 3940; R.C. 1899, § 3940; R.C. 1905, § 5386; C.L. 1913, § 5942; R.C. 1943, § 9-1001.

Derivation:

Cal. Civ. C., 1708.

Cross-References.

Liability for negligent injury to another, see § 9-10-06.

Obligation of lessor to repair dwelling, see § 47-16-13.1.

Right to protection from personal injury, see § 14-02-01.

Notes to Decisions

Failure to Make a Loan.

Failure of a bank to make a loan after negotiations does not create an inference that the bank originally promised to make a loan. If any inference could be drawn from such negotiations, it is that the bank originally hoped to provide future financial assistance but was unable to do so when the course of events rendered the loan economically unfeasible. State Bank v. Lindberg, 471 N.W.2d 470, 1991 N.D. LEXIS 107 (N.D. 1991).

Fraud.

If the essential elements of actual fraud are present, a plaintiff can recover such damages as he has sustained through relying on the misrepresentation of a defendant in any transaction, whereby plaintiff has been induced to part with property or surrender some legal right, and thereby suffered loss and injury. Guild v. More, 32 N.D. 432, 155 N.W. 44, 1915 N.D. LEXIS 58 (N.D. 1915).

Statute of frauds did not preclude appellants’ deceit claim; it was based on an alleged deliberate misrepresentation of fact by appellee, and appellants claimed they relied on the misrepresentations and were deceived into transferring property. Appellants were seeking damages for reliance on the alleged misrepresentations, not enforcement of any agreement. McDougall v. AgCountry Farm Credit Servs., PCA, 2020 ND 6, 937 N.W.2d 546, 2020 N.D. LEXIS 23 (N.D. 2020).

Legal Duty.

The term “obligation” in the statute providing for assignability and survivorship of things in action comprehends only a legal duty from contract or by operation of law from a status voluntarily assumed. Grabow v. Bergeth, 59 N.D. 214, 229 N.W. 282, 1930 N.D. LEXIS 134 (N.D. 1930).

Wrongful death claim under N.D.C.C. § 32-21-01 fell squarely within the protections of N.D.C.C. §§ 9-10-01 and 9-10-06 because, in this case, bar owners undertook a duty to act with due care when they physically ejected an intoxicated person from their bar in the midst of winter. Because there was a factual dispute as to whether the bar owners exercised reasonable and ordinary care in ejecting the decedent from the bar a second time, and whether injury or death was foreseeable as a result of the ejection, judgment on the pleadings was not appropriate. Hoff v. Elkhorn Bar, 613 F. Supp. 2d 1146, 2009 U.S. Dist. LEXIS 58752 (D.N.D. 2009).

Under N.D.C.C. §§ 9-10-01 and 9-10-06, the district court erred by deciding only whether the landowner had a duty to protect plaintiff from the driver’s presumed negligence and failing to analyze whether the landowner had a separate duty to avoid injury to plaintiff under general negligence principles or under premises liability law. Saltsman v. Sharp, 2011 ND 172, 803 N.W.2d 553, 2011 N.D. LEXIS 172 (N.D. 2011).

Valuable Contractual Right.

Use of plaintiff’s recipe for cole slaw in combination with her name was a valuable contractual right under this section. Volk v. Auto-Dine Corp., 177 N.W.2d 525, 1970 N.D. LEXIS 100 (N.D. 1970).

Water Rights.

One landowner may not take underlying percolating water from a common source and transport it to lands not overlying the common supply if such taking is injurious to other landowners overlying the common supply. Volkmann v. Crosby, 120 N.W.2d 18, 1963 N.D. LEXIS 70 (N.D. 1963).

9-10-02. Deceit — Definition.

A deceit within the meaning of section 9-10-03 is:

  1. The suggestion as a fact of that which is not true by one who does not believe it to be true;
  2. The assertion as a fact of that which is not true by one who has no reasonable ground for believing it to be true;
  3. The suppression of a fact by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or
  4. A promise made without any intention of performing.

Source:

Civ. C. 1877, § 975; R.C. 1895, § 3942; R.C. 1899, § 3942; R.C. 1905, § 5388; C.L. 1913, § 5944; R.C. 1943, § 9-1002.

Derivation:

Cal. Civ. C., 1710.

Notes to Decisions

Actionable Deceit.

Actual fraud, with damage, constitutes actionable deceit. Beare v. Wright, 14 N.D. 26, 103 N.W. 632, 1905 N.D. LEXIS 36 (N.D. 1905).

Two of the essential elements of actionable deceit are a willful misrepresentation, and an intent thereby to induce another to alter his position. Hart v. Evanson, 14 N.D. 570, 105 N.W. 942 (N.D. 1895).

While a misrepresentation of law is not an actionable deceit in North Dakota, a statement amounting to a representation of the legal effect of facts not disclosed or otherwise known to the recipient, which may be justifiably interpreted by it as implying the existence of the facts which substantiate the statement, is actionable. Nodak Oil Co. v. Mobil Oil Corp., 533 F.2d 401, 1976 U.S. App. LEXIS 11831 (8th Cir. N.D. 1976).

Where proof of actual damage proximately caused by the misrepresentation or nondisclosure is an essential element of a tort action for fraud and deceit, and plaintiffs presented no evidence showing a causal connection between defendants’ behavior and plaintiffs’ inability to farm their property, summary judgment dismissal of the plaintiffs’ fraud and deceit claim was proper. Schneider v. Schaaf, 1999 ND 235, 603 N.W.2d 869, 1999 N.D. LEXIS 262 (N.D. 1999).

Employer and building owner were granted summary judgment on a former employee’s fraud and deceit claims where she presented no evidence that two human resource employees knowingly made false statements to induce her into not filing a workers’ compensation claim for her dental injuries suffered as a result of several falls. Nagel v. Sykes Realty, Inc., 400 F. Supp. 2d 1198, 2005 U.S. Dist. LEXIS 28463 (D.N.D. 2005).

Applicability.

A fraud action brought under the provisions of N.D.C.C. ch. 9-03, applies only to misrepresentations between parties to a contract, while deceit under the provisions of this chapter applies where there is no contract between the parties. Olson v. Fraase, 421 N.W.2d 820, 1988 N.D. LEXIS 89 (N.D. 1988).

Because the statute of frauds was a rule of evidence giving rise to a defense in a contract action, and because the action was not on the contract, the landowner’s alleged statements to the oil and gas company’s representatives could be offered to support a deceit claim, N.D.C.C. § 9-10-02; the district court abused its discretion by misapplying the law when denying amendment of the complaint due to futility. Ir. Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715, 2011 N.D. LEXIS 36 (N.D. 2011).

Landowners’ claim against a township for deceit, based on misrepresentation of law concerning amendments to zoning ordinances following issuance of a conditional use permit, was barred as a matter of law. Arnegard v. Arnegard Twp., 2018 ND 80, 908 N.W.2d 737, 2018 N.D. LEXIS 85 (N.D. 2018).

Bank’s Nondisclosure of Customer’s Insolvency.

Where no conspiracy was alleged between a bank and its customer to deceive the payees of checks, the bank had no duty to disclose its customer’s insolvency, and evidence of a lending limit violation did not establish such a duty. Hellman v. Thiele, 413 N.W.2d 321, 1987 N.D. LEXIS 400 (N.D. 1987).

While the defendant bank was originally under no duty to divulge any information about the debtor’s credit status, once the bank chose to reply to the plaintiff creditor’s inquiry it had a duty to impart full, accurate, and truthful information. Ostlund Chem. Co. v. Norwest Bank, 417 N.W.2d 833, 1988 N.D. LEXIS 3 (N.D. 1988).

Burden of Proof.

Plaintiff has greater burden in tort action based on fraud than in contract action for rescission based on fraud; in tort, plaintiff must prove that assertion of fact was made by one who had no reasonable grounds for believing it to be true, whereas in contract plaintiff need only prove the assertion was made in manner not warranted by information of person making it. Nodak Oil Co. v. Mobil Oil Corp., 391 F. Supp. 276, 1975 U.S. Dist. LEXIS 13088 (D.N.D. 1975).

Trial court’s grant of summary judgment was proper when bar owners failed to show actual damages incurred by alleged fraud perpetrated by undercover drug agents, who were employed by an intergovernmental task force, but failed to disclose this information when the agents sought employment with the bar. Grandbois & Grandbois, Inc. v. City of Watford City, 2004 ND 162, 685 N.W.2d 129, 2004 N.D. LEXIS 291 (N.D. 2004).

Civil Conspiracy.

Deceit is the type of tort that can underlie a civil conspiracy charge. In re North Dakota Personal Injury Asbestos Litigation No. 1, 737 F. Supp. 1087, 1990 U.S. Dist. LEXIS 6048 (D.N.D. 1990).

Plaintiffs’ charge of “fraudulent concealment/civil conspiracy,” which is in essence concerned with alleged suppression of information disclosing health risks of asbestos, was grounded not so much in fraud, but in what North Dakota recognizes as deceit. In re North Dakota Personal Injury Asbestos Litigation No. 1, 737 F. Supp. 1087, 1990 U.S. Dist. LEXIS 6048 (D.N.D. 1990).

Damages.

The trial court’s finding that no damage ensued from the defendants’ “acts of deceit” or “attempts to defraud” required that the nominal damage award for those acts be reversed. Olson v. Fraase, 421 N.W.2d 820, 1988 N.D. LEXIS 89 (N.D. 1988).

Proof of actual damage proximately caused by misrepresentation or nondisclosure is an essential element of a tort action for fraud and deceit, since courts cannot correct unconscientious acts which are followed by no loss or injury. Schneider v. Schaaf, 1999 ND 235, 603 N.W.2d 869, 1999 N.D. LEXIS 262 (N.D. 1999).

Deceit and Fraud.

Where lenders alleged that, after the borrowers’ loan was in default, the borrowers’ principal fraudulently promised individually, and on behalf of a related company, that he would obtain new leases on the expiring collateral leases to preserve the lenders’ collateral, the lenders failed to provide sufficient facts to allow a jury to find by clear and convincing evidence that the principal and the related company promised to obtain new leases. Macquarie Bank v. Knickel, 723 F. Supp. 2d 1161, 2010 U.S. Dist. LEXIS 65844 (D.N.D. 2010), aff'd, 793 F.3d 926, 2015 U.S. App. LEXIS 12356 (8th Cir. N.D. 2015).

District court did erred in dismissing a purchaser's counterclaims against a partner because they were legally sufficient to state a claim; there was a potential for proof to support the purchaser's counterclaims for the partner's alleged deceit or misrepresentation. Haugrud v. Craig, 2017 ND 262, 903 N.W.2d 537, 2017 N.D. LEXIS 272 (N.D. 2017).

District court properly dismissed a requester’s claims based on fraud because the requester had not pleaded facts establishing he had a contract with the State or its agencies; the State agencies’ obligation to provide records and collect any appropriate fees arose not by contract but under statute, specifically the open records law. Kuntz v. Bureau of Crim. Investigation, 2019 ND 46, 923 N.W.2d 513, 2019 N.D. LEXIS 53 (N.D. 2019).

District court did not abuse its discretion in denying a requester’s motion for leave to amend because the requester failed to plead sufficient facts with particularity to support a claim for deceit, including how he relied on allegedly false or misleading representations and what the specific misrepresentations were. Kuntz v. Bureau of Crim. Investigation, 2019 ND 46, 923 N.W.2d 513, 2019 N.D. LEXIS 53 (N.D. 2019).

Special master did not err in dismissing a husband’s deceit claim against a hospital because the husband’s complaint failed to allege facts establishing the hospital had a duty to disclose information about an employee or drug diversion; in addition, the husband did not allege representations made by the hospital or inquiries made by him or his wife that could give rise to a duty to disclose. Krebsbach v. Trinity Hosps., Inc., 2020 ND 24, 938 N.W.2d 133, 2020 N.D. LEXIS 24 (N.D. 2020).

Statute of frauds did not preclude appellants’ deceit claim; it was based on an alleged deliberate misrepresentation of fact by appellee, and appellants claimed they relied on the misrepresentations and were deceived into transferring property. Appellants were seeking damages for reliance on the alleged misrepresentations, not enforcement of any agreement. McDougall v. AgCountry Farm Credit Servs., PCA, 2020 ND 6, 937 N.W.2d 546, 2020 N.D. LEXIS 23 (N.D. 2020).

Definitions of Actual Fraud and Deceit.

The statutory definitions of actual fraud and deceit are similar. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Distinction Between Fraud and Deceit.

The only significant distinction between the torts of fraud and deceit is whether the wrongdoer happens to be a party to a contract. The conduct prohibited under the separate statutory definitions of fraud and deceit is substantially identical and, for purposes of the punitive damages statute, fraud and deceit are synonymous. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

Technically, fraud under N.D.C.C. ch. 9-03 applies only when there is a contract between the parties; deceit under this chapter applies when there is no contract between the parties, nevertheless, conduct can be both fraudulent and deceitful. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

A fraud action brought under N.D.C.C. § 9-03-08 applies to misrepresentations between parties to a contract, while deceit under this section applies where there is no contract between the parties. West v. Carlson, 454 N.W.2d 307, 1990 N.D. LEXIS 80 (N.D. 1990).

Technically, a fraud action brought under the provisions of N.D.C.C. ch. 9-03, applies only to misrepresentations between parties to a contract, while deceit under the provisions of N.D.C.C. ch. 9-10, applies where there is no contract between the parties. Bourgois v. Montana-Dakota Utils. Co., 466 N.W.2d 813, 1991 N.D. LEXIS 38 (N.D. 1991).

Under North Dakota statutory definitions of “fraud” and “deceit,” the same conduct, a promise made without any intention of performing, can constitute both “deceit” and “fraud” although, technically, “fraud” applies to parties to a contract, while “deceit” applies where there is no contract between the parties. Delzer v. United Bank, 527 N.W.2d 650, 1995 N.D. LEXIS 22 (N.D. 1995).

Duty to Disclose.

Defendants were entitled to summary judgment on plaintiff’s claim of deceit, where plaintiff failed to show that defendant owed plaintiff any duty of disclosure. Dole v. USA Waste Servs., 100 F.3d 1384, 1996 U.S. App. LEXIS 29968 (8th Cir. N.D. 1996).

Essential Terms of Oral Agreement.

Where lenders alleged that, after the borrowers’ loan was in default, the borrowers’ principal promised individually, and on behalf of a related company, that he would obtain new leases on the expiring collateral leases to preserve the lenders’ collateral, the alleged promise did not constitute an oral contract because the lender failed to provide any evidence that the principal or the related company would receive any consideration for renewing the leases. Macquarie Bank v. Knickel, 723 F. Supp. 2d 1161, 2010 U.S. Dist. LEXIS 65844 (D.N.D. 2010), aff'd, 793 F.3d 926, 2015 U.S. App. LEXIS 12356 (8th Cir. N.D. 2015).

Expressions of Opinion.

Where buyers purchased a property “as is” and contracted not to hold the seller liable for any non-disclosed or latent defects, and the buyers presented testimony of the seller’s alleged fraudulent statements regarding the profitability and condition of the property but presented no evidence showing the seller’s statements amounted to either fraud or deceit under N.D.C.C. §§ 9-03-08 or 9-10-02, the evidence presented at trial led to the conclusion that the seller’s statements did not rise to the level of fraud or deceit and the district court properly granted judgment as a matter of law. Statements of value and predictions of future earnings or profits fall within the class of statements whose truth or falsity cannot be precisely determined and which are not, therefore, actionable as misrepresentations of fact and statements of opinion, as, for example, expressions by the seller commending the thing he is selling, have been held not actionable even though they are false. Dahl v. Messmer, 2006 ND 166, 719 N.W.2d 341, 2006 N.D. LEXIS 169 (N.D. 2006).

Insufficient Proof.

Where a former employee alleged that she was deceived by her former employer because she was told that she was being placed on administrative leave when the employer actually planned to terminate her, the employee’s claim of deceit was dismissed because the record lacked sufficient evidence to support a finding that there was an intention to terminate the employee at the time she was first placed on administrative leave. Humann v. KEM Elec. Coop., Inc., 450 F. Supp. 2d 1006, 2006 U.S. Dist. LEXIS 63537 (D.N.D. 2006), aff'd, 497 F.3d 810, 2007 U.S. App. LEXIS 19136 (8th Cir. N.D. 2007).

Motion by a debtor’s customers to amend their complaint against a creditor to add a claim for deceit was properly denied because the creditor’s alleged misrepresentations were never communicated to the customers. Thimjon Farms P'ship v. First Int'l Bank & Thimjon Farms P'ship v. First Int'l Bank & Trust, 2013 ND 160, 837 N.W.2d 327, 2013 N.D. LEXIS 162 (Sept. 6, 2013).

Insurer’s Duty.

The genesis of an insurer’s duty of good faith is the contractual relationship between the insurer and its policyholders from which the law implies a duty of fair dealing in paying claims, providing a defense to claims, negotiating settlements, and fulfilling all other contractual obligations. The tort of deceit under N.D.C.C. ch. 9-10 is separate and distinct from this duty of good faith. Dvorak v. American Family Mut. Ins. Co., 508 N.W.2d 329, 1993 N.D. LEXIS 212 (N.D. 1993).

Liability for Nondisclosure.

Suppression of a fact, by one who is bound to disclose it, amounts to the tort of deceit in North Dakota. In re North Dakota Personal Injury Asbestos Litigation No. 1, 737 F. Supp. 1087, 1990 U.S. Dist. LEXIS 6048 (D.N.D. 1990).

In North Dakota, parties are liable for nondisclosure only if they had a duty to disclose the true facts. In re North Dakota Personal Injury Asbestos Litigation No. 1, 737 F. Supp. 1087, 1990 U.S. Dist. LEXIS 6048 (D.N.D. 1990).

Ownership.

The trial court’s finding that the lessee was damaged by the lessor’s failure to disclose her limited ownership interest in land which, because the lessor only had a life estate, she could not sell, was not clearly erroneous. Ehrman v. Feist, 1997 ND 180, 568 N.W.2d 747, 1997 N.D. LEXIS 198 (N.D. 1997).

Promise Without Intention of Performing.

A promise to pay to the government and to a county money which was not required to be paid, coupled with a misrepresentation of law to the effect that the payment was required, could be considered “a promise made without any intention of performing” within the meaning of this section. Hellebust v. Bonde, 42 N.D. 324, 172 N.W. 812, 1919 N.D. LEXIS 141 (N.D. 1919).

Employee’s N.D.C.C. § 9-10-02(4) deceit claim against a finance company’s sole shareholder was properly dismissed on summary judgment where the claim was based on another employee’s contract with the shareholder and a jury had found that the shareholder had not breached that contract. Although deceit is a question of fact, it must be established by clear and convincing evidence and it is appropriate on summary judgment in a fraud or deceit claim to consider the quantum of proof necessary and, on the record in this case, employee had not established he was prejudiced by the summary judgment dismissal of his deceit claim. Erickson v. Brown, 2008 ND 57, 747 N.W.2d 34, 2008 N.D. LEXIS 58 (N.D. 2008).

Employee’s N.D.C.C. § 9-10-02(4) deceit claim against a finance company’s sole shareholder was improperly dismissed where the claim was not impacted by the jury’s conclusion as to the existence of a contract with another employee and there were disputed issues of fact as to whether the shareholder had made misrepresentations to the employee. Erickson v. Brown, 2008 ND 57, 747 N.W.2d 34, 2008 N.D. LEXIS 58 (N.D. 2008).

Purchase of Land.

Where father of purchaser negotiated directly with the vendors and led them to believe that his son would be the purchaser of their land, and banker led the vendors to believe that his only involvement in the transaction would be as the lender for son’s down payment, and at a meeting father of purchaser and banker decided that banker would be the actual purchaser, once it was decided that banker would purchase the land and obtain the first mortgage financing on it, father purchaser and banker had a duty to disclose these facts to the vendors. Such failure to disclose important facts and information to vendors rendered them liable for deceit. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

The jury’s finding that purchaser committed deceit was supported by substantial evidence where he transferred the land to banker and failed to disclose this fact to the vendors, notwithstanding that he was not involved in any of the negotiations, that he had no knowledge of the negotiations until they were concluded, and that he “was a young lad of 20 with no experience in real estate matters” who did only what his father and his banker instructed him to do. Dewey v. Lutz, 462 N.W.2d 435, 1990 N.D. LEXIS 200 (N.D. 1990).

Reliance.

Claims of deceit and fraud by an injured party against the tortfeasor’s insurer failed as a matter of law where the party negotiated a settlement with the tortfeasor’s insurer after having rejected the initial settlement offer which had been accompanied by a misrepresentation by the adjustor. Dvorak v. American Family Mut. Ins. Co., 508 N.W.2d 329, 1993 N.D. LEXIS 212 (N.D. 1993).

Suppression of a Fact.

House sellers who were aware that unusual conservation measures were necessary to avoid overloading the sewage system and who failed to disclose this fact to the buyers when specifically asked, thereby suppressed facts they were duty bound to disclose. Fitzgerald v. Balkowitsch, 288 N.W.2d 761, 1980 N.D. LEXIS 178 (N.D. 1980).

Collateral References.

False representation as to income, profits, or productivity of property as affected by scienter and intent of representative, 27 A.L.R.2d 14.

Action for fraud predicated on realty broker’s misrepresentation as to character, condition, location, quantity, or title of property, as affected by prinicipal’s knowledge as to falsity or making of representations, 58 A.L.R.2d 10, 29.

Liability for representations and express warranties in connection with sale of used motor vehicle, 36 A.L.R.3d 125.

Liability for warranty or representation that article, other than motor vehicle, is new, 36 A.L.R.3d 237.

Liability of bank, to other than party whose financial condition is misrepresented, for erroneous credit information furnished by bank or its directors, officers, or employees, 77 A.L.R.3d 6.

Law Reviews.

Reconsidering the Reliance Rules: The Restatement of Contracts and Promissory Estoppel in North Dakota, 66 N.D. L. Rev. 317 (1990).

Punitive Damages and Insurance: Are Punitive Damages Insurable? The North Dakota Supreme Court Says Yes, Despite North Dakota’s Public Policy to the Contrary, 70 N.D. L. Rev. 637 (1994).

Case Comment: Fraud - Rights of Action and Defenses: Statute Of Frauds Does Not Preclude the Assertion of a Deceit Claim, Irish Oil & Gas, Inc. v. Riemer, 2011 ND 22, 794 N.W.2d 715, see 87 N.D. L. Rev. 743 (2011).

9-10-03. Damages for deceit.

One who willfully deceives another with intent to induce that person to alter that person’s position to that person’s injury or risk is liable for any damage which that person thereby suffers.

Source:

Civ. C. 1877, § 974; R.C. 1895, § 3941; R.C. 1899, § 3941; R.C. 1905, § 5387; C.L. 1913, § 5943; R.C. 1943, § 9-1003.

Derivation:

Cal. Civ. C., 1709.

Notes to Decisions

Bank Director.

A director of a state bank was not liable for deceit on the ground that the continuation of the bank in business after insolvency was a false representation that it was solvent. Hart v. Evanson, 14 N.D. 570, 105 N.W. 942 (N.D. 1895).

Bank’s Nondisclosure of Customer’s Insolvency.

While the defendant bank was originally under no duty to divulge any information about the debtor’s credit status, once the bank chose to reply to the plaintiff creditor’s inquiry it had a duty to impart full, accurate, and truthful information. Ostlund Chem. Co. v. Norwest Bank, 417 N.W.2d 833, 1988 N.D. LEXIS 3 (N.D. 1988).

Where no conspiracy was alleged between a bank and its customer to deceive the payees of checks, the bank had no duty to disclose its customer’s insolvency, and evidence of a lending limit violation did not establish such a duty. Hellman v. Thiele, 413 N.W.2d 321, 1987 N.D. LEXIS 400 (N.D. 1987).

Complaint Insufficient.

District court properly dismissed a requester’s claims based on fraud because the requester had not pleaded facts establishing he had a contract with the State or its agencies; the State agencies’ obligation to provide records and collect any appropriate fees arose not by contract but under statute, specifically the open records law. Kuntz v. Bureau of Crim. Investigation, 2019 ND 46, 923 N.W.2d 513, 2019 N.D. LEXIS 53 (N.D. 2019).

Special master did not err in dismissing a husband’s deceit claim against a hospital because the husband’s complaint failed to allege facts establishing the hospital had a duty to disclose information about an employee or drug diversion; in addition, the husband did not allege representations made by the hospital or inquiries made by him or his wife that could give rise to a duty to disclose. Krebsbach v. Trinity Hosps., Inc., 2020 ND 24, 938 N.W.2d 133, 2020 N.D. LEXIS 24 (N.D. 2020).

Complaint Sufficient.

Plaintiff’s complaint properly stated a claim for deceit against defendant where it alleged that defendant promised there would be sufficient funds in his account to honor three checks totalling $11,793.50; plaintiff relied on the promise, as defendant intended; defendant was a debtor in a Chapter 12 bankruptcy case when the checks were issued and had liabilities of almost $900,000; defendant anticipated disposable income of $11,610 in the year previous; and defendant knew it was impossible to comply with his Chapter 12 plan and pay the checks. Rolin Mfg. v. Mosbrucker, 544 N.W.2d 132, 1996 N.D. LEXIS 48 (N.D. 1996).

Conditional Use Permit.

Landowners’ claim against a township for deceit, based on misrepresentation of law concerning amendments to zoning ordinances following issuance of a conditional use permit, was barred as a matter of law. Arnegard v. Arnegard Twp., 2018 ND 80, 908 N.W.2d 737, 2018 N.D. LEXIS 85 (N.D. 2018).

Corporate Liability.

A corporation is liable for deceit the same as a natural person. Gunderson v. Havanna-Clyde Mining Co., 22 N.D. 329, 133 N.W. 554, 1911 N.D. LEXIS 49 (N.D. 1911).

Measure of Damages.

The measure of damages in an action for deceit, in the absence of a claim for special or exemplary damages, is the difference in value in what was received or parted with, or what would have been received or parted with had the representations been true. Beare v. Wright, 14 N.D. 26, 103 N.W. 632, 1905 N.D. LEXIS 36 (N.D. 1905).

If the essential elements of actual fraud are present, a plaintiff can recover such damages as he has sustained through relying on the misrepresentations of a defendant in any transaction, whereby plaintiff has been induced to part with property or surrender some legal right, and thereby suffered loss and injury. Guild v. More, 32 N.D. 432, 155 N.W. 44, 1915 N.D. LEXIS 58 (N.D. 1915).

The amount of damages suffered by purchaser of mining stock by reason of deceit would be no more than the amount of money plaintiff paid for the stock, and the interest thereon from time of payment. Andrieux v. Kaeding, 47 N.D. 17, 181 N.W. 59, 1920 N.D. LEXIS 84 (N.D. 1920).

Employer suffered no damages from employees' competing business because (1) the two businesses were not in competition, and (2) the employer's fraud and conspiracy to defraud claims failed for lack of proof of actual damages. Serv. Oil, Inc. v. Gjestvang, 2015 ND 77, 861 N.W.2d 490, 2015 N.D. LEXIS 77 (N.D. 2015).

No Intent to Perform.

This section provides that one who willfully deceives another with the intent to induce him to alter his position is liable for damages from the resultant injuries. A promise made without any intention of performing is a deceit within the meaning of this section. State Bank v. Lindberg, 471 N.W.2d 470, 1991 N.D. LEXIS 107 (N.D. 1991).

Partnership Liability.

Partnership was the beneficiary, and not the victim of partner’s fraud, where partner’s knowledge of the fraud could be imputed to the partnership, and the purpose of the fraud was to continue to hide loans made to the partnership after directors of the lender prohibited its agent from making future loans. Woods Farmers Coop. Elevator Co. v. Z-Mega Farms Ltd. Pshp. I, 95 F.3d 693, 1996 U.S. App. LEXIS 23880 (8th Cir. N.D. 1996).

Statute of Frauds.

Statute of frauds did not preclude appellants’ deceit claim; it was based on an alleged deliberate misrepresentation of fact by appellee, and appellants claimed they relied on the misrepresentations and were deceived into transferring property. Appellants were seeking damages for reliance on the alleged misrepresentations, not enforcement of any agreement. McDougall v. AgCountry Farm Credit Servs., PCA, 2020 ND 6, 937 N.W.2d 546, 2020 N.D. LEXIS 23 (N.D. 2020).

Summary Judgment Proper.

Trial court’s grant of summary judgment was proper when bar owners failed to show actual damages incurred by alleged fraud perpetrated by undercover drug agents, who were employed by an intergovernmental task force, but failed to disclose this information when the agents sought employment with the bar. Grandbois & Grandbois, Inc. v. City of Watford City, 2004 ND 162, 685 N.W.2d 129, 2004 N.D. LEXIS 291 (N.D. 2004).

Collateral References.

Measure of damages for fraudulently procuring services at lowered rate or gratuitously, 24 A.L.R.2d 742.

9-10-04. Intent to defraud — Presumption.

One who practices a deceit with intent to defraud the public or a particular class of persons is deemed to have intended to defraud every individual in that class who actually is misled by the deceit.

Source:

Civ. C. 1877, § 976; R.C. 1895, § 3943; R.C. 1899, § 3943; R.C. 1905, § 5389; C.L. 1913, § 5945; R.C. 1943, § 9-1004.

Derivation:

Cal. Civ. C., 1711.

Notes to Decisions

Bank’s Nondisclosure of Customer’s Insolvency.

Where no conspiracy was alleged between a bank and its customer to deceive the payees of checks, the bank had no duty to disclose its customer’s insolvency, and evidence of a lending limit violation did not establish such a duty. Hellman v. Thiele, 413 N.W.2d 321, 1987 N.D. LEXIS 400 (N.D. 1987).

9-10-05. Restoration of property taken without consent — Exceptions.

One who obtains a thing without the consent of its owner, or by a consent afterwards rescinded, or by an unlawful exaction which the owner at the time could not refuse with prudence, shall restore it without demand to the person from whom it was obtained except in the following cases:

  1. When the person has acquired a title thereto superior to that of the person from whom the property was taken;
  2. When the transaction is corrupt and unlawful on both sides; or
  3. When a thing is obtained by mutual mistake, and in such case the party obtaining the thing is not bound to return it until that person has notice of the mistake.

Source:

Civ. C. 1877, §§ 977, 978; R.C. 1895, §§ 3944, 3945; R.C. 1899, §§ 3944, 3945; R.C. 1905, §§ 5390, 5391; C.L. 1913, §§ 5946, 5947; R.C. 1943, § 9-1005.

Derivation:

Cal. Civ. C., 1712, 1713.

Notes to Decisions

Moneys Paid Under Mistake.

A legal right of action to recover moneys paid under mistake arises out of the obligation imposed by law, and not out of contract. Chrysler Light & Power Co. v. Belfield, 58 N.D. 33, 224 N.W. 871, 1929 N.D. LEXIS 178 (N.D. 1929).

Warehouseman.

A warehouseman was liable for conversion of an automobile where he refused to deliver it to the true owner upon demand. Cunningham v. Lahr Motor Sales Co., 50 N.D. 846, 198 N.W. 347, 1924 N.D. LEXIS 38 (N.D. 1924).

It was not the intention of the legislature, in enacting former section 60-08-17, to change the fundamental rules of liability, contained in this section, further than to excuse a warehouseman for refusing to deliver goods to which an adverse claim is made during such reasonable time as may be required to ascertain the validity of the claim or to institute an action to compel the claimants to litigate the claim. Cunningham v. Lahr Motor Sales Co., 50 N.D. 846, 198 N.W. 347, 1924 N.D. LEXIS 38 (N.D. 1924).

9-10-06. Willful acts and negligence — Liability.

A person is responsible not only for the result of the person’s willful acts but also for an injury occasioned to another by the person’s want of ordinary care or skill in the management of the person’s property or self. The extent of the liability in such cases is defined by sections 32-03-01 through 32-03-18.

Source:

Civ. C. 1877, § 979; R.C. 1895, § 3946; R.C. 1899, § 3946; R.C. 1905, § 5392; C.L. 1913, § 5948; R.C. 1943, § 9-1006; S.L. 1973, ch. 78, § 3; 1999, ch. 50, § 4.

Derivation:

Cal. Civ. C., 1714.

Notes to Decisions

Comparative Negligence.

This statute was amended by the 1973 Legislature which adopted the doctrine of comparative negligence (former N.D.C.C. § 9-10-07) and the affirmative defenses of assumption of risk and contributory negligence are no longer the law of North Dakota. Wentz v. Deseth, 221 N.W.2d 101, 1974 N.D. LEXIS 216 (N.D. 1974).

Dangerous Circumstances.

Ordinary care varies with the circumstances and dangers involved; the greater the danger the greater the care required, and a person engaging in an act which the circumstances indicate may be dangerous and must take all the care which prudence would suggest to avoid injury. Chicago, M., St. P. & Pac. R.R. v. Johnstons Fuel Liners, Inc., 122 N.W.2d 140 (N.D. 1963).

Duty to Inform.

Both the employer of plaintiff and the manufacturer of the machine on which plaintiff was working when injured were liable where neither defendant gave the inexperienced plaintiff any warning of the dangers involved in working on the new potato-harvesting machine, where such dangers were not obvious to the plaintiff, and where a partially shielded sprocket and unshielded chain on the machine were within easy reach and were natural objects for plaintiff’s hand to contact in search of support when plaintiff lost her balance and fell with the result that plaintiff’s hand was caught in the chain and sprocket. Lindenberg v. Folson, 138 N.W.2d 573, 1965 N.D. LEXIS 102 (N.D. 1965).

Manufacturer actually has two duties: one is to give adequate instructions for safe use of the product, and the other is to give warning as to the dangers inherent in improper use. Seibel v. Symons Corp., 221 N.W.2d 50, 1974 N.D. LEXIS 219 (N.D. 1974).

Guests.

Where a plaintiff, at her own request, was riding with a third person who owned and controlled a horse and conveyance and whose judgment and capacity to drive plaintiff had no reason to doubt, the negligence of such person contributing to an injury sustained could not be imputed to the plaintiff. Ouverson v. Grafton, 5 N.D. 281, 65 N.W. 676, 1895 N.D. LEXIS 33 (N.D. 1895).

The driver of an automobile was liable for the death of a guest caused by overturned car where the accident resulted from the driver’s lack of care and his desire to do a dare-devil stunt and to frighten the guests in the car. McKeen v. Iverson, 47 N.D. 132, 180 N.W. 805, 1921 N.D. LEXIS 84 (N.D. 1921).

Intervening Cause.

An intervening cause will relieve a negligent party of liability only if it is a new and independent force which breaks the causal connection between the original wrong and the injury, and itself becomes the direct and immediate cause of the injury. Chicago, M., St. P. & Pac. R.R. v. Johnstons Fuel Liners, Inc., 122 N.W.2d 140 (N.D. 1963).

Landlord and Tenant.

Landlord has duty to apprise tenant of dangerous conditions causing foreseeable unreasonable risk to persons, including social guests, if there is reason to expect that tenant will not discover such condition. Francis v. Pic, 226 N.W.2d 654, 1975 N.D. LEXIS 199 (N.D. 1975).

This section does not apply to govern the standard of care owed by a landlord to a tenant. Bellemare v. Gateway Builders, 420 N.W.2d 733, 1988 N.D. LEXIS 51 (N.D. 1988).

Manufacturer’s Liability.

Where danger to an employee or ultimate user may be reasonably anticipated, a warning to an immediate employer or supplier does not necessarily insulate the manufacturer from liability. Seibel v. Symons Corp., 221 N.W.2d 50, 1974 N.D. LEXIS 219 (N.D. 1974).

Master and Servant.

It is the duty of a master to provide safe and proper machinery in the control of competent servants. Warehime v. Huseby, 38 N.D. 344, 165 N.W. 502, 1917 N.D. LEXIS 36 (N.D. 1917).

Municipalities.

A city is answerable for injuries sustained as a result of failure to repair sidewalks. Chacey v. Fargo, 5 N.D. 173, 64 N.W. 932, 1895 N.D. LEXIS 21 (N.D. 1895).

A city, under the statutes in effect in 1899, was liable for negligence of officers for failing to repair sidewalks. Coleman v. Fargo, 8 N.D. 69, 76 N.W. 1051, 1898 N.D. LEXIS 19 (N.D. 1898); Trost v. Casselton, 8 N.D. 534, 79 N.W. 1071, 1899 N.D. LEXIS 43 (N.D. 1899).

Negligence.

The question of negligence, if from the facts reasonable men might draw different conclusions or deductions, must be left to the jury. Heckman v. Evenson, 7 N.D. 173, 73 N.W. 427, 1897 N.D. LEXIS 60 (N.D. 1897).

The setting of fire to the bottom of a strawstack, where the ground was covered with snow, was not negligence, though the fire escaped after twelve days and after a second snow storm. Hogan v. Bragg, 41 N.D. 203, 170 N.W. 324, 1918 N.D. LEXIS 143 (N.D. 1918).

When but one conclusion can reasonably be drawn from conceded facts, the question of negligence is a question of law. Ferm v. Great N. Ry., 53 N.D. 543, 207 N.W. 39, 1926 N.D. LEXIS 5 (N.D. 1926); Billingsley v. McCormick Transfer Co., 58 N.D. 913, 228 N.W. 424, 1929 N.D. LEXIS 296 (N.D. 1929).

Wrongful death claim under N.D.C.C. § 32-21-01 fell squarely within the protections of N.D.C.C. §§ 9-10-01 and 9-10-06 because, in this case, bar owners undertook a duty to act with due care when they physically ejected an intoxicated person from their bar in the midst of winter. Because there was a factual dispute as to whether the bar owners exercised reasonable and ordinary care in ejecting the decedent from the bar a second time, and whether injury or death was foreseeable as a result of the ejection, judgment on the pleadings was not appropriate. Hoff v. Elkhorn Bar, 613 F. Supp. 2d 1146, 2009 U.S. Dist. LEXIS 58752 (D.N.D. 2009).

Under N.D.C.C. §§ 9-10-01 and 9-10-06, the district court erred by deciding only whether the landowner had a duty to protect plaintiff from the driver’s presumed negligence and failing to analyze whether the landowner had a separate duty to avoid injury to plaintiff under general negligence principles or under premises liability law. Saltsman v. Sharp, 2011 ND 172, 803 N.W.2d 553, 2011 N.D. LEXIS 172 (N.D. 2011).

Injured party, who claimed that she was pushed to the ground by an intoxicated person, could pursue a negligence claim for premises liability against the bar that served the intoxicated person. Forsman v. Blues, Brews and Bar-B-Ques, Inc., 2012 ND 184, 820 N.W.2d 748, 2012 N.D. LEXIS 186 (N.D. 2012).

Negligent Failure to Discover Mistake.

If one pays money under a mutual mistake of fact, and if he had in his hands the present means of ascertaining the fact but negligently omitted to do so, he cannot recover if on account of his negligence the other party has lost a valuable right and cannot be placed in status quo. Fegan v. Great N. Ry., 9 N.D. 30, 81 N.W. 39, 1899 N.D. LEXIS 131 (N.D. 1899).

Parent and Child.

Except for guest statute no exception under this section would prevent unemancipated minor automobile passenger from bringing tort action against parents to recover for injury sustained in automobile collision. Nuelle v. Wells, 154 N.W.2d 364, 1967 N.D. LEXIS 109 (N.D. 1967).

The law does not require a housewife to keep her child within her sight every moment, but merely to exercise such degree of care as is reasonable under all the circumstances of the case. Perleberg v. General Tire & Rubber Co., 221 N.W.2d 729, 1974 N.D. LEXIS 175 (N.D. 1974).

Products Liability.

Manufacturers must use reasonable care in designing their products to protect users against unreasonable risk of harm while putting the product to reasonably foreseeable use; thus it was a jury question whether auto manufacturer had been negligent in the design and placement of gas tank and whether rear-end collision of sufficient force to burst gas tank was reasonably foreseeable. Johnson v. American Motors Corp., 225 N.W.2d 57, 1974 N.D. LEXIS 146 (N.D. 1974) (expressly adopting Restatement (2d) Torts § 402A).

Proximate Cause.

The question of the proximate cause of a fire for which damages are claimed is a question for the jury. Pielke v. Chicago, M. & St. P. Ry., 41 N.W. 669, 5 Dakota 444, 1889 Dakota LEXIS 3 (Dakota 1889); Gram v. Northern Pac. Ry., 1 N.D. 252, 46 N.W. 972, 1890 N.D. LEXIS 32 (N.D. 1890); Johnson v. Northern Pac. Ry., 1 N.D. 354, 48 N.W. 227, 1890 N.D. LEXIS 41 (N.D. 1890).

The proximate cause of injuries sustained by a switchman on a railway is for the jury. Bennett v. Northern Pac. Ry., 2 N.D. 112, 49 N.W. 408, 1891 N.D. LEXIS 25 (N.D. 1891); Bennett v. Northern Pac. Ry., 3 N.D. 91, 54 N.W. 314, 1892 N.D. LEXIS 13 (N.D. 1892); Boss v. Northern Pac. Ry., 2 N.D. 128, 49 N.W. 655, 1891 N.D. LEXIS 33 (N.D. 1891).

Proximate cause need not be the last negligent act in point of time, but is fixed by determining the responsible cause without regard to its time or place in the succession of events that resulted in the injury. Chicago, M., St. P. & Pac. R.R. v. Johnstons Fuel Liners, Inc., 122 N.W.2d 140 (N.D. 1963).

Absent any allegation of fraud, an accounting firm has no liability for negligence towards creditors or investors who may rely on their report unless the report was undertaken for a specific transaction and primarily for the benefit of the third party. Bunge Corp. v. Eide, 372 F. Supp. 1058, 1974 U.S. Dist. LEXIS 9239 (D.N.D. 1974).

Railroads.
—In General.

A railway company is responsible for negligence committed on its tracks on a right of way which it was using regardless of the title to the right of way. Gram v. Northern Pac. Ry., 1 N.D. 252, 46 N.W. 972, 1890 N.D. LEXIS 32 (N.D. 1890).

A railway company is required to exercise care in approaching a private railroad crossing. Bishop v. Chicago, M. & St. P. R. Co., 4 N.D. 536, 62 N.W. 605, 1895 N.D. LEXIS 50 (N.D. 1895).

—Intoxicated Passenger.

Where a railway company carried an intoxicated passenger past his station to the next, where he was put off and left out in the cold, and as the result of the exposure died, the company was answerable in damages. Haug v. Great N. Ry., 8 N.D. 23, 77 N.W. 97, 43 L.R.A. 664 (1898), overruled on other grounds, Hopkins v. McBane, 427 N.W.2d 85, 77 A.L.R.4th 391 (N.D. 1988), distinguished, Olson v. Minneapolis, St. P. & S.S.M. Ry., 43 N.D. 371, 175 N.W. 371 (1919), see also, Puppe v. A.C. & S., Inc., 733 F. Supp. 1355, 1990 U.S. Dist. LEXIS 3418 (D.N.D. 1990).

Warehouseman.

Where a warehouse filled with grain was destroyed, the burden of proof in a suit to recover for grain stored was upon the warehouseman to show that the grain for which suit was brought was destroyed by fire. Marshall v. Andrews, 8 N.D. 364, 79 N.W. 851, 1899 N.D. LEXIS 20 (N.D. 1899).

DECISIONS UNDER PRIOR LAW

Apportionment of Damages.

Where negligence of both drivers contributed to collision, recovery was completely barred in an action for wrongful death; this section did not authorize court to apportion damages between parties according to degree of their liability. Krise v. Gillund, 184 N.W.2d 405, 1971 N.D. LEXIS 157 (N.D. 1971).

Assumption of Risk.

In order to establish assumption of risk as a defense under this statute, it must be shown that plaintiff was aware of the conditions creating the risk and voluntarily assumed the risk. Borstad v. La Roque, 98 N.W.2d 16, 1959 N.D. LEXIS 95 (N.D. 1959); Wheat v. Patterson, 154 N.W.2d 367, 1967 N.D. LEXIS 107 (N.D. 1967).

Contributory Negligence.

This section does not obviate the common-law rule as to contributory negligence. Bostwick v. Minneapolis & Pac. R.R., 2 N.D. 440, 51 N.W. 781, 1892 N.D. LEXIS 25 (N.D. 1892).

Abandonment of the long-standing rule of contributory negligence would require the selection of one of a number of interpretations of the comparative negligence rule and is a change of such magnitude that it should be made by legislative, rather than judicial, action. Krise v. Gillund, 184 N.W.2d 405, 1971 N.D. LEXIS 157 (N.D. 1971).

Collateral References.

Motorist’s liability for striking person lying in road, 41 A.L.R.4th 303.

Liability of physician, for injury to or death of third party, due to failure to disclose driving-related impediment, 43 A.L.R.4th 153.

Liability of land carrier to passenger who becomes victim of another passenger’s assault, 43 A.L.R.4th 189.

Tavernkeeper’s liability to patron for third persons’ assault, 43 A.L.R.4th 281.

Personal injury liability of civil engineer for negligence in highway or bridge construction or maintenance, 43 A.L.R.4th 911.

Security guard company’s liability for negligent hiring, supervision, retention, or assignment of guard, 44 A.L.R.4th 620.

Probation officer’s liability for negligent supervision of probationer, 44 A.L.R.4th 638.

Recoverability from tort-feasor of cost of diagnostic examinations absent proof of actual bodily injury, 46 A.L.R.4th 1151.

Personal injury or property damage caused by lightning as basis of tort liability, 46 A.L.R.4th 1170.

Liability for injury to martial arts participant, 47 A.L.R.4th 403.

Liability of telephone company for mistakes in or ommissions from its directory, 47 A.L.R.4th 882.

Physician’s tort liability for unauthorized disclosure of confidential information about patient, 48 A.L.R.4th 668.

Medical malpractice: res ipsa loquitur in negligent anesthesia cases, 49 A.L.R.4th 63.

Parking facility proprietor’s liability for criminal attack on patron, 49 A.L.R.4th 1257.

Negligence in preparing abstract of title as ground of liability to one other than person ordering abstract, 50 A.L.R.4th 314.

Liability of hospital or sanitarium for negligence of physician or surgeon, 51 A.L.R.4th 235.

Modern status of rule of absolute or strict liability for dogbite, 51 A.L.R.4th 446.

Placement, maintenance, or design of standing utility pole as affecting private utility’s liability for personal injury resulting from vehicle’s collision with pole within or beside highway, 51 A.L.R.4th 602.

Liability of employer, supervisor, or manager for intentionally or recklessly causing employee emotional distress, 52 A.L.R.4th 853.

Tennis club’s liability for tennis player’s injuries, 52 A.L.R.4th 1253.

Liability of proprietor of store, business, or place of amusement, for injury to one using baby stroller, shopping cart, or the like, furnished by defendant, 42 A.L.R.5th 159.

Liability of owner or operator of business premises for injuries from electrically operated door, 44 A.L.R.5th 525.

Malpractice: Physician’s liability for injury or death resulting from side effects of drugs intentionally administered to or prescribed for patient, 47 A.L.R.5th 433.

Malpractice in diagnosis and treatment of male urinary tract and related organs, 48 A.L.R.5th 575.

Liability of hotel, motel, resort, or private membership club or association operating swimming pool, for injury or death of guest or member, 55 A.L.R.5th 463.

Liability of participant in team athletic competition for injury to or death of another participant, 55 A.L.R.5th 529.

Hospital liability as to diagnosis and care of patients in emergency room, 58 A.L.R.5th 613.

Recovery for emotional distress based on fear of contracting HIV or AIDS, 59 A.L.R.5th 535.

Coverage of professional-liability or -indemnity policy for sexual contact with patients by physicians, surgeons, and other healers, 60 A.L.R.5th 239.

Products liability: cement and concrete, 60 A.L.R.5th 413.

Physical injury requirement for emotional distress claim based on false positive conclusion on medical test diagnosing disease, 69 A.L.R.5th 411.

Skier’s liability for injuries to or death of another person, 75 A.L.R.5th 583.

Law Reviews.

Looking Back on a Century of Complete Codification of the Law, 53 N.D. L. Rev. 223 (1976).

Negligence and Secondary School Sports Injuries in North Dakota: Who Bears the Legal Liability?, 62 N.D. L. Rev. 455 (1986).

9-10-07. Comparative negligence. [Repealed]

Repealed by S.L. 1987, ch. 404, § 13, as amended by S.L. 1993, ch. 324, § 1.

CHAPTER 9-11 Transfer and Performance of Obligation or Offer

9-11-01. Transfer of rights.

A right arising out of an obligation is the property of the person to whom it is due and may be transferred as such.

Source:

Civ. C. 1877, § 818; R.C. 1895, § 3782; R.C. 1899, § 3782; R.C. 1905, § 5227; C.L. 1913, § 5783; R.C. 1943, § 9-1101.

Derivation:

Cal. Civ. C., 1458, 1459.

Notes to Decisions

Action for Deceit.

A cause of action for deceit is not assignable under this section. Grabow v. Bergeth, 59 N.D. 214, 229 N.W. 282, 1930 N.D. LEXIS 134 (N.D. 1930).

Contract Between Dealer and Distributor.

After a contract between an automobile distributor and a dealer had been canceled and obligations of dealer fully discharged, money due on the contract could be assigned by the dealer despite a stipulation against assignment of the agreement. Dixon-Reo Co. v. Horton Motor Co., 49 N.D. 304, 191 N.W. 780, 1922 N.D. LEXIS 56 (N.D. 1922).

Contract for Sale of Land.

A contract for the sale of land, in so far as it expresses the purchaser’s obligation to pay the price, is transferable without the purchaser’s consent. First Sec. Bank v. Hillesland, 62 N.D. 31, 241 N.W. 289, 1932 N.D. LEXIS 147 (N.D. 1932).

Lease.

Under a lease and bond to pay rent, the right to the rent was the property of the lessor, and it was transferable as such. Gardner v. Stangebye, 48 N.D. 513, 185 N.W. 369, 1921 N.D. LEXIS 72 (N.D. 1921).

Collateral References.

Assignability of warranty of goods and chattel, 17 A.L.R.2d 1196.

Validity of anti-assignment clause in contract, 37 A.L.R.2d 1251.

Partnership: construction, application, and effect of Uniform Partnership Act, § 25(2)(b), relating to nonassignability of partner’s right in specific partnership property, 39 A.L.R.2d 1365.

Personal injury or death, assignability of claim for, 40 A.L.R.2d 500, 33 A.L.R.4th 82.

Motor vehicle, assignment of lien for storage of, 48 A.L.R.2d 894, 85 A.L.R.3d 199.

Wages: assignability of statutory claim against employer for nonpayment of wages, 48 A.L.R.2d 1385.

Personal property, assignability of claim in tort for damage to, 57 A.L.R.2d 603.

Inventions: assignability of rights under “shop right rule” or license giving employer limited rights in employees’ inventions and discoveries, 61 A.L.R.2d 356, 408.

Patent licensing contract, assignability of licensee’s right under, 66 A.L.R.2d 606.

License: right to withdraw application to procure or transfer liquor license, 73 A.L.R.2d 1223.

Malicious prosecution, assignability of claim for, 76 A.L.R.2d 1286.

Civil rights statute, assignability and survivability of cause of action created by, 88 A.L.R.2d 1153.

Wages: law governing assignment of, 1 A.L.R.3d 927.

Modern status and application of rule that only voluntary transfer or assignment of claim against United States is within Assignment of Claims Act (31 USCS sec. 203, 41 USCS sec. 15), 44 A.L.R. Fed. 775.

9-11-02. Transfer by endorsement — Non-negotiable written contract.

A non-negotiable written contract for the payment of money or personal property may be transferred by endorsement in like manner with negotiable instruments. Such endorsement transfers all the rights of the assignor under the instrument to the assignee subject to all equities and defenses existing in favor of the maker at the time of the endorsement.

Source:

Civ. C. 1877, § 819, R.C. 1895, § 3783; R.C. 1899, § 3783; R.C. 1905, § 5228; C.L. 1913, § 5784; R.C. 1943, § 9-1102.

Derivation:

Cal. Civ. C., 1460.

Notes to Decisions

Endorsee of Negotiable Paper.

The word “assigns”, as used in former section 26-09-02 (now 26.1-11-03), making unenforceable an obligation owed to a foreign insurer doing business in the state without authority, does not include the endorsee of negotiable paper who takes the same before maturity, for value, and without notice of defense thereto. National Bank of Commerce v. Pick, 13 N.D. 74, 99 N.W. 63, 1904 N.D. LEXIS 16 (N.D. 1904).

9-11-03. Transfer of burden requires beneficiary’s consent.

The burden of an obligation may be transferred with the consent of the party entitled to its benefit, but not otherwise, except as provided by section 47-04-29.

Source:

Civ. C. 1877, § 817; R.C. 1895, § 3781; R.C. 1899, § 3781; R.C. 1905, § 5226; C.L. 1913, § 5782; R.C. 1943, § 9-1103.

Derivation:

Cal. Civ. C., 1457.

Cross-References.

Covenants running with land, see §§ 47-04-24 to 47-04-30.

Notes to Decisions

Obligation Not Transferred.

The transfer of land was not a transfer of any part of a contractual payment obligation, where the exception provided in section 47-04-29 did not apply and there was no consent of the party entitled to its benefit. Murphy v. Murphy (In re Estate of Murphy), 554 N.W.2d 432, 1996 N.D. LEXIS 221 (N.D. 1996).

Vendee.

A vendee in an executory contract for sale of land cannot be compelled to accept the deed of a third party, where the contract contains personal covenants of the vendor which do not run with the land. Wilhite v. Central Inv. Properties, 409 N.W.2d 348, 1987 N.D. LEXIS 360 (N.D. 1987).

9-11-04. Want of performance or offer — When excused.

The want of performance of an obligation or of an offer of performance, in whole or in part, or any delay therein, is excused by the following causes to the extent to which they operate:

  1. When such performance or offer is prevented or delayed by the act of the creditor or by the operation of law, even though there may have been a stipulation that this may not be an excuse;
  2. When it is prevented or delayed by an irresistible superhuman cause or by the act of public enemies of this state or of the United States, unless the parties have agreed expressly to the contrary; or
  3. When the debtor is induced not to perform or offer performance by any act of the creditor at or before the time at which such performance or offer may be made and which the creditor has not rescinded before that time.

Source:

Civ. C. 1877, § 855; R.C. 1895, § 3820; R.C. 1899, § 3830; R.C. 1905, § 5265; C.L. 1913, § 5821; R.C. 1943, § 9-1104.

Derivation:

Cal. Civ. C., 1511.

Notes to Decisions

Accidental Fire.

Accidental fire, not caused by lightning, is not “an irresistible superhuman cause” and will not excuse from the performance of an obligation unless specially so stipulated, or when the party is bound only to the exercise of reasonable care and diligence. Clay County v. Simonsen, 46 N.W. 592, 1 Dakota 403, 1877 Dakota LEXIS 10 (Dakota 1877).

Sale of Real Estate.

Act of defendant, who purchased real estate from plaintiff under a bond for a deed contract, in obtaining a deed of conveyance of the land in question from the plaintiff’s grantee, to whom land was transferred after the debt matured, was of such a nature as to exonerate plaintiff from giving the defendant title. Shelly v. Mikkelson, 5 N.D. 22, 63 N.W. 210, 1895 N.D. LEXIS 7 (N.D. 1895).

Submission to Jury.

It is proper to submit to a jury the sufficiency of plaintiff’s tender to perform or his justification in refusing to perform, if the parties differ from the true consideration. Pattee v. Prall, 45 N.D. 107, 176 N.W. 659, 1920 N.D. LEXIS 106 (N.D. 1920).

Collateral References.

Prevention of performance as bar to claim of dissatisfaction under provision in private building and construction contract that work must be done to satisfaction of owner, 44 A.L.R.2d 1114, 1128.

9-11-05. Benefits awarded to debtor.

If the performance of an obligation is prevented by the creditor, the debtor is entitled to all the benefits which the debtor would have obtained if it had been performed by both parties.

Source:

Civ. C. 1877, § 856; R.C. 1895, § 3821; R.C. 1899, § 3821; R.C. 1905, § 5266; C.L. 1913, § 5822; R.C. 1943, § 9-1105.

Derivation:

Cal. Civ. C., 1512.

Notes to Decisions

Party Preventing Performance.

A party who prevents the performance of a contract is not permitted to derive benefit from the failure of the other party to perform. Shelly v. Mikkelson, 5 N.D. 22, 63 N.W. 210, 1895 N.D. LEXIS 7 (N.D. 1895).

9-11-06. Ratable proportion of benefits awarded to debtor.

If performance of an obligation is prevented by any cause excusing performance, other than the act of the creditor, the debtor is entitled to a ratable proportion of the consideration to which the debtor would have been entitled upon full performance according to the benefit which the creditor receives from the actual performance.

Source:

Civ. C. 1877, § 857; R.C. 1895, § 3822; R.C. 1899, § 3822; R.C. 1905, § 5267; C.L. 1913, § 5823; R.C. 1943, § 9-1106.

Derivation:

Cal. Civ. C., 1514.

9-11-07. Refusal before offer — Equivalent to offer and refusal — Exception.

A refusal by a creditor to accept performance made before an offer thereof is equivalent to an offer and refusal unless before performance actually is due the creditor gives notice to the debtor of the creditor’s willingness to accept it.

Source:

Civ. C. 1877, § 858; R.C. 1895, § 3823; R.C. 1899, § 3823; R.C. 1905, § 5268; C.L. 1913, § 5824; R.C. 1943, § 9-1107.

Derivation:

Cal. Civ. C., 1515.

Notes to Decisions

Refusal to Abide by Terms.

The party who has not broken his compact is not allowed to treat it as in force for the purpose of performing in direct opposition to the refusal of the other to abide by its terms, and then enforce the payment of the contract price. Hart-Parr Co. v. Finley, 31 N.D. 130, 153 N.W. 137, 1915 N.D. LEXIS 159 (N.D. 1915); 42 N.D. 255, 172 N.W. 829 (1919).

Collateral References.

Will or conveyance of property at death in consideration of support or services, recovery of damages for breach of contract for, during promisor’s lifetime, 7 A.L.R.2d 1166, 1171.

9-11-08. Definitions. [Repealed]

Repealed by S.L. 1981, ch. 91, § 66.

9-11-09. Assignment of account receivable. [Repealed]

Repealed by S.L. 1973, ch. 79, § 1.

CHAPTER 9-12 Extinction of Obligation

9-12-01. Extinction by full performance.

Upon acceptance by the creditor, full performance extinguishes an obligation if done by the party whose duty it is to perform it or by any other person on that party’s behalf and with that party’s assent.

Source:

Civ. C. 1877, § 827; R.C. 1895, § 3792; R.C. 1899, § 3792; R.C. 1905, § 5237; C.L. 1913, § 5793; R.C. 1943, § 9-1201.

Derivation:

Cal. Civ. C., 1473.

Notes to Decisions

Payment of Mortgage.

The payment of a mortgage by one primarily liable satisfies the debt. Morris v. Twichell, 63 N.D. 747, 249 N.W. 905, 1933 N.D. LEXIS 231 (N.D. 1933).

Prohibition on Payment of Further Dividends.

Although the shareholder argued that the prohibition on payment of further dividends should not be given effect because no purchase agreement was prepared as called for by the December 28, 2001, offer and because the closing was delayed beyond the contemplated closing date of the end of March 2002, the shareholder accepted payment for his shares of stock when the sale was finally closed on September 12, 2002; a party who accepts performance in a manner different from that required by contract acquiesces in any nonconforming performance. Bernabucci v. Huber, 2006 ND 71, 712 N.W.2d 323, 2006 N.D. LEXIS 74 (N.D. 2006).

9-12-02. Performance of obligation to one person — Extinguishment — Exception.

An obligation in favor of several persons is extinguished by performance rendered to any of them, except in the case of a deposit made by owners in common or in joint ownership which is regulated by the provisions of title 60.

Source:

Civ. C. 1877, § 829; R.C. 1895, § 3794; R.C. 1899, § 3794; R.C. 1905, § 5239; C.L. 1913, § 5795; R.C. 1943, § 9-1202.

Derivation:

Cal. Civ. C., 1475.

9-12-03. Performance of obligation by one person.

Performance of an obligation by one of several persons who are liable jointly under it extinguishes the liability of all persons who are liable jointly thereon.

Source:

Civ. C. 1877, § 828; R.C. 1895, § 3793; R.C. 1899, § 3793; R.C. 1905, § 5238; C.L. 1913, § 5794; R.C. 1943, § 9-1203.

Derivation:

Cal. Civ. C., 1474.

Notes to Decisions

Unsatisfied Amount of Judgment.

District court erred in denying an assignee’s application for a charging order against a second guarantor because the assignee could statutorily take an assignment of a bank against two guarantors, the assignee could then take an assignment of the judgment from the first guarantor to enforce his right of contribution from the second guarantor for the “unsatisfied amount of the judgment,” and the second guarantor did not present any evidence contesting the amount of his proportional share of the unsatisfied amount of the judgment, and any execution sought against the second guarantor was only for his proportionate share. Open Rd. Trucking, LLC v. Swanson, 2019 ND 295, 936 N.W.2d 72, 2019 N.D. LEXIS 301 (N.D. 2019).

9-12-04. Performance directed by creditor.

If a creditor, or any one of two or more joint creditors, at any time directs the debtor to perform the debtor’s obligation in a particular manner, the obligation is extinguished by performance in that manner even though the creditor does not receive the benefit of such performance.

Source:

Civ. C. 1877, § 830; R.C. 1895, § 3795; R.C. 1899, § 3795; R.C. 1905, § 5240; C.L. 1913, § 5796; R.C. 1943, § 9-1204.

Derivation:

Cal. Civ. C., 1476.

9-12-05. Partial performance — Extinction pro tanto.

A partial performance of an indivisible obligation extinguishes a corresponding proportion thereof if the benefit of such performance is retained voluntarily by the creditor, but not otherwise. If such partial performance is of such a nature that the creditor cannot avoid retaining it without injuring the creditor’s own property, the creditor’s retention thereof is not presumed to be voluntary.

Source:

Civ. C. 1877, § 831; R.C. 1895, § 3796; R.C. 1899, § 3796; R.C. 1905, § 5241; C.L. 1913, § 5797; R.C. 1943, § 9-1205.

Derivation:

Cal. Civ. C., 1477.

Notes to Decisions

Partial Payment.

A partial payment of an obligation does not preclude recovery of the balance due. Anderson v. First Nat'l Bank, 4 N.D. 182, 59 N.W. 1029, 1894 N.D. LEXIS 26 (N.D. 1894).

Under a general collateral agreement the law applies payments and discharges the debt pro tanto. Styles v. Dickey, 22 N.D. 515, 134 N.W. 702, 1912 N.D. LEXIS 38 (N.D. 1912).

9-12-06. Payment defined.

Performance of an obligation for the delivery of money only is called payment.

Source:

Civ. C. 1877, § 832; R.C. 1895, § 3797; R.C. 1899, § 3797; R.C. 1905, § 5242; C.L. 1913, § 5798; R.C. 1943, § 9-1206.

Derivation:

Cal. Civ. C., 1478.

Notes to Decisions

Collateral Security.

The giving of collateral security does not constitute payment. Star Wagon Co. v. Matthiessen, 14 N.W. 107, 3 Dakota 233, 1882 Dakota LEXIS 16 (Dakota 1882).

9-12-07. Performance when there are several obligations — Application.

When a debtor under several obligations to another does an act by way of performance, in whole or in part, which is applicable equally to two or more of such obligations, such performance must be applied as follows:

  1. If, at the time of the performance, the intention or desire of the debtor that such performance should be applied to the extinction of any particular obligation is manifested to the creditor, it must be applied in such manner.
  2. If no such application is then made, the creditor, within a reasonable time after such performance, may apply it toward the extinction of any obligation the performance of which was due to the creditor from the debtor at the time of such performance, except that if similar obligations were due to the creditor both individually and as a trustee, unless otherwise directed by the debtor, the creditor shall apply the performance to the extinction of all such obligations in equal proportion. An application once made by the creditor cannot be rescinded without the consent of the debtor.
  3. If neither party makes such application within the time prescribed herein, the performance must be applied to the extinction of obligations in the following order, and if there is more than one obligation of a particular class, to the extinction of all in that class ratably.
    1. Of interest due at the time of the performance.
    2. Of principal due at the time of performance.
    3. Of the obligation earliest in date of maturity.
    4. Of an obligation not secured by a lien or collateral undertaking.
    5. Of an obligation secured by a lien or collateral undertaking.

Source:

Civ. C. 1877, § 833; R.C. 1895, § 3798; R.C. 1899, § 3798; R.C. 1905, § 5243; C.L. 1913, § 5799; R.C. 1943, § 9-1207.

Derivation:

Cal. Civ. C., 1479.

Cross-References.

Specific performance, see ch. 32-04.

Notes to Decisions

Application of Payment.
—In General.

If the debtor fails to direct the application, the creditor may apply a payment in conformity with the statute. Foster County State Bank v. Hester, 18 N.D. 135, 119 N.W. 1044, 1909 N.D. LEXIS 10 (N.D. 1909).

Undesignated payments are applied on accounts earliest in date of maturity. Emmons County v. Kleppe, 61 N.D. 536, 238 N.W. 651, 1931 N.D. LEXIS 305 (N.D. 1931).

If a debtor gives no specific instructions as to the application of payment, the creditor may apply it to any one of the secured claims or to the most precarious. Depositors' Holding Co. v. Brown, 64 N.D. 222, 251 N.W. 295, 1933 N.D. LEXIS 268 (N.D. 1933).

—Child Support Arrearages.

Absent a contrary agreement between the parties, payments applied to child support arrearages should be applied first to any interest due on the earliest maturing child support payment, and then to any principal due on that payment, with any excess going to the next earliest maturing support payment, to be applied in the same manner, first to interest, then to principal. Martin v. Rath, 1999 ND 31, 589 N.W.2d 896, 1999 N.D. LEXIS 33 (N.D. 1999).

—Collateral Agreement.

Under a collateral agreement the law applies payment and discharges the debt pro tanto. Styles v. Dickey, 22 N.D. 515, 134 N.W. 702, 1912 N.D. LEXIS 38 (N.D. 1912).

—Debts of Debtor.

A direction as to the application of a payment made prior to payment and not changed at or before payment sufficiently manifests the debts of the debtor as to application. First Nat'l Bank v. Roberts, 2 N.D. 195, 49 N.W. 722, 1891 N.D. LEXIS 35 (N.D. 1891).

Debtor did not communicate to creditor how checks were to be applied by mere notation on face of the checks as written by third party, so that creditor acted properly under this section in applying payments to oldest debts first, including debt secured by an unrecorded retail installment contract. Hansen v. Fettig, 179 N.W.2d 739, 1970 N.D. LEXIS 134 (N.D. 1970).

It was not clearly erroneous to find debtors did not manifest an intent, under N.D.C.C. § 9-12-07(1), to first apply credit account payments to a ring because the evidence showed the debtors had no such agreement with a seller and manifested no such intent. Royal Jewelers Inc. v. Light, 2015 ND 44, 859 N.W.2d 921, 2015 N.D. LEXIS 43 (N.D. 2015).

—Mortgage.

Where a debtor pays part of an indebtedness secured by a mortgage, and directs that it be applied on the mortgage, the mortgage is reduced, and the creditor cannot thereafter apply the payment upon another debt. Hagen v. Dwyer, 36 N.D. 346, 162 N.W. 699, 1917 N.D. LEXIS 199 (N.D. 1917).

Proceeds of Sale of Collateral.

Where this section does not govern the application of proceeds from the sale of collateral, and there is no agreement requiring a specific application, the duty devolves on the court to make such application guided by the principles of equity and justice under the facts of each case. State Bank v. Nester, 385 N.W.2d 95, 1986 N.D. LEXIS 288 (N.D. 1986).

Voluntary Performance.

A debtor performs when he voluntarily makes a payment to the creditor. State Bank v. Nester, 385 N.W.2d 95, 1986 N.D. LEXIS 288 (N.D. 1986).

The funds applied by the bank to reduce the loan balance did not come from a voluntary payment by defendant but rather via court-ordered liquidation of the collateral. This does not constitute voluntary performance. State Bank v. Nester, 385 N.W.2d 95, 1986 N.D. LEXIS 288 (N.D. 1986).

In a divorce case, a husband was not purged of contempt as to unpaid spousal support by his surety’s payment on a supersedeas bond; the wife was entitled to apply the surety’s payment to unpaid property distribution obligations because the husband did not pay voluntarily and did not request a particular allocation until after payment was made. Kautzman v. Kautzman, 2003 ND 140, 668 N.W.2d 59, 2003 N.D. LEXIS 153 (N.D. 2003).

9-12-08. Extinction by offer — Exception.

An obligation is extinguished by an offer of performance made in conformity to the provisions set out in this chapter and with intent to extinguish the obligation. An offer of partial performance, however, is of no effect.

Source:

Civ. C. 1877, §§ 834, 835; R.C. 1895, §§ 3799, 3800; R.C. 1899, §§ 3799, 3800; R.C. 1905, §§ 5244, 5245; C.L. 1913, §§ 5800 R.C. 1943, § 9-1208.

Derivation:

Cal. Civ. C., 1485, 1486.

Notes to Decisions

Contract for Sale of Land.

If the covenants of a contract for the sale of land are mutual and dependent, and the vendor’s obligation to convey depends upon certain payments, and time is not of the essence of the contract, the vendee can place the vendor in default by tendering performance, and without such tender he cannot rescind the contract and recover back the payments made. Arnett v. Smith, 11 N.D. 55, 88 N.W. 1037, 1902 N.D. LEXIS 183 (N.D. 1902).

An offer of performance by the vendee under a contract for the sale of land with present ability to perform is sufficient without production of the money and notes. Foster County Implement Co. v. Smith, 17 N.D. 178, 115 N.W. 663, 1908 N.D. LEXIS 23 (N.D. 1908).

Offer of Restoration.

An offer of restoration, being an offer of partial performance, is of no effect. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

Partial Performance.

Where borrower did not tender the February and March 1993 mortgage payments until May 4, 1993, so that by that time the April and May 1993 payments were also delinquent, the tendered payment did not bring the loan current; borrower therefore did not tender the performance of his obligation, but only tendered partial performance. While an obligation is extinguished by an offer of performance intended to extinguish the obligation, an offer of partial performance is of no effect and borrower was not released from any obligation to pay interest on the debt. Resolution Trust Corp. v. Gosbee, 536 N.W.2d 698, 1995 N.D. LEXIS 140 (N.D. 1995), cert. denied, 516 U.S. 1075, 116 S. Ct. 779, 133 L. Ed. 2d 730, 1996 U.S. LEXIS 520 (U.S. 1996).

Secured Note.

A tender and the deposit pursuant to law, of the full amount due upon a secured note, extinguishes the obligation. Swallow v. First State Bank, 35 N.D. 608, 161 N.W. 207, 1917 N.D. LEXIS 6 (N.D. 1917).

9-12-09. Offer of performance — Assent of debtor.

An offer of performance must be made by the debtor or by some person on the debtor’s behalf and with the debtor’s assent.

Source:

Civ. C. 1877, § 836; R.C. 1895, § 3801; R.C. 1899, § 3801; R.C. 1905, § 5246; C.L. 1913, § 5802; R.C. 1943, § 9-1209.

Derivation:

Cal. Civ. C., 1487.

9-12-10. Offer of performance made to creditor or authorized agent.

An offer of performance must be made to the creditor, or to any one of two or more joint creditors, or to a person authorized by one or more of them to receive or collect what is due under the obligation if such creditor or authorized person is present at the place where the offer may be made, and if not, wherever the creditor may be found.

Source:

Civ. C. 1877, § 837; R.C. 1895, § 3802; R.C. 1899, § 3802; R.C. 1905, § 5247; C.L. 1913, § 5803; R.C. 1943, § 9-1210.

Derivation:

Cal. Civ. C., 1488.

9-12-11. Offer of performance — Place made.

In the absence of an express provision to the contrary, an offer of performance may be made at the option of the debtor:

  1. At any place appointed by the creditor;
  2. Wherever the person to whom the offer ought to be made can be found; or
  3. If such person cannot with reasonable diligence be found within this state and within a reasonable distance from that person’s residence or place of business, or if that person evades the debtor, at that person’s residence or place of business if the same with reasonable diligence can be found within the state, or if this cannot be done, then at any place within this state.

Source:

Civ. C. 1877, § 838; R.C. 1895, § 3803; R.C. 1899, § 3803; R.C. 1905, § 5248; C.L. 1913, § 5804; R.C. 1943, § 9-1211.

Derivation:

Cal. Civ. C., 1489.

9-12-12. Time for performance fixed.

When an obligation fixes a time for its performance, an offer of performance must be made at that time, within reasonable hours, and not before nor afterwards.

Source:

Civ. C. 1877, § 839; R.C. 1895, § 3804; R.C. 1899, § 3804; R.C. 1905, § 5249; C.L. 1913, § 5805; R.C. 1943, § 9-1212.

Derivation:

Cal. Civ. C., 1490.

Notes to Decisions

Sale of Goods.

Time is usually of the essence of an executory contract for the sale and subsequent delivery of goods, where no right of property in the same passes by the bargain from the vendor to the purchaser. Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359, 1915 N.D. LEXIS 118 (N.D. 1915).

Collateral References.

Modern views of state courts as to whether consent judgment is entitled to res judicata or collateral estoppel effect, 91 A.L.R.3d 1170.

9-12-13. Time for performance not fixed.

When an obligation does not fix a time for its performance, an offer of performance may be made at any time before the debtor, upon a reasonable demand, has refused to perform.

Source:

Civ. C. 1877, § 840; R.C. 1895, § 3805; R.C. 1899, § 3805; R.C. 1905, § 5250; C.L. 1913, § 5806; R.C. 1943, § 9-1213.

Derivation:

Cal. Civ. C., 1491.

9-12-14. Offer of performance — Good faith.

An offer of performance must be made in good faith and in such manner as is most likely under the circumstances to benefit the creditor.

Source:

Civ. C. 1877, § 842; R.C. 1895, § 3807; R.C. 1899, § 3807; R.C. 1905, § 5252; C.L. 1913, § 5808; R.C. 1943, § 9-1214.

Derivation:

Cal. Civ. C., 1493.

9-12-15. Offer of performance — Free from condition.

An offer of performance must be free from any condition which the creditor is not bound on the creditor’s part to perform.

Source:

Civ. C. 1877, § 843; R.C. 1895, § 3808; R.C. 1899, § 3808; R.C. 1905, § 5253; C.L. 1913, § 5809; R.C. 1943, § 9-1215.

Derivation:

Cal. Civ. C., 1494.

Notes to Decisions

Contract for Sale of Land.

The tender, by the vendor, in a contract for the sale of land for a deed from a third party who owns the land agreed to be conveyed, does not comply with a provision in the contract calling for a deed from the vendor. McVeety v. Harvey Mercantile Co., 24 N.D. 245, 139 N.W. 586, 1913 N.D. LEXIS 1 (N.D. 1913).

9-12-16. Offer of performance — When effective.

An offer of performance is of no effect if the person making it is not able and willing to perform according to the offer.

Source:

Civ. C. 1877, § 844; R.C. 1895, § 3809; R.C. 1899, § 3809; R.C. 1905, § 5254; C.L. 1913, § 5810; R.C. 1943, § 9-1216.

Derivation:

This section was derived from the Field Code, and was adopted by the Dakota Territory in 1865. See Glatt v. Bank of Kirkwood Plaza, 383 N.W.2d 473 (1986).

9-12-17. Refusal of offer — Production unnecessary.

The thing to be delivered, if any, need not in any case actually be produced upon an offer of performance unless the offer is accepted.

Source:

Civ. C. 1877, § 845; R.C. 1895, § 3810; R.C. 1899, § 3810; R.C. 1905, § 5255; C.L. 1913, § 5811; R.C. 1943, § 9-1217.

Derivation:

Cal. Civ. C., 1496.

Notes to Decisions

Real Estate Sales Contract.

Purchaser had a right of action for breach of the contract to convey real estate where it made an offer of performance in good faith, pursuant to the contract, with present ability and willingness to perform. Actual production of the money and notes, called for by the contract, was unnecessary. Foster County Implement Co. v. Smith, 17 N.D. 178, 115 N.W. 663, 1908 N.D. LEXIS 23 (N.D. 1908).

9-12-18. Offer of performance — Mode — Waiver of objections.

The creditor must make objections to the mode of an offer of performance at the time it is made to the creditor. If this is not done, any objection which could have been obviated at that time is waived by the creditor’s failure to make the same.

Source:

Civ. C. 1877, § 850; R.C. 1895, § 3815; R.C. 1899, § 3815; R.C. 1905, § 5260; C.L. 1913, § 5816; R.C. 1943, § 9-1218.

Derivation:

Cal. Civ. C., 1501.

Notes to Decisions

Failure to Object to Tender.

Failure to object to tender makes it a proper tender as a matter of law. Haugland v. Hoyt, 267 N.W.2d 803, 1978 N.D. LEXIS 140 (N.D. 1978).

In a suit brought by mineral interest holders (holders) against a petroleum company seeking a declaration that an oil and gas lease had not been effectively renewed, the petroleum company’s motion for summary judgment was granted because the holders’ failure to timely object to the uncertified check tendered by the petroleum company constituted an implied-in-law waiver under N.D.C.C. § 9-12-18 of the option’s requirement for tender of a certified check, and the their objection after the deadline for exercising the option was untimely and ineffective; as a consequence, there was no genuine issue of material fact that the petroleum company’s tender of payment effectively exercised the option to renew the lease and the lease was thereby renewed. Frandson v. Oasis Petroleum N. Am., LLC, 870 F. Supp. 2d 726, 2012 U.S. Dist. LEXIS 59003 (D.N.D. 2012).

Offer to Pay Money.

Where there is an offer by a debtor to pay the creditor in court, and the objection of the creditor is not to the mode of the offer of performance, but to the insufficient amount of the offer, it was not necessary to object to the mode. Kuhn v. Hamilton, 138 N.W.2d 604, 1965 N.D. LEXIS 107 (N.D. 1965).

Partial Performance.

An obligation is not extinguished by an offer of partial performance. Schaff v. Kennelly, 61 N.W.2d 538, 1953 N.D. LEXIS 86 (N.D. 1953).

Shortage in Amount of Tender.

A tender, which was twelve cents short, was valid, where it was not refused because of the shortage. Ackerman v. Maddux, 26 N.D. 50, 143 N.W. 147, 1913 N.D. LEXIS 39 (N.D. 1913).

Tender of Cashier’s Check.

The tender of a cashier’s check instead of currency is waived unless an objection is made on that ground. Ugland v. Farmers & Merchants' State Bank, 23 N.D. 536, 137 N.W. 572, 1912 N.D. LEXIS 124 (N.D. 1912).

9-12-19. Offer of performance — When title passes.

The title to a thing duly offered in performance of an obligation passes to the creditor if the debtor, at the time the offer is made, signifies the debtor’s intention to that effect.

Source:

Civ. C. 1877, § 851; R.C. 1895, § 3816; R.C. 1899, § 3816; R.C. 1905, § 5261; C.L. 1913, § 5817; R.C. 1943, § 9-1219.

Derivation:

Cal. Civ. C., 1502.

9-12-20. Offer of performance — Definite object.

A thing, when offered by way of performance, must not be mixed with other things from which it cannot be separated immediately and without difficulty.

Source:

Civ. C. 1877, § 846; R.C. 1895, § 3811; R.C. 1899, § 3811; R.C. 1905, § 5256; C.L. 1913, § 5812; R.C. 1943, § 9-1220.

Derivation:

Cal. Civ. C., 1497.

9-12-21. Offer of performance — Contingency.

When a debtor is entitled to the performance of a condition precedent to or concurrent with performance on the debtor’s part, the debtor may make the debtor’s offer to depend upon the due performance of such condition.

Source:

Civ. C. 1877, § 847; R.C. 1895, § 3812; R.C. 1899, § 3812; R.C. 1905, § 5257; C.L. 1913, § 5813; R.C. 1943, § 9-1221.

Derivation:

Cal. Civ. C., 1498.

9-12-22. Performance — Demand for written receipt.

A debtor has a right to require from the debtor’s creditor a written receipt for any property delivered in performance of the debtor’s obligation.

Source:

Civ. C. 1877, § 848; R.C. 1895, § 3813; R.C. 1899, § 3813; R.C. 1905, § 5258; C.L. 1913, § 5814; R.C. 1943, § 9-1222.

Derivation:

Cal. Civ. C., 1499.

9-12-23. Performance after due date.

When delay in performance is capable of exact and entire compensation and time has not been declared expressly to be of the essence of the obligation, an offer of performance, accompanied with an offer of such compensation, may be made at any time after it is due but without prejudice to any rights acquired by the creditor or by any other person in the meantime.

Source:

Civ. C. 1877, § 841; R.C. 1895, § 3806; R.C. 1899, § 3806; R.C. 1905, § 5251; C.L. 1913, § 5807; R.C. 1943, § 9-1223.

Derivation:

Cal. Civ. C., 1492.

Notes to Decisions

Contract for Sale of Land.

In a contract for the sale of land where time is of its essence, failure to perform precludes the claiming of rights thereunder by the person in default. Fargusson v. Talcott, 7 N.D. 183, 73 N.W. 207, 1897 N.D. LEXIS 59 (N.D. 1897).

Shipment of Goods.

A shipment of goods made on September twenty-eighth was no substantial compliance with agreement to make such shipment by August fifteenth and purchasers were clearly within their rights in refusing to accept such goods when received. Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359, 1915 N.D. LEXIS 118 (N.D. 1915).

9-12-24. Deposit extinguishes obligation.

An obligation for the payment of money is extinguished by a due offer of payment if the amount immediately is deposited in the name of the creditor with some bank of deposit of good repute within this state, and notice thereof is given to the creditor.

Source:

Civ. C. 1877, § 849; R.C. 1895, § 3814; R.C. 1899, § 3814; R.C. 1905, § 5259; C.L. 1913, § 5815; R.C. 1943, § 9-1224.

Derivation:

Cal. Civ. C., 1500.

Notes to Decisions

Conveyance or Leasing of Real Estate.

This statute does not apply to the tender that is a necessary precedent to the right to maintain an action in specific performance for the conveyance or leasing of real estate. Alfson v. Anderson, 78 N.W.2d 693, 1956 N.D. LEXIS 145 (N.D. 1956).

Damages and Costs.

Where, thirteen days after the impounding of cattle, the owner offered to pay the damages and costs, and the offer was rejected, the debt was not extinguished, nor would the offer constitute an offer of judgment. Ryding v. Hanson, 30 N.D. 99, 152 N.W. 120, 1915 N.D. LEXIS 102 (N.D. 1915).

Farm Contract.

Tender and deposit clearly operated as payment of note by tenant under farm contract. Kern v. Kelner, 77 N.D. 948, 48 N.W.2d 90, 1951 N.D. LEXIS 125 (N.D. 1951).

Mortgages.

The tender of the amount due by the mortgagor to the mortgagee, according to the terms of the statute, operates as a satisfaction of the mortgage under N.D.C.C. § 35-01-27. Kronebusch v. Raumin, 42 N.W. 656, 6 Dakota 243, 1889 Dakota LEXIS 15 (Dakota 1889).

A tender of the amount required to redeem from foreclosure sale must be kept good to be fulfilled. Brown v. Smith, 13 N.D. 580, 102 N.W. 171, 1904 N.D. LEXIS 86 (N.D. 1904).

The tender and deposit in a bank of the full amount due upon notes secured by a mortgage extinguishes the obligation, and entitles the mortgagor to a satisfaction, and renders the mortgagee liable for the statutory penalty for refusal to satisfy. Swallow v. First State Bank, 35 N.D. 608, 161 N.W. 207, 1917 N.D. LEXIS 6 (N.D. 1917).

Notice of Tender.

It is not necessary to state in the notice of tender that the bank in which the deposit is made is of good repute. Ugland v. Farmers & Merchants' State Bank, 23 N.D. 536, 137 N.W. 572, 1912 N.D. LEXIS 124 (N.D. 1912).

9-12-25. Offer and deposit — Results.

An obligation for the delivery of money or property or for the conveyance of property is not discharged by an offer of performance, nor are any of its incidents affected thereby, unless:

  1. If the thing offered is money, the same is deposited according to the provisions of section 9-12-24 and notice of such deposit is given to the creditor.
  2. If the thing offered is something other than money, the same is deposited for the creditor with some depositary of good repute at the place of performance and notice of such deposit is given to the creditor.

After such deposit and notice, the thing deposited is at the risk and expense of the creditor.

Source:

Civ. C. 1877, § 853; R.C. 1895, § 3818; R.C. 1899, § 3818; R.C. 1905, § 5263; C.L. 1913, § 5819; R.C. 1943, § 9-1225.

Derivation:

Cal. Civ. C., 1504.

Notes to Decisions

Conveyance or Leasing of Real Estate.

This section does not apply to the tender that is a necessary precedent to the right to maintain an action in specific performance for the conveyance or leasing of real estate. Alfson v. Anderson, 78 N.W.2d 693, 1956 N.D. LEXIS 145 (N.D. 1956).

Farm Contract.

Where tenant by his tender, followed by deposit, had done everything possible in the circumstances to substantially perform the farm contract by tendering and making payment for all sums coming to the landlord, including damages sustained by the latter by reason of noncompliance by the tenant of certain provisions of the contract, notice of rescission served by landlord more than eight months later was unavailing. Kern v. Kelner, 77 N.D. 948, 48 N.W.2d 90, 1951 N.D. LEXIS 125 (N.D. 1951).

Mortgages.

Tender of the amount required for a complete redemption from a chattel mortgage sale must be kept good by a deposit of the amount tendered in accordance with N.D.C.C. § 9-12-24. Brown v. Smith, 13 N.D. 580, 102 N.W. 171, 1904 N.D. LEXIS 86 (N.D. 1904).

The tender and deposit in the manner provided by law of the full amount due upon note secured by mortgages extinguished the obligation. Brown v. Smith, 13 N.D. 580, 102 N.W. 171, 1904 N.D. LEXIS 86 (N.D. 1904); Swallow v. First State Bank, 35 N.D. 608, 161 N.W. 207, 1917 N.D. LEXIS 6 (N.D. 1917).

9-12-26. Deposit of thing offered — How held.

The person offering a thing other than money by way of performance, if that person means to treat it as belonging to the creditor, shall retain it as a depositary for hire until:

  1. The creditor accepts it;
  2. That person has given reasonable notice to the creditor that that person will retain it no longer; or
  3. That person has deposited it with such suitable depositary therefor as that person is able to find with the exercise of reasonable diligence.

Source:

Civ. C. 1877, § 852; R.C. 1895, § 3817; R.C. 1899, § 3817; R.C. 1905, § 5262; C.L. 1913, § 5818; R.C. 1943, § 9-1226.

Derivation:

Cal. Civ. C., 1503.

9-12-27. Creditor as gratuitous depositary.

If anything is given to a creditor by way of performance which the creditor refuses to accept as such, the creditor is not bound to return it without demand, but if the creditor retains it, the creditor is a gratuitous depositary thereof.

Source:

Civ. C. 1877, § 854; R.C. 1895, § 3819; R.C. 1899, § 3819; R.C. 1905, § 5264; C.L. 1913, § 5820; R.C. 1943, § 9-1227.

Derivation:

Cal. Civ. C., 1505.

Notes to Decisions

Failure to Object to Tender.

In a suit brought by mineral interest holders (holders) against a petroleum company seeking a declaration that an oil and gas lease had not been effectively renewed, the petroleum company’s motion for summary judgment was granted because the holders’ failure to timely object to the uncertified check tendered by the petroleum company constituted an implied-in-law waiver under N.D.C.C. § 9-12-18 of the option’s requirement for tender of a certified check, and the their objection after the deadline for exercising the option was untimely and ineffective; as a consequence, there was no genuine issue of material fact that the petroleum company’s tender of payment effectively exercised the option to renew the lease and the lease was thereby renewed. Frandson v. Oasis Petroleum N. Am., LLC, 870 F. Supp. 2d 726, 2012 U.S. Dist. LEXIS 59003 (D.N.D. 2012).

9-12-28. Deposit in special fund to extinguish lien, encumbrance, or cloud affecting or relating to the title to real property.

Any lien, encumbrance, or cloud affecting or related to the title to real property, when the only obligation concerns the payment of a sum certain in money to a specified creditor when the creditor, or the creditor’s heirs, successors, or assigns cannot be located, may be extinguished as provided by this section and section 9-12-29. The debtor shall deposit with the county treasurer the debtor’s affidavit to the effect that the debtor has made a careful, diligent, and good-faith search for the creditor and the creditor cannot be found. The debtor shall also deposit with the county treasurer the full amount of the debt, including all interest accumulated to the date of the deposit. The affidavit together with notice of the deposit, specifying the amount of the deposit, specifying that the purpose of the deposit is to discharge the lien, encumbrance, or cloud, and specifically describing the real property, must be published at the expense of the debtor once a week for three successive weeks in the official county newspaper in all counties in which the real property is situated.

Source:

S.L. 1979, ch. 150, § 1.

9-12-29. Claim of money by creditor — Extinguishment of lien.

The creditor is entitled to claim the amount of money from the county treasurer within nine months of the date of deposit upon a showing to the county treasurer of a satisfaction of the lien, encumbrance, or cloud which includes an indication by the recorder that the satisfaction has been duly recorded. If the creditor does not claim the money in nine months from the date of first publication of the notice, the money, a copy of the debtor’s affidavit, and a copy of the published notice must be forwarded by the county treasurer to the state land commissioner for deposit to the credit of the state of North Dakota for the use and benefit of the common schools trust fund of the state. At the same time these items are forwarded to the state land commissioner, the county treasurer shall record in the office of the recorder a notice to the effect that the lien, encumbrance, or cloud affecting or related to the title to the real property, giving the specific legal description of the property, has been discharged by the procedures set out in section 9-12-28 and this section. The debtor shall pay the recorder’s fees for recording the county treasurer’s notice.

At any time after the original nine-month period, the creditor, or the creditor’s heirs, successors, or assigns, may claim the full amount of the original deposit without any interest or penalty from the state administrator of abandoned property in the manner specified in chapter 47-30.2 for claiming the proceeds of other abandoned and unclaimed property.

Source:

S.L. 1979, ch. 150, § 2; 1985, ch. 510, § 40; 2001, ch. 120, § 1; 2021, ch. 337, § 1, effective July 1, 2021.

CHAPTER 9-13 Release and Substitutions of Obligation

9-13-01. Extinction of obligation by release.

An obligation is extinguished by a release therefrom given to the debtor by the creditor upon a new consideration, or if the release is in writing, with or without a new consideration.

Source:

Civ. C. 1877, § 867; R.C. 1895, § 3832; R.C. 1899, § 3832; R.C. 1905, § 5277; C.L. 1913, § 5833; R.C. 1943, § 9-1301.

Derivation:

Cal. Civ. C., 1541.

Notes to Decisions

Payment of Lesser Amount.

The written acknowledgment of a satisfaction by the payment of a lesser amount, or the payment of a lesser amount in accordance with a written agreement, obviates the necessity for a new consideration, and an offer in writing may be withdrawn before payment. Strobeck v. Blackmore, 38 N.D. 593, 165 N.W. 980, 1917 N.D. LEXIS 59 (N.D. 1917).

9-13-02. Extension to known claims.

A general release does not extend to claims which the creditor does not know or suspect to exist in the creditor’s favor at the time of executing the release, which if known by the creditor, must have materially affected the creditor’s settlement with the debtor.

Source:

Civ. C. 1877, § 868; R.C. 1895, § 3833; R.C. 1899, § 3833; R.C. 1905, § 5278; C.L. 1913, § 5834; R.C. 1943, § 9-1302.

Derivation:

Cal. Civ. C., 1542.

Notes to Decisions

Applicability.

Trustees’ reliance on N.D.C.C. § 9-13-02 was misplaced where, although the stock purchase agreement did not foreclose the possibility of further dividends, neither did it guarantee that further dividends would be declared before the closing, and the trustee’s plans to continue to seek a dividend after he signed the stock purchase agreement could not be construed to be a guarantee of a dividend that would have materially affected his decision to enter into the agreement if further dividends were not forthcoming; the trustee had no knowledge whether the board would or would not approve distribution of a dividend before he signed the agreement, which contained a mutual release with respect to all claims arising from the sale; therefore, the statute was inapplicable under the circumstances. Bernabucci v. Huber, 2006 ND 71, 712 N.W.2d 323, 2006 N.D. LEXIS 74 (N.D. 2006).

Cancellation of Release.

If the release of his cause of action for injuries sustained while on a railway train is given by a passenger who relies upon false representations, it may be rescinded, and an action for damages may be maintained without a decree canceling the release. Clark v. Northern Pac. Ry., 36 N.D. 503, 162 N.W. 406, 1917 N.D. LEXIS 189 (N.D. 1917).

9-13-03. Joint debtors — Effecting release.

A release of one of two or more joint debtors does not extinguish the obligations of any of the others unless they are mere guarantors. Such release does not affect the right of the joint debtors to contribution from the party so released.

Source:

Civ. C. 1877, § 869; R.C. 1895, § 3834; R.C. 1899, § 3834; R.C. 1905, § 5279; C.L. 1913, § 5835; R.C. 1943, § 9-1303.

Derivation:

Cal. Civ. C., 1543.

Notes to Decisions

Husband and Wife.

In an action on a promissory note to foreclose a mortgage given therefor and for a deficiency judgment, the release or discharge of the wife would not operate to release her husband upon the judgment rendered. Orth v. Procise, 42 N.D. 149, 171 N.W. 861, 1919 N.D. LEXIS 113 (N.D. 1919).

Warehouseman’s Bond.

Joint liability of warehouseman and bonding company on warehouseman’s bond was not released by warehouseman’s attempted settlement with receipt holders through fraudulent representations. State ex rel. Olson v. Royal Indem. Co., 44 N.D. 550, 175 N.W. 625, 1919 N.D. LEXIS 216 (N.D. 1919).

9-13-04. Accord defined.

An accord is an agreement to accept in extinction of an obligation something different from or less than that to which the person agreeing to accept is entitled.

Source:

Civ. C. 1877, § 859; R.C. 1895, § 3824; R.C. 1899, § 3824; R.C. 1905, § 5269; C.L. 1913, § 5825; R.C. 1943, § 9-1304.

Derivation:

Cal. Civ. C., 1521.

Notes to Decisions

Acceptance of Consideration.

An agreement upon an acceptance of a consideration for an accord and satisfaction of an obligation are a prerequisite to its extinguishment. Billings v. G. Doering Grain Co., 47 N.D. 196, 181 N.W. 54, 1921 N.D. LEXIS 85 (N.D. 1921).

Court properly enjoined the owner from preventing the planned unit development’s (PUD) right to access the owner’s property for lawn care, snow removal and other activities authorized by the amended declaration, because there was a reasonable inference the owner offered the check on the condition that her 2007 assessments for snow removal would be discharged, and there was an inference of satisfaction when the PUD endorsed and deposited the check; the PUD accepted and cashed the March 2007 check for $70 and this was in acceptance of the owner’s offer to pay in full for the 2007 snow removal. Wheeler v. Southport Seven Planned Unit Dev., 2012 ND 201, 821 N.W.2d 746, 2012 N.D. LEXIS 209 (N.D. 2012).

Agreement to Offset Accounts.

A pleading which states only that there was a computation of the amounts mutually due between the parties and that it was agreed the accounts should mutually offset each other, although one sum was less than the other, does not state an accord and satisfaction. Webster v. McLaren, 19 N.D. 751, 123 N.W. 395, 1909 N.D. LEXIS 92 (N.D. 1909).

Crop Insurance Policy.

“Final loss adjustment” and a paid draft constitute a good accord and satisfaction of an obligation on account of a crop insurance policy. Rokusek v. National Union Fire Ins. Co., 50 N.D. 123, 195 N.W. 300, 1923 N.D. LEXIS 88 (N.D. 1923).

Disputed Claims.

Negotiation of check without evidence of mutual assent did not constitute accord and satisfaction, and plaintiff met the general contract requirement of placing disputed claims in writing before acceptance of final payment by letter setting forth his claims and requesting additional amount. Peterson v. Ramsey County, 1997 ND 92, 563 N.W.2d 103, 1997 N.D. LEXIS 92 (N.D. 1997).

Execution and Delivery.

An accord is required to be executed by a delivery and reception to the thing agreed to be accepted in satisfaction. Arnett v. Smith, 11 N.D. 55, 88 N.W. 1037, 1902 N.D. LEXIS 183 (N.D. 1902).

Meeting of the Minds.

An essential element of accord is an assent or meeting of the minds. Hochstetler v. Graber, 78 N.D. 90, 48 N.W.2d 15, 1951 N.D. LEXIS 75 (N.D. 1951).

Mutual Agreement.

Plaintiff’s failure to respond to defendant’s statement that he was keeping money given him by plaintiff for purchase of cattle and applying it to another debt owed him was not sufficient to establish a mutual agreement necessary for an accord and satisfaction. Dangerud v. Dobesh, 353 N.W.2d 328, 1984 N.D. LEXIS 369 (N.D. 1984).

Mutual assent is an essential element of an accord and satisfaction. Shirazi v. United Overseas, 354 N.W.2d 651, 1984 N.D. LEXIS 351 (N.D. 1984).

The defense of accord and satisfaction contemplates the mutual assent of the parties to modify their rights and obligations regarding each other. Mougey v. Salzwedel, 401 N.W.2d 509, 1987 N.D. LEXIS 254 (N.D. 1987).

District court did not err in denying the employees’ request for a jury instruction defining accord where the employees cited no evidence tending to show the employees and the sole shareholder intended to suspend their agreement to give an ownership interest in a finance company pending performance of any agreement to earn an interest in the company; rather, the evidence in the record showed only a substituted agreement, i.e., a novation. Erickson v. Brown, 2008 ND 57, 747 N.W.2d 34, 2008 N.D. LEXIS 58 (N.D. 2008).

Question of Fact.

Unless the evidence in a case is such that reasonable persons can draw but one conclusion, the question whether or not there has been an accord and satisfaction is a question of fact. Herb Hill Ins. v. Radtke, 380 N.W.2d 651, 1986 N.D. LEXIS 253 (N.D. 1986).

Where the evidence was highly disputed and easily capable of leading reasonable persons to more than one conclusion, the court’s finding that there was an unsatisfied accord as opposed to a novation was a question of fact subject to the clearly erroneous standard of Herb Hill Ins. v. Radtke, 380 N.W.2d 651, 1986 N.D. LEXIS 253 (N.D. 1986).

Satisfaction of Claims.

If the purchaser turned over the piano, purchased under a conditional sales contract, in satisfaction of the claim against him by the piano company, and the company accepted it in satisfaction of that claim, then, and in the event, there was an accord and satisfaction within the statute. Chubb v. Baldwin Piano Co., 54 N.D. 189, 208 N.W. 975, 1926 N.D. LEXIS 133 (N.D. 1926).

A check taken in satisfaction of a claim amounts to an accord and satisfaction. Nesben v. Koos, 59 N.D. 269, 229 N.W. 368, 1930 N.D. LEXIS 139 (N.D. 1930).

An agreement entered into whereby creditor released state bank from its obligation to account for collections made upon collateral, deposited as security for the payment of a judgment held by the bank against the creditor, surrendered all his claims to the collateral and, in addition, executed his note to the bank for an agreed amount much less than the amount of the judgment, payable in the future, and in consideration of the doing of these things the bank agreed to satisfy the judgment forthwith, resulted in an accord as defined by the statute. Peterson v. First & Sec. State Bank, 61 N.D. 1, 236 N.W. 722, 1931 N.D. LEXIS 236 (N.D. 1931).

“Accord and satisfaction” is a method of discharging a contract or cause of action by which the parties agree to give and accept something in settlement of a claim or demand of the one against the other, where they thereafter perform such agreement. The “accord” is the agreement, and the “satisfaction” is the performance of such agreement. Campbell v. Beaton, 117 N.W.2d 849, 1962 N.D. LEXIS 96, 1962 N.D. LEXIS 97 (N.D. 1962).

Where receipt of salary and disability payments was alleged to be a violation of corporate resolution, agreement acknowledged defendant would pay back a portion of disability payments as part of sale of business, and agreement stated that it constituted the entire agreement between the parties with respect to its subject matter, it was held to be an accord and satisfaction of the disability insurance and salary matter. Earthworks v. Sehn, 553 N.W.2d 490, 1996 N.D. LEXIS 205 (N.D. 1996).

Settlement of Claim.

Findings of trial court that an agreement had been reached between plaintiff and defendant as to balance due for services rendered and that such sum had been paid by defendant were in effect a finding of accord and satisfaction even though that term was not used. Campbell v. Beaton, 117 N.W.2d 849, 1962 N.D. LEXIS 96, 1962 N.D. LEXIS 97 (N.D. 1962).

Stipulation in a Divorce Settlement.

A stipulation in a divorce settlement between the mother and stepfather of a child did not operate as an accord and satisfaction vis-`-vis the stepfather’s claim against the natural father for reimbursement of support. Mougey v. Salzwedel, 401 N.W.2d 509, 1987 N.D. LEXIS 254 (N.D. 1987).

Unliquidated Claims.

Where unliquidated claims against a county are presented to the board of county commissioners for allowance, and are considered together and allowed at a lump sum less than the amount claimed, and a warrant therefor is accepted by the claimant, payment in full is presumed. Paulson v. Ward County, 23 N.D. 601, 137 N.W. 486, 1912 N.D. LEXIS 122 (N.D. 1912).

There may be an accord and satisfaction either of a liquidated or a disputed unliquidated demand. Wilkins v. National Union Fire Ins. Co., 48 N.D. 1295, 189 N.W. 317, 1922 N.D. LEXIS 177 (N.D. 1922).

Collateral References.

Modern status of rule that acceptance of check purporting to be final settlement of disputed amount constitutes accord and satisfaction, 42 A.L.R.4th 12.

Creditor’s certification of check purporting to be final settlement of disputed amount as constituting accord and satisfaction, 42 A.L.R.4th 95.

Creditor’s retention without negotiation of check purporting to be final settlement of disputed amount as constituting accord and satisfaction, 42 A.L.R.4th 117.

Validity and effect of “Mary Carter” or similar agreement setting maximum liability of one cotortfeasor and providing for reduction or extinguishment thereof relative to recovery against nonagreeing cotortfeasor, 22 A.L.R.5th 483.

9-13-05. Satisfaction defined.

Acceptance by the creditor of the consideration of an accord extinguishes the obligation and is called satisfaction.

Source:

Civ. C. 1877, § 861; R.C. 1895, § 3826; R.C. 1899, § 3826; R.C. 1905, § 5271; C.L. 1913, § 5827; R.C. 1943, § 9-1305.

Derivation:

Cal. Civ. C., 1523.

Notes to Decisions

Acceptance of Consideration.

An accord is required to be executed by delivery and reception of the thing agreed to be accepted in satisfaction. Arnett v. Smith, 11 N.D. 55, 88 N.W. 1037, 1902 N.D. LEXIS 183 (N.D. 1902).

An agreement upon and an acceptance of a consideration for an accord and satisfaction of an obligation are a prerequisite to its extinguishment. Billings v. G. Doering Grain Co., 47 N.D. 196, 181 N.W. 54, 1921 N.D. LEXIS 85 (N.D. 1921).

If the purchaser turned over the piano, purchased under a conditional sales contract, in satisfaction of the claim against him by the piano company, and the company accepted it in satisfaction of that claim, then, and in that event, there was an accord and satisfaction within the statute. Chubb v. Baldwin Piano Co., 54 N.D. 189, 208 N.W. 975, 1926 N.D. LEXIS 133 (N.D. 1926).

Where creditor release state bank from its obligation to account for collections made upon collateral, deposited as security for the payment of a judgment held by the bank against the creditor, surrendered all his claims to the collateral and, in addition, executed his note to the bank for an agreed amount much less than the amount of the judgment, payable in the future, and in consideration of the doing of these things the bank agreed to satisfy the judgment forthwith, it resulted in an accord, and an acceptance of the consideration of the accord in satisfaction thereof. Peterson v. First & Sec. State Bank, 61 N.D. 1, 236 N.W. 722, 1931 N.D. LEXIS 236 (N.D. 1931).

Agreement Held to Be Accord and Satisfaction.

Where receipt of salary and disability payments was alleged to be a violation of corporate resolution, agreement acknowledged defendant would pay back a portion of disability payments as part of sale of business, and agreement stated that it constituted the entire agreement between the parties with respect to its subject matter, it was held to be an accord and satisfaction of the disability insurance and salary matter. Earthworks v. Sehn, 553 N.W.2d 490, 1996 N.D. LEXIS 205 (N.D. 1996).

Court properly enjoined the owner from preventing the planned unit development’s (PUD) right to access the owner’s property for lawn care, snow removal and other activities authorized by the amended declaration, because there was a reasonable inference the owner offered the check on the condition that her 2007 assessments for snow removal would be discharged, and there was an inference of satisfaction when the PUD endorsed and deposited the check; the PUD accepted and cashed the March 2007 check for $70 and this was in acceptance of the owner’s offer to pay in full for the 2007 snow removal. Wheeler v. Southport Seven Planned Unit Dev., 2012 ND 201, 821 N.W.2d 746, 2012 N.D. LEXIS 209 (N.D. 2012).

Agreement to Accept Less Than Is Due.

A mere agreement to accept less than is due, without any consideration, where there is no dispute, is not an accord and satisfaction. Webster v. McLaren, 19 N.D. 751, 123 N.W. 395, 1909 N.D. LEXIS 92 (N.D. 1909).

Burden of Proof.

Accord and satisfaction is affirmative defense, and burden of establishing defense is on person who seeks to rely on it. Frank v. Daimler--Benz, A. G., 226 N.W.2d 143, 1975 N.D. LEXIS 187 (N.D. 1975).

Crop Insurance Policy.

A “final lost adjustment” and a paid draft constitute a good accord and satisfaction of an obligation on account of a crop insurance policy. Rokusek v. National Union Fire Ins. Co., 50 N.D. 123, 195 N.W. 300, 1923 N.D. LEXIS 88 (N.D. 1923).

Disputed Claims.

Negotiation of check without evidence of mutual assent did not constitute accord and satisfaction, and plaintiff met the general contract requirement of placing disputed claims in writing before acceptance of final payment by letter setting forth his claims and requesting additional amount. Peterson v. Ramsey County, 1997 ND 92, 563 N.W.2d 103, 1997 N.D. LEXIS 92 (N.D. 1997).

Meeting of Minds.

An essential element of satisfaction is an assent or meeting of the minds. Hochstetler v. Graber, 78 N.D. 90, 48 N.W.2d 15, 1951 N.D. LEXIS 75 (N.D. 1951).

Mutual Agreement.

The defense of accord and satisfaction contemplates the mutual assent of the parties to modify their rights and obligations regarding each other. Mougey v. Salzwedel, 401 N.W.2d 509, 1987 N.D. LEXIS 254 (N.D. 1987).

Question of Fact.

Whether there is accord and satisfaction is question of fact and where conflicting evidence is presented is question for jury; thus, where purchaser of automobile paid part of repair bill in order to get automobile back, but told both distributor and his employees that he was not satisfied and they would be hearing from him, purchaser’s testimony that he never intended to settle all his claims against defendants by accepting payment for half the cost of parts used in repairing car was evidence that there was no meeting of minds, therefore question of accord and satisfaction should have been presented to jury. Frank v. Daimler--Benz, A. G., 226 N.W.2d 143, 1975 N.D. LEXIS 187 (N.D. 1975).

Unless the evidence in a case is such that reasonable persons can draw but one conclusion, the question whether or not there has been an accord and satisfaction is a question of fact. Herb Hill Ins. v. Radtke, 380 N.W.2d 651, 1986 N.D. LEXIS 253 (N.D. 1986).

Where the evidence was highly disputed and easily capable of leading reasonable persons to more than one conclusion, the court’s finding that there was an unsatisfied accord as opposed to a novation was a question of fact subject to the clearly erroneous standard of Herb Hill Ins. v. Radtke, 380 N.W.2d 651, 1986 N.D. LEXIS 253 (N.D. 1986).

Stipulation in a Divorce Settlement.

A stipulation in a divorce settlement between the mother and stepfather of a child did not operate as an accord and satisfaction vis-`-vis the stepfather’s claim against the natural father for reimbursement of support. Mougey v. Salzwedel, 401 N.W.2d 509, 1987 N.D. LEXIS 254 (N.D. 1987).

Unliquidated Claims.

Where unliquidated claims against a county are presented to the board of county commissioners for allowance, and are considered together and allowed at a lump sum less than the amount claimed, and a warrant therefor is accepted by the claimant, payment in full is presumed. Paulson v. Ward County, 23 N.D. 601, 137 N.W. 486, 1912 N.D. LEXIS 122 (N.D. 1912).

Collateral References.

Modern status of rule that acceptance of check purporting to be final settlement of disputed amount constitutes accord and satisfaction, 42 A.L.R.4th 12.

Creditor’s certification of check purporting to be final settlement of disputed amount as constituting accord and satisfaction, 42 A.L.R.4th 95.

Creditor’s retention without negotiation of check purporting to be final settlement of disputed amount as constituting accord and satisfaction, 42 A.L.R.4th 117.

9-13-06. Only full execution of accord extinguishes obligation.

Though the parties to an accord are bound to execute it, yet it does not extinguish the obligation until it is executed fully.

Source:

Civ. C. 1877, § 860; R.C. 1895, § 3825; R.C. 1899, § 3825; R.C. 1905, § 5270; C.L. 1913, § 5826; R.C. 1943, § 9-1306.

Derivation:

Cal. Civ. C., 1522.

Notes to Decisions

Affirmative Defense.

Accord and satisfaction is an affirmative defense and must be specially pleaded. Hochstetler v. Graber, 78 N.D. 90, 48 N.W.2d 15, 1951 N.D. LEXIS 75 (N.D. 1951).

Burden of Proof.

The burden of proof to establish accord and satisfaction is upon the party who seeks to rely upon it. Hochstetler v. Graber, 78 N.D. 90, 48 N.W.2d 15, 1951 N.D. LEXIS 75 (N.D. 1951).

Compromise of Claim.

A compromise of a claim for insuance is an accord and, if it is not executed, an action may be maintained upon the original contract. Lehde v. National Union Fire Ins. Co., 46 N.D. 162, 180 N.W. 56, 1920 N.D. LEXIS 61 (N.D. 1920).

Farming Contract.

Retention of proceeds of check by tenant did not constitute an accord and satisfaction which settled a controversy with respect to tenant’s share of the crop and its sale, terminating all rights of the tenant in the crop, where there was no dispute regarding the crop, and tenant accepted the check as an advance against tenant’s share of the crop. Hochstetler v. Graber, 78 N.D. 90, 48 N.W.2d 15, 1951 N.D. LEXIS 75 (N.D. 1951).

Partial Execution.

If an agreement for an accord is partially executed only, a creditor either may sue on the original claim for the balance or for breach of contract for an accord. Meske v. Melicher, 49 N.D. 1160, 194 N.W. 737, 1923 N.D. LEXIS 52 (N.D. 1923).

Payment.

The written acknowledgment of a satisfaction by the payment of a lesser amount, or the payment of a lesser amount in accordance with a written agreement, obviates the necessity for a new consideration, and an offer in writing may be withdrawn before payment. Strobeck v. Blackmore, 38 N.D. 593, 165 N.W. 980, 1917 N.D. LEXIS 59 (N.D. 1917).

Question for Jury.

Where the evidence with respect to the facts is conflicting, the question whether or not there has been an accord and satisfaction is for the jury. Hochstetler v. Graber, 78 N.D. 90, 48 N.W.2d 15, 1951 N.D. LEXIS 75 (N.D. 1951).

Sufficient Execution.

An accord is sufficiently executed only when all is done which the party agrees to accept in satisfaction of the preexisting obligation. Arnett v. Smith, 11 N.D. 55, 88 N.W. 1037, 1902 N.D. LEXIS 183 (N.D. 1902).

Collateral References.

Accord and satisfaction as affected by Negotiable Instruments Law (§ 122) as to renunciation of rights, 65 A.L.R.2d 593, 621.

Validity and effect, as between former spouses, of agreement releasing parent from payment of child support provided for in an earlier divorce decree, 100 A.L.R.3d 1129.

Private contests and lotteries: entrants’ rights and remedies, 64 A.L.R.4th 1021.

9-13-07. Part performance accepted in writing extinguishes obligation.

Part performance of an obligation, either before or after a breach thereof, when expressly accepted by the creditor in writing in satisfaction, or rendered in pursuance of an agreement in writing for that purpose, though without any new consideration, extinguishes the obligation.

Source:

Civ. C. 1877, § 862; R.C. 1895, § 3827; R.C. 1899, § 3827; R.C. 1905, § 5272; C.L. 1913, § 5828; R.C. 1943, § 9-1307.

Derivation:

Cal. Civ. C., 1524.

Notes to Decisions

Acceptance As Complete Performance.

A partial performance does not extinguish an obligation unless it is accepted as a complete performance. Anderson v. First Nat'l Bank, 4 N.D. 182, 59 N.W. 1029, 1894 N.D. LEXIS 26 (N.D. 1894).

Crop Insurance Policy.

“Final loss adjustment” and a paid draft constitute a good accord and satisfaction of an obligation on account of a crop insurance policy. Rokusek v. National Union Fire Ins. Co., 50 N.D. 123, 195 N.W. 300, 1923 N.D. LEXIS 88 (N.D. 1923).

Good Consideration.

A creditor’s acceptance of less than an entire debt in satisfaction of the entire debt due constitutes a good consideration. SCHIEBER v. SCHIEBER, 64 N.D. 720, 256 N.W. 159, 1934 N.D. LEXIS 258 (N.D. 1934).

Payment.

The written acknowledgment of a satisfaction by the payment of a lesser amount, or the payment of a lesser amount in accordance with a written agreement, obviates the necessity for a new consideration, and an offer in writing may be withdrawn before payment. Strobeck v. Blackmore, 38 N.D. 593, 165 N.W. 980, 1917 N.D. LEXIS 59 (N.D. 1917).

Collateral References.

Landlord’s agreement to accept less rent than that stipulated in the lease, 30 A.L.R.3d 1259.

9-13-08. Novation defined.

Novation is the substitution of a new obligation for an existing one.

Source:

Civ. C. 1877, § 863; R.C. 1895, § 3828; R.C. 1899, § 3828; R.C. 1905, § 5273; C.L. 1913, § 5829; R.C. 1943, § 9-1308.

Derivation:

Cal. Civ. C., 1530.

Notes to Decisions

Burden of Proof.

If the debtor sends to the creditor a check which is not paid by the bank, the burden of proof that the bank was insolvent at the time of payment falls upon the creditor. Schafer v. Olson, 24 N.D. 542, 139 N.W. 983, 1912 N.D. LEXIS 32 (N.D. 1912).

Intent for Creation.

The intent to create a novation may be shown not only by the terms of the agreement itself, but also by the character of the transaction and by the facts and circumstances surrounding the transaction. Jedco Dev. Co. v. Bertsch, 441 N.W.2d 664, 1989 N.D. LEXIS 115 (N.D. 1989).

Partnership Guaranty.

Where guarantor had signed a continuing guaranty for a partnership, the signing of a later guaranty, after the loan had been paid and after that guarantor’s withdrawal, by all other partners, did not create a novation as to a subsequent loan of which that guarantor was unaware. First Nat'l Bank & Trust Co. v. Meyer Enters., 427 N.W.2d 328, 1988 N.D. LEXIS 162 (N.D. 1988).

Question of Fact.

The question of whether or not there has been a novation is a question of fact if the evidence is such that reasonable persons can draw more than one conclusion. Herb Hill Ins. v. Radtke, 380 N.W.2d 651, 1986 N.D. LEXIS 253 (N.D. 1986).

Where the evidence was highly disputed and easily capable of leading reasonable persons to more than one conclusion, the court’s finding that there was an unsatisfied accord as opposed to a novation was a question of fact subject to the clearly erroneous standard of Herb Hill Ins. v. Radtke, 380 N.W.2d 651, 1986 N.D. LEXIS 253 (N.D. 1986).

9-13-09. Novation — Created by contract.

Novation is made by contract and is subject to all the rules concerning contracts in general.

Source:

Civ. C. 1877, § 865; R.C. 1895, § 3830; R.C. 1899, § 3830; R.C. 1905, § 5275; C.L. 1913, § 5831; R.C. 1943, § 9-1309.

Derivation:

Cal. Civ. C., 1532.

Notes to Decisions

Changes in An Obligation.

If changes in an obligation prejudicially affect an assignor, a new agreement has been formed between the assignee and the other original contracting party; more concisely, a novation has occurred and the assignor’s original obligation has been discharged. Rosenberger v. Son, Inc., 491 N.W.2d 71, 1992 N.D. LEXIS 202 (N.D. 1992).

9-13-10. How novation made.

Novation is made by the substitution of:

  1. A new obligation between the same parties with intent to extinguish the old obligation;
  2. A new debtor in the place of the old one with intent to release the latter; or
  3. A new creditor in place of the old one with intent to transfer the rights of the latter to the former.

Source:

Civ. C. 1877, § 864; R.C. 1895, § 3829; R.C. 1899, § 3829; R.C. 1905, § 5274; C.L. 1913, § 5830; R.C. 1943, § 9-1310.

Derivation:

Cal. Civ. C., 1531.

Notes to Decisions

Acceptance of Check.

Acceptance of a check does not create a novation in the absence of an agreement by the parties that it substitutes for the original contract. Schmitt v. Berwick Township, 488 N.W.2d 398, 1992 N.D. LEXIS 169 (N.D. 1992).

Applicability.

The law of divisible contracts, novation, and requirements contracts were not applicable to ancillary services agreement between wholesale photo-finisher and supplier. Monarch Photo v. Qualex, Inc., 935 F. Supp. 1028, 1996 U.S. Dist. LEXIS 11323 (D.N.D. 1996).

Note As Payment.

Debtor’s note was not an absolute payment of his obligation unless it was so intended. State ex rel. Olson v. Royal Indem. Co., 44 N.D. 550, 175 N.W. 625, 1919 N.D. LEXIS 216 (N.D. 1919).

Novation and Assignment.

If changes in an obligation prejudicially affect an assignor, a new agreement has been formed between the assignee and the other original contracting party; more concisely, a novation has occurred and the assignor’s original obligation has been discharged. Rosenberger v. Son, Inc., 491 N.W.2d 71, 1992 N.D. LEXIS 202 (N.D. 1992).

It was evident from the express language of an assignment agreement between original obligor and assignee that only an assignment was intended, not a novation, where the agreement made no mention of discharging original obligor from any further liability on the contract. Rosenberger v. Son, Inc., 491 N.W.2d 71, 1992 N.D. LEXIS 202 (N.D. 1992).

Partnership Guaranty.

Where guarantor had signed a continuing guaranty for a partnership, the signing of a later guaranty, after the loan had been paid and after that guarantor’s withdrawal, by all other partners, did not create a novation as to a subsequent loan of which that guarantor was unaware. First Nat'l Bank & Trust Co. v. Meyer Enters., 427 N.W.2d 328, 1988 N.D. LEXIS 162 (N.D. 1988).

Requirements for Novation.

For a novation to be valid, in addition to the requirement that the parties intend to extinguish the old obligation, there must also exist mutual assent and sufficient consideration. North Dakota Pub. Serv. Comm'n v. Valley Farmers Bean Ass'n, 365 N.W.2d 528, 1985 N.D. LEXIS 285 (N.D. 1985).

To have a novation, the parties must intend to extinguish the old obligation, there must be mutual assent, and there must be sufficient consideration. Schmitt v. Berwick Township, 488 N.W.2d 398, 1992 N.D. LEXIS 169 (N.D. 1992).

There can be a novation even if the parties are in disagreement about the terms of the original agreement. Schmitt v. Berwick Township, 488 N.W.2d 398, 1992 N.D. LEXIS 169 (N.D. 1992).

Standard of Review.

The question of whether there has been a novation is a question of fact, which will not be overturned on appeal unless it is clearly erroneous. Schmitt v. Berwick Township, 488 N.W.2d 398, 1992 N.D. LEXIS 169 (N.D. 1992).

Collateral References.

Creditor’s acceptance of obligation of third person as constituting novation, 61 A.L.R.2d 755.

Negotiable instruments laws, effect of provision of, as to renunciation of rents on discharge of debt by novation, 65 A.L.R.2d 593, 621.

Novation as affected by Negotiable Instruments Law (§ 122) as to renunciation of rights, 65 A.L.R.2d 593, 621.

9-13-11. Rescinding acceptance.

When the obligation of a third person or an order upon such person is accepted in satisfaction, the creditor may rescind such acceptance if:

  1. The debtor prevents such person from complying with the order or from fulfilling the obligation;
  2. At the time the obligation or order is received, such person is insolvent and this fact is unknown to the creditor; or
  3. Before the creditor with reasonable diligence can present the order to the person upon whom it is given, that person becomes insolvent.

Source:

Civ. C. 1877, § 866; R.C. 1895, § 3831; R.C. 1899, § 3831; R.C. 1905, § 5276; C.L. 1913, § 5832; R.C. 1943, § 9-1311.

Derivation:

Cal. Civ. C., 1533.

CHAPTER 9-14 Invention Development Services Contracts

9-14-01. Definitions.

As used in this chapter, unless the context otherwise requires:

  1. “Contract for invention development services” includes a contract by which an invention developer undertakes to develop or promote an invention for a customer.
  2. “Customer” means any individual who is solicited by, inquires about, seeks the services of, or enters into a contract with an invention developer for invention development services.
  3. “Invention” includes a process, machine, manufacture, composition of matter, improvement upon the foregoing, or a concept.
  4. “Invention developer” means any person, and the agents, employees, or representatives of the person, that develops or promotes or offers to develop or promote an invention of a customer in order that the customer’s invention may be patented, licensed, or sold for manufacture or manufactured in large quantities, except the term does not include:
    1. A partnership, corporation, or limited liability company when all of its partners, stockholders, or members are licensed by a state or the United States to render legal advice concerning patents and trademarks, or a person so licensed.
    2. A department or agency of federal, state, or local government.
    3. A charitable, scientific, educational, religious, or other organization described in section 170(b)(1)(A) of the Internal Revenue Code of 1954.
    4. An entity that does not charge a fee for invention development services.
    5. An entity whose gross receipts from contracts for invention development services do not exceed ten percent of its gross receipts from all sources during the fiscal year preceding the year in which any contract for invention development services is signed.
    6. A partnership, corporation, or limited liability company that accepts technology from institutions of higher education and other state and federal research institutions for evaluation and the providing of marketing services.
  5. “Invention development services” includes acts required or promised to be performed, or actually performed, by an invention developer for a customer.

For the purposes of this subsection, “fee” includes any payment made by the customer to the entity, including reimbursements for expenditures made or costs incurred by such entity, but does not include a payment made from a portion of the income received by a customer by virtue of invention development services performed by the entity.

Source:

S.L. 1987, ch. 134, § 1; 1993, ch. 54, § 106.

Collateral References.

Construction and effect of “changed conditions” clause in public works or construction contract with state or its subdivisions, 56 A.L.R.4th 1042.

9-14-02. Notice to customers.

  1. Every contract for invention development services must be in writing and is subject to this chapter. A copy of each fully executed contract must be given to the customer at the time the customer signs the contract.
  2. If one or more contracts are contemplated by the invention developer in connection with an invention or if the invention developer contemplates performance of services in connection with an invention in more than one phase with the performance of each phase covered in one or more contracts, the invention developer shall so state in a written statement and shall supply to the customer the written statement together with a copy of each contract or a written summary of the general terms of each contract, including the total cost or consideration required from the customer, before the customer signs the first contract.

Source:

S.L. 1987, ch. 134, § 2.

9-14-03. Right of cancellation.

  1. Notwithstanding any contractual provision to the contrary, the customer has the unconditional right to cancel a contract for invention development services for any reason at any time before midnight of the third business day following the date the invention developer and the customer sign the contract and the customer receives a fully executed copy of it. Written notice of cancellation may be delivered personally or by mail. If given by mail, the notice is effective upon placement in the possession of the United States postal service, properly addressed and first-class postage prepaid. Notice of cancellation need not take a particular form and is sufficient if it indicates, by any form of written expression, the intention of the customer not to be bound by the contract. Within ten business days after receipt of the notice of cancellation, the invention developer shall deliver to the customer, personally or by mail, all moneys paid, any note or other evidence of indebtedness, and all materials provided by the customer.
  2. Every contract for invention development services must contain the following statement in ten-point boldface type immediately above the place where the customer signs the contract:

The three-business-day period during which you may cancel this contract for any reason by mailing or delivering written notice to the invention developer will expire on (last date to mail or deliver notice). If you choose to mail your notice, it must be placed in the United States mail addressed to (name of invention developer), at (address of invention developer’s place of business) with first-class postage prepaid before midnight of this date. If you choose to personally deliver your notice to the invention developer, it must be delivered to the invention developer by five p.m. on this date.

Source:

S.L. 1987, ch. 134, § 3.

9-14-04. Mandatory contract form.

  1. A contract for invention development services must set forth the information required in this section in at least ten-point type or equivalent size if handwritten.
  2. The following disclosure statement must be in boldface type and must be located conspicuously on a cover sheet that contains no other writing:
  3. The contract must describe fully and in detail the acts or services that the invention developer contracts to perform for the customer.
  4. The contract must state whether the invention developer contracts to construct one or more prototypes, models, or devices embodying the customer’s invention, the number of such prototypes to be constructed, and whether the invention developer contracts to sell or distribute such prototypes, models, or devices.
  5. If an oral or written estimate of customer earnings is made, the contract must state the estimate and the data upon which it is based.
  6. In a single statement the contract must set forth both the total number of customers who have contracted with the invention developer, except that the number need not reflect those customers who have contracted within the last thirty days, and the number of customers who have received, by virtue of the invention developer’s performance of invention development services, an amount of money in excess of the amount of money paid by such customers to the invention developer pursuant to a contract for invention development services.
  7. The contract must state the expected date of completion of the invention development services.
  8. The contract must state whether and the extent to which it effectuates or makes possible the purchase by the invention developer of an interest in the title to the customer’s invention.
  9. The contract must explain that the invention developer is required to maintain all records and correspondence relating to performance of the invention development services for that customer for a period not less than three years after expiration of the term of the contract for invention development services.
  10. The contract must state that the records and correspondence required to be maintained pursuant to section 9-14-08 will be made available to the customer or the customer’s representative for review and copying at the customer’s expense on the invention developer’s premises during normal business hours upon seven days’ written notice, the time period to begin from the date the notice is placed in the United States mail properly addressed and first-class postage prepaid.
  11. The contract must state the name of the person or firm contracting to perform the invention development services, all names under which said person or firm is doing or has done business as an invention developer during the previous ten years, the names of all parent and subsidiary companies to the firm, and the name of all companies that have a contractual obligation to the firm to perform invention development services.
  12. The contract must state the invention developer’s principal business address and the name and address of its agent in this state authorized to receive service of process in this state.

The following disclosures are required by law and are expressly made a part of this contract: You have the right to cancel this contract for any reason at any time within three business days from the date you and the invention developer sign the contract and you receive a fully executed copy of it. To exercise this option you need only mail or personally deliver to this invention developer written notice of your cancellation. The method and time for notification is set forth in this contract immediately above the place for your signature. Upon cancellation, the invention developer must return by mail or personal delivery, within ten business days after receipt of the cancellation notice, all money paid and all materials provided either by you or by another party in your behalf.

Unless the invention developer is an attorney or patent agent registered with the United States patent office, the invention developer is not permitted to give you legal advice concerning patent, copyright, or trademark law or to advise you of whether your idea or invention may be patentable or may be protected under the patent, copyright, or trademark laws of the United States or any other law.

No patent, copyright, or trademark protection will be acquired for you by the invention developer or by this contract. Your failure to inquire into the law governing patent, copyright, or trademark matters may jeopardize your rights in your idea or invention both in the United States and in foreign countries. Your failure to identify and investigate existing patents, trademarks, or registered copyrights may place you in jeopardy of infringing the copyrights, patent rights, or trademark rights of other persons if you proceed to make, use, distribute, or sell your idea or invention.

Source:

S.L. 1987, ch. 134, § 4.

Collateral References.

Construction and effect of provision of employment contract giving employer right to inventions made by employee, 66 A.L.R.4th 1135.

9-14-05. Disclosures made prior to contract.

  1. In either the first written communication from the invention developer to a specific customer or at the first personal meeting between the invention developer and a customer, whichever occurs first, the invention developer shall make a written disclosure to the customer of the information required in this section.
  2. The disclosure must state the median fee charged to all of the invention developers’ customers who have signed contracts with the developer in the preceding six months, excluding customers who have signed in the preceding thirty days.
  3. The disclosure must include a single statement setting forth the total number of customers who have contracted with the invention developer, except that the number need not reflect those customers who have contracted within the preceding thirty days, and the number of customers who have received by virtue of the invention developer’s performance of invention development services an amount of money in excess of the amount of money paid by those customers to the invention developer pursuant to a contract for invention development services.
  4. The disclosure must include a single statement setting forth the names of all individuals and entities that possess an ownership interest in the invention developer and have held or presently hold more than a ten percent ownership interest in any other invention developer. The statement must include for each individual and entity the information required to be disclosed by subsection 3.
  5. The disclosure must contain the following statement:
  6. If the invention developer provides invention development services involving the evaluation of inventions, the disclosure must include a statement setting forth the percentage of evaluated inventions that have been successfully marketed or licensed by the invention developer. If the invention developer does not provide invention development services involving the evaluation of inventions, the disclosure must inform the customer that there is considerable risk involved in proceeding with the development and promotion of the invention without an evaluation and must further recommend that the customer obtain an evaluation of the invention by an evaluation source. The disclosure must contain the following statement:

Unless the invention developer is an attorney or patent agent registered with the United States patent office, the invention developer is not permitted to give you legal advice concerning patent, copyright, or trademark law or to advise you of whether your idea or invention may be patentable or may be protected under the patent rights, copyright, or trademark laws of the United States or any other law.

No patent, copyright, or trademark protection will be acquired for you by the invention developer. Your failure to inquire into the law governing patent, copyright, or trademark matters may jeopardize your rights in your idea or invention, both in the United States and in foreign countries. Your failure to identify and investigate existing patents, trademarks, or registered copyrights may place you in jeopardy of infringing the copyrights, patent rights, or trademark rights of other persons if you proceed to make, use, distribute, or sell your idea or invention.

It is likely that no more than two percent and probably less than one percent of all inventions are successfully developed and promoted. You should evaluate your chances of success accordingly and not rely solely on the opinion of an invention developer.

Source:

S.L. 1987, ch. 134, § 5.

9-14-06. Financial requirements.

  1. Every invention developer rendering or offering to render invention development services in this state shall maintain a bond issued by a surety company authorized to do business in this state, and equal to either ten percent of the invention developer’s gross income from the invention development business in this state during the invention developer’s preceding fiscal year, or twenty-five thousand dollars, whichever is larger. A copy of the bond must be approved by the attorney general and filed with the secretary of state before the invention developer renders or offers to render invention development services in this state. The invention developer has ninety days after the end of each fiscal year within which to change the bond as may be necessary to conform to the requirements of this subsection.
  2. The bond required by subsection 1 must be in favor of the state of North Dakota for the benefit of any person who, after entering into a contract for invention development services with an invention developer, is damaged by fraud or dishonesty of the invention developer in performance of the contract, by the insolvency or the cessation of business by the invention developer, or by the intentional violation of this chapter by the invention developer. Any person claiming against the bond may maintain a claim for relief against the invention developer and the surety company.
  3. In lieu of the bond required by subsection 1, the invention developer may deposit with the Bank of North Dakota a cash deposit in the like amount. The Bank of North Dakota may not refund a deposit until sixty days after either the invention developer has ceased doing business in the state or a bond has been filed which complies with subsections 1 and 2.

The aggregate liability of the surety company to all persons for all breaches of conditions of the bond may not exceed the amount of the bond.

Source:

S.L. 1987, ch. 134, § 6.

9-14-07. Restriction on use of negotiable instruments.

In connection with a contract for invention development services, the invention developer may not take from a customer a negotiable instrument other than a check as evidence of the obligation of the customer. A holder is not a holder in due course if the holder takes a negotiable instrument taken from a customer in violation of this section.

Source:

S.L. 1987, ch. 134, § 7.

9-14-08. Records.

Every invention developer shall maintain all records and correspondence relating to performance of each invention development contract for a period of not less than three years after expiration of the term of the contract.

Source:

S.L. 1987, ch. 134, § 8.

9-14-09. Remedies and enforcement.

  1. The provisions of this chapter are not exclusive and do not relieve the parties or the contract from compliance with all other applicable laws.
  2. Any contract for invention development services that does not comply with the applicable provisions of this chapter is unenforceable against the customer as contrary to public policy; provided, that no contract is unenforceable if the invention developer proves that noncompliance was unintentional and resulted from a bona fide error in spite of the developer’s use of reasonable procedures adopted to avoid any such errors, and if the developer makes an appropriate correction.
  3. Any contract for invention development services entered into by a customer with an invention developer who has used any fraud, false pretense, false promise, misrepresentation, misleading statement, or deceptive practice in respect to that customer with the intent that the customer rely thereon, whether or not the customer was in fact misled, deceived, or damaged, is unenforceable against the customer.
  4. Any waiver by the customer of the provisions of this chapter is contrary to public policy and is void and unenforceable.
  5. Any person who has been injured by a violation of this chapter by an invention developer, by any false or fraudulent statement, representation, or omission of material fact by an invention developer or by failure of an invention developer to make all the disclosures required by this chapter may bring a civil action against the invention developer for the damages sustained together with costs and disbursements, including reasonable attorney’s fees. The court in its discretion may increase the award of damages to an amount not to exceed three times the damages sustained.
  6. Failure to make the disclosures required by section 9-14-05 renders any contract subsequently entered into between the customer and the invention developer voidable by the customer.

Source:

S.L. 1987, ch. 134, § 9.

Collateral References.

Construction and effect of provision of employment contract giving employer right to inventions made by employee, 66 A.L.R.4th 1135.

CHAPTER 9-15 Athlete Agents [Repealed]

[Repealed by S.L. 2003, ch. 81, § 17]

CHAPTER 9-15.1 Uniform Athlete Agents Act [Repealed]

9-15.1-01. Definitions. [Repealed]

Source:

S.L. 2003, ch. 81, § 1; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-02. Service of process — Subpoenas. [Repealed]

Source:

S.L. 2003, ch. 81, § 2; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-03. Athlete agents — Registration required — Void contracts. [Repealed]

Source:

S.L. 2003, ch. 81, § 3; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-04. Registration as athlete agent. [Repealed]

Source:

S.L. 2003, ch. 81, § 4; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-05. Certificate of registration — Issuance or denial — Renewal. [Repealed]

Source:

S.L. 2003, ch. 81, § 5; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-06. Suspension, revocation, or refusal to renew registration. [Repealed]

Source:

S.L. 2003, ch. 81, § 6; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-07. Temporary registration. [Repealed]

Source:

S.L. 2003, ch. 81, § 7; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-08. Registration and renewal fees. [Repealed]

Source:

S.L. 2003, ch. 81, § 8; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-09. Required form of contract. [Repealed]

Source:

S.L. 2003, ch. 81, § 9; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-10. Notice to educational institution. [Repealed]

Source:

S.L. 2003, ch. 81, § 10; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-11. Student-athlete’s right to cancel. [Repealed]

Source:

S.L. 2003, ch. 81, § 11; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-12. Required records. [Repealed]

Source:

S.L. 2003, ch. 81, § 12; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-13. Prohibited conduct. [Repealed]

Source:

S.L. 2003, ch. 81, § 13; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-14. Penalty. [Repealed]

Source:

S.L. 2003, ch. 81, § 14; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-15. Civil remedies. [Repealed]

Source:

S.L. 2003, ch. 81, § 15; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

9-15.1-16. Administrative penalty. [Repealed]

Source:

S.L. 2003, ch. 81, § 16; repealed by 2017, ch. 79, § 2, effective August 1, 2017.

CHAPTER 9-15.2 Revised Uniform Athlete Agents Act

9-15.2-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Agency contract” means an agreement in which a student-athlete authorizes a person to negotiate or solicit on behalf of the athlete a professional sports services contract or endorsement contract.
  2. “Athlete agent”:
    1. Means an individual, whether or not registered under this chapter, who:
      1. Directly or indirectly recruits or solicits a student-athlete to enter an agency contract or, for compensation, procures employment or offers, promises, attempts, or negotiates to obtain employment for a student-athlete as a professional athlete or member of a professional sports team or organization;
      2. For compensation or in anticipation of compensation related to a student-athlete’s participation in athletics:
        1. Serves the athlete in an advisory capacity on a matter related to finances, business pursuits, or career management decisions, unless the individual is an employee of an educational institution acting exclusively as an employee of the institution for the benefit of the institution; or
        2. Manages the business affairs of the athlete by providing assistance with bills, payments, contracts, or taxes; or
      3. In anticipation of representing a student-athlete for a purpose related to the athlete’s participation in athletics:
        1. Gives consideration to the student-athlete or another person;
        2. Serves the athlete in an advisory capacity on a matter related to finances, business pursuits, or career management decisions; or
        3. Manages the business affairs of the athlete by providing assistance with bills, payments, contracts, or taxes; but
    2. Does not include an individual who:
      1. Acts solely on behalf of a professional sports team or organization; or
      2. Is a licensed, registered, or certified professional and offers or provides services to a student-athlete customarily provided by members of the profession, unless the individual:
        1. Also recruits or solicits the athlete to enter into an agency contract;
        2. Also, for compensation, procures employment or offers, promises, attempts, or negotiates to obtain employment for the athlete as a professional athlete or member of a professional sports team or organization; or
        3. Receives consideration for providing the services calculated using a different method than for an individual who is not a student-athlete.
  3. “Athletic director” means the individual responsible for administering the overall athletic program of an educational institution or, if an educational institution has separately administered athletic programs for male students and female students, the athletic program for males or the athletic program for females, as appropriate.
  4. “Educational institution” includes a public or private elementary school, secondary school, technical or vocational school, community college, college, and university.
  5. “Endorsement contract” means an agreement under which a student-athlete is employed or receives consideration to use on behalf of the other party any value that the athlete may have because of publicity, reputation, following, or fame obtained because of athletic ability or performance.
  6. “Enrolled or enrolls” means registered for courses and attending athletic practice or class.
  7. “Intercollegiate sport” means a sport played at the collegiate level for which eligibility requirements for participation by a student-athlete are established by a national association that promotes or regulates collegiate athletics.
  8. “Interscholastic sport” means a sport played between educational institutions that are not community colleges, colleges, or universities.
  9. “Licensed, registered, or certified professional” means an individual licensed, registered, or certified as an attorney, dealer in securities, financial planner, insurance agent, real estate broker or sales agent, tax consultant, accountant, or member of a profession, other than that of athlete agent, who is licensed, registered, or certified by the state or a nationally recognized organization that licenses, registers, or certifies members of the profession on the basis of experience, education, or testing.
  10. “Person” means an individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.
  11. “Professional sports services contract” means an agreement under which an individual is employed as a professional athlete or agrees to render services as a player on a professional sports team or with a professional sports organization.
  12. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
  13. “Recruit or solicit” means an attempt to influence the choice of an athlete agent by a student-athlete or, if the athlete is a minor, a parent or guardian of the athlete. The term does not include giving advice on the selection of a particular agent in a family, coaching, or social situation unless the individual giving the advice does so because of the receipt or anticipated receipt of an economic benefit, directly or indirectly, from the agent.
  14. “Registration” means registration as an athlete agent under this chapter.
  15. “Sign” means, with present intent to authenticate or adopt a record:
    1. To execute or adopt a tangible symbol; or
    2. To attach to or logically associate with the record an electronic symbol, sound, or process.
  16. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
  17. “Student-athlete” means an individual who is eligible to attend an educational institution and engages in, is eligible to engage in, or may be eligible in the future to engage in, an interscholastic or intercollegiate sport. The term does not include an individual permanently ineligible to participate in a particular interscholastic or intercollegiate sport for that sport.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-02. Secretary of state — Authority — Procedure.

  1. Chapter 28-32 applies to this chapter. The secretary of state may adopt rules under chapter 28-32 to implement this chapter.
  2. By acting as an athlete agent in this state, a nonresident individual appoints the secretary of state as the individual’s agent for service of process in any civil action in this state related to the individual acting as an athlete agent in this state.
  3. The secretary of state may issue a subpoena for material that is relevant to the administration of this chapter.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-03. Athlete agent — Registration required — Void contract.

  1. Except as provided in subsection 2, an individual may not act as an athlete agent in this state without holding a certificate of registration under this chapter.
  2. Before being issued a certificate of registration under this chapter an individual may act as an athlete agent in this state for all purposes except signing an agency contract, if:
    1. A student-athlete or another person acting on behalf of the athlete initiates communication with the individual; and
    2. Not later than seven days after an initial act that requires the individual to register as an athlete agent, the individual submits an application for registration as an athlete agent in this state.
  3. An agency contract resulting from conduct in violation of this section is void, and the athlete agent shall return any consideration received under the contract.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-04. Registration as athlete agent — Application — Requirements — Reciprocal registration.

  1. An applicant for registration as an athlete agent shall submit an application for registration to the secretary of state in a form prescribed by the secretary of state. The applicant must be an individual, and the application must be signed by the applicant under penalty of perjury. The application must contain at least the following:
    1. The name and date and place of birth of the applicant and the following contact information for the applicant:
      1. The address of the applicant’s principal place of business;
      2. Work and mobile telephone numbers; and
      3. Any means of communicating electronically, including a facsimile number, electronic mail, and personal and business or employer websites;
    2. The name of the applicant’s business or employer, if applicable, including for each business or employer, its mailing address, telephone number, organization form, and the nature of the business;
    3. Each social media account with which the applicant or the applicant’s business or employer is affiliated;
    4. Each business or occupation in which the applicant engaged within five years before the date of the application, including self-employment and employment by others, and any professional or occupational license, registration, or certification held by the applicant during that time;
    5. A description of the applicant’s:
      1. Formal training as an athlete agent;
      2. Practical experience as an athlete agent; and
      3. Educational background relating to the applicant’s activities as an athlete agent;
    6. The name of each student-athlete for whom the applicant acted as an athlete agent within five years before the date of the application or, if the individual is a minor, the name of the parent or guardian of the minor, together with the athlete’s sport and last-known team;
    7. The name and address of each person that:
      1. Is a partner, member, officer, manager, associate, or profit sharer or directly or indirectly holds an equity interest of five percent or greater of the athlete agent’s business if it is not a corporation; and
      2. Is an officer or director of a corporation employing the athlete agent or a shareholder having an interest of five percent or greater in the corporation;
    8. A description of the status of any application by the applicant, or any person named under subdivision g, for a state or federal business, professional, or occupational license, other than as an athlete agent, from a state or federal agency, including any denial, refusal to renew, suspension, withdrawal, or termination of the license and any reprimand or censure related to the license;
    9. Whether the applicant, or any person named under subdivision g, has pleaded guilty or no contest to, has been convicted of, or has charges pending for, a crime that would involve moral turpitude or be a felony if committed in this state and, if so, identification of:
      1. The crime;
      2. The law enforcement agency involved; and
      3. If applicable, the date of the conviction and the fine or penalty imposed;
    10. Whether, within fifteen years before the date of application, the applicant, or any person named under subdivision g, has been a defendant or respondent in a civil proceeding, including a proceeding seeking an adjudication of legal incompetence and, if so, the date and a full explanation of each proceeding;
    11. Whether the applicant, or any person named under subdivision g, has an unsatisfied judgment or a judgment of continuing effect, including spousal support or a domestic order in the nature of child support, which is not current at the date of the application;
    12. Whether, within ten years before the date of application, the applicant, or any person named under subdivision g, was adjudicated bankrupt or was an owner of a business that was adjudicated bankrupt;
    13. Whether there has been any administrative or judicial determination that the applicant, or any person named under subdivision g, made a false, misleading, deceptive, or fraudulent representation;
    14. Each instance in which conduct of the applicant, or any person named under subdivision g, resulted in the imposition of a sanction, suspension, or declaration of ineligibility to participate in an interscholastic, intercollegiate, or professional athletic event on a student-athlete or a sanction on an educational institution;
    15. Each sanction, suspension, or disciplinary action taken against the applicant, or any person named under subdivision g, arising out of occupational or professional conduct;
    16. Whether there has been a denial of an application for, suspension or revocation of, refusal to renew, or abandonment of, the registration of the applicant, or any person named under subdivision g, as an athlete agent in any state;
    17. Each state in which the applicant currently is registered as an athlete agent or has applied to be registered as an athlete agent;
    18. If the applicant is certified or registered by a professional league or players association:
      1. The name of the league or association;
      2. The date of certification or registration, and the date of expiration of the certification or registration, if any; and
      3. If applicable, the date of any denial of an application for, suspension or revocation of, refusal to renew, withdrawal of, or termination of, the certification or registration or any reprimand or censure related to the certification or registration; and
    19. Any additional information required by the secretary of state.
  2. Instead of proceeding under subsection 1, an individual registered as an athlete agent in another state may apply for registration as an athlete agent in this state by submitting to the secretary of state:
    1. A copy of the application for registration in the other state;
    2. A statement that identifies any material change in the information on the application or verifies there is no material change in the information, signed under penalty of perjury; and
    3. A copy of the certificate of registration from the other state.
  3. The secretary of state shall issue a certificate of registration to an individual who applies for registration under subsection 2 if the secretary of state determines:
    1. The application and registration requirements of the other state are substantially similar to or more restrictive than this chapter; and
    2. The registration has not been revoked or suspended and no action involving the individual’s conduct as an athlete agent is pending against the individual or the individual’s registration in any state.
  4. For purposes of implementing subsection 3, the secretary of state may:
    1. Cooperate with national organizations concerned with athlete agent issues and agencies in other states which register athlete agents to develop a common registration form and determine which states have laws that are substantially similar to or more restrictive than this chapter; and
    2. Exchange information, including information related to actions taken against registered athlete agents or their registrations, with those organizations and agencies.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-05. Certificate of registration — Issuance or denial — Renewal.

  1. Except as otherwise provided in subsection 2, the secretary of state shall issue a certificate of registration to an applicant for registration who complies with subsection 1 of section 9-15.2-04.
  2. The secretary of state may refuse to issue a certificate of registration to an applicant for registration under subsection 1 of section 9-15.2-04 if the secretary of state determines that the applicant has engaged in conduct that significantly adversely reflects on the applicant’s fitness to act as an athlete agent. In making the determination, the secretary of state may consider whether the applicant has:
    1. Pleaded guilty or no contest to, has been convicted of, or has charges pending for, a crime that would involve moral turpitude or be a felony if committed in this state;
    2. Made a materially false, misleading, deceptive, or fraudulent representation in the application or as an athlete agent;
    3. Engaged in conduct that would disqualify the applicant from serving in a fiduciary capacity;
    4. Engaged in conduct prohibited by section 9-15.2-13;
    5. Had a registration as an athlete agent suspended, revoked, or denied in any state;
    6. Been refused renewal of registration as an athlete agent in any state;
    7. Engaged in conduct resulting in imposition of a sanction, suspension, or declaration of ineligibility to participate in an interscholastic, intercollegiate, or professional athletic event on a student athlete or a sanction on an educational institution; or
    8. Engaged in conduct that adversely reflects on the applicant’s credibility, honesty, or integrity.
  3. In making a determination under subsection 2, the secretary of state shall consider:
    1. How recently the conduct occurred;
    2. The nature of the conduct and the context in which it occurred; and
    3. Other relevant conduct of the applicant.
  4. An athlete agent registered under subsection 1 may apply to renew the registration by submitting an application for renewal in a form prescribed by the secretary of state. The applicant shall sign the application for renewal under penalty of perjury and include current information on all matters required in an original application for registration.
  5. An athlete agent registered under subsection 3 of section 9-15.2-04 may renew the registration by proceeding under subsection 4 or, if the registration in the other state has been renewed, by submitting to the secretary of state copies of the application for renewal in the other state and the renewed registration from the other state. The secretary of state shall renew the registration if the secretary of state determines:
    1. The registration requirements of the other state are substantially similar to or more restrictive than this chapter; and
    2. The renewed registration has not been suspended or revoked and no action involving the individual’s conduct as an athlete agent is pending against the individual or the individual’s registration in any state.
  6. A certificate of registration or renewal of registration under this chapter is valid for two years.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-06. Suspension, revocation, or refusal to renew registration.

  1. The secretary of state may limit, suspend, revoke, or refuse to renew a registration of an individual registered under subsection 1 of section 9-15.2-05 for conduct that would have justified refusal to issue a certificate of registration under subsection 2 of section 9-15.2-05.
  2. The secretary of state may suspend or revoke the registration of an individual registered under subsection 3 of section 9-15.2-04 or renewed under subsection 5 of section 9-15.2-05 for any reason for which the secretary of state could have refused to grant or renew registration or for conduct that would justify refusal to issue a certificate of registration under subsection 2 of section 9-15.2-05.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-07. Temporary registration.

The secretary of state may issue a temporary certificate of registration as an athlete agent while an application for registration or renewal of registration is pending.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-08. Registration and renewal fees.

An application for registration or renewal of registration as an athlete agent must be accompanied by a fee in the following amount:

  1. Two hundred fifty dollars for an initial application for registration;
  2. Two hundred fifty dollars for registration based on a certificate of registration issued by another state;
  3. One hundred fifty dollars for an application for renewal of registration; or
  4. One hundred fifty dollars for renewal of registration based on a renewal of registration in another state.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-09. Required form of agency contract.

  1. An agency contract must be in a record signed by the parties.
  2. An agency contract must contain:
    1. A statement that the athlete agent is registered as an athlete agent in this state and a list of any other states in which the agent is registered as an athlete agent;
    2. The amount and method of calculating the consideration to be paid by the student-athlete for services to be provided by the agent under the contract and any other consideration the agent has received or will receive from any other source for entering into the contract or providing the services;
    3. The name of any person not listed in the agent’s application for registration or renewal of registration which will be compensated because the athlete signed the contract;
    4. A description of any expenses the athlete agrees to reimburse;
    5. A description of the services to be provided to the athlete;
    6. The duration of the contract; and
    7. The date of execution.
      1. YOU MAY LOSE YOUR ELIGIBILITY TO COMPETE AS A STUDENT-ATHLETE IN YOUR SPORT;
      2. IF YOU HAVE AN ATHLETIC DIRECTOR, WITHIN 72 HOURS AFTER SIGNING THIS CONTRACT OR BEFORE THE NEXT SCHEDULED ATHLETIC EVENT IN WHICH YOU PARTICIPATE, WHICHEVER OCCURS FIRST, BOTH YOU AND YOUR ATHLETE AGENT MUST NOTIFY YOUR ATHLETIC DIRECTOR THAT YOU HAVE ENTERED INTO THIS CONTRACT AND PROVIDE THE NAME AND CONTACT INFORMATION OF THE ATHLETE AGENT; AND
      3. YOU MAY CANCEL THIS CONTRACT WITHIN 14 DAYS AFTER SIGNING IT. CANCELLATION OF THIS CONTRACT MAY NOT REINSTATE YOUR ELIGIBILITY AS A STUDENT-ATHLETE IN YOUR SPORT.
  3. Subject to subsection 7, an agency contract must contain a conspicuous notice in boldface type and in substantially the following form:
  4. An agency contract must be accompanied by a separate record signed by the student-athlete or, if the athlete is a minor, the parent or guardian of the athlete acknowledging that signing the contract may result in the loss of the athlete’s eligibility to participate in the athlete’s sport.
  5. A student-athlete or, if the athlete is a minor, the parent or guardian of the athlete may void an agency contract that does not conform to this section. If the contract is voided, any consideration received from the athlete agent under the contract to induce entering into the contract is not required to be returned.
  6. At the time an agency contract is executed, the athlete agent shall give the student-athlete or, if the athlete is a minor, the parent or guardian of the athlete a copy in a record of the contract and the separate acknowledgment required by subsection 4.
  7. If a student-athlete is a minor, an agency contract must be signed by the parent or guardian of the minor and the notice required by subsection 3 must be revised accordingly.

WARNING TO STUDENT-ATHLETE,

IF YOU SIGN THIS CONTRACT:

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-10. Notice to educational institution.

  1. In this section, “communicating or attempting to communicate” means contacting or attempting to contact by an in-person meeting, a record, or any other method that conveys or attempts to convey a message.
  2. Not later than seventy-two hours after entering an agency contract or before the next scheduled athletic event in which the student-athlete may participate, whichever occurs first, the athlete agent shall give notice in a record of the existence of the contract to the athletic director of the educational institution at which the athlete is enrolled or at which the agent has reasonable grounds to believe the athlete intends to enroll.
  3. Not later than seventy-two hours after entering an agency contract or before the next scheduled athletic event in which the student-athlete may participate, whichever occurs first, the athlete shall inform the athletic director of the educational institution at which the athlete is enrolled that the athlete has entered an agency contract and the name and contact information of the athlete agent.
  4. If an athlete agent enters an agency contract with a student-athlete and the athlete subsequently enrolls at an educational institution, the agent shall notify the athletic director of the institution of the existence of the contract not later than seventy-two hours after the agent knew or should have known the athlete enrolled.
  5. If an athlete agent has a relationship with a student-athlete before the athlete enrolls in an educational institution and receives an athletic scholarship from the institution, the agent shall notify the institution of the relationship not later than ten days after the enrollment if the agent knows or should have known of the enrollment and:
    1. The relationship was motivated in whole or part by the intention of the agent to recruit or solicit the athlete to enter an agency contract in the future; or
    2. The agent directly or indirectly recruited or solicited the athlete to enter an agency contract before the enrollment.
  6. An athlete agent shall give notice in a record to the athletic director of any educational institution at which a student-athlete is enrolled before the agent communicates or attempts to communicate with:
    1. The athlete or, if the athlete is a minor, a parent or guardian of the athlete, to influence the athlete or parent or guardian to enter into an agency contract; or
    2. Another individual to have that individual influence the athlete or, if the athlete is a minor, the parent or guardian of the athlete to enter into an agency contract.
  7. If a communication or attempt to communicate with an athlete agent is initiated by a student-athlete or another individual on behalf of the athlete, the agent shall notify in a record the athletic director of any educational institution at which the athlete is enrolled. The notification must be made not later than ten days after the communication or attempt.
  8. An educational institution that becomes aware of a violation of this chapter by an athlete agent shall notify the secretary of state and any professional league or players association with which the institution is aware the agent is licensed or registered of the violation.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-11. Student-athlete’s right to cancel.

  1. A student-athlete or, if the athlete is a minor, the parent or guardian of the athlete may cancel an agency contract by giving notice in a record of cancellation to the athlete agent not later than fourteen days after the contract is signed.
  2. A student-athlete or, if the athlete is a minor, the parent or guardian of the athlete may not waive the right to cancel an agency contract.
  3. If a student-athlete or parent or guardian cancels an agency contract, the athlete or parent or guardian is not required to pay any consideration under the contract or return any consideration received from the athlete agent to influence the athlete to enter into the contract.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-12. Required records.

  1. An athlete agent shall create and retain for five years records of the following:
    1. The name and address of each individual represented by the agent;
    2. Each agency contract entered by the agent; and
    3. The direct costs incurred by the agent in the recruitment or solicitation of each student-athlete to enter an agency contract.
  2. Records described in subsection 1 are open to inspection by the secretary of state during normal business hours.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-13. Prohibited conduct.

An athlete agent may not intentionally:

  1. Give a student-athlete or, if the athlete is a minor, give a parent or guardian of the athlete materially false or misleading information or make a materially false promise or representation with the intent to influence the athlete, parent, or guardian to enter an agency contract;
  2. Furnish anything of value to a student-athlete or another individual, if to do so may result in loss of the athlete’s eligibility to participate in the athlete’s sport, unless:
    1. The agent notifies the athletic director of the educational institution at which the athlete is enrolled or at which the agent has reasonable grounds to believe the athlete intends to enroll, not later than seventy-two hours after giving the thing of value; and
    2. The athlete or, if the athlete is a minor, the parent or guardian of the athlete acknowledges to the agent in a record that receipt of the thing of value may result in loss of the athlete’s eligibility to participate in the athlete’s sport;
  3. Initiate contact, directly or indirectly, with a student-athlete or, if the athlete is a minor, a parent or guardian of the athlete, to recruit or solicit the athlete, parent, or guardian to enter an agency contract unless registered under this chapter;
  4. Fail to create, retain, or permit inspection of the records required by section 9-15.2-12;
  5. Fail to register when required by section 9-15.2-03;
  6. Provide materially false or misleading information in an application for registration or renewal of registration;
  7. Predate or postdate an agency contract;
  8. Fail to notify a student-athlete or, if the athlete is a minor, a parent or guardian of the athlete, before the athlete, parent, or guardian signs an agency contract for a particular sport that the signing may result in loss of the athlete’s eligibility to participate in the athlete’s sport;
  9. Encourage another individual to do any of the acts described in subsections 1 through 8 on behalf of the agent; or
  10. Encourage another individual to assist any other individual in doing any of the acts described in subsections 1 through 8 on behalf of the agent.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017; 2021, ch. 84, § 1, effective August 1, 2021.

9-15.2-14. Criminal penalty.

An athlete agent who violates section9-15.2-13 is guilty of a class A misdemeanor.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-15. Civil remedy.

  1. An educational institution or student-athlete may bring an action for damages against an athlete agent if the institution or athlete is adversely affected by an act or omission of the agent in violation of this chapter. An educational institution or student-athlete is adversely affected by an act or omission of the agent only if, because of the act or omission, the institution or an individual who was a student-athlete at the time of the act or omission and enrolled in the institution:
    1. Is suspended or disqualified from participation in an interscholastic or intercollegiate sports event by or under the rules of a state or national federation or association that promotes or regulates interscholastic or intercollegiate sports; or
    2. Suffers financial damage.
  2. A plaintiff that prevails in an action under this section may recover damages, costs, and reasonable attorney’s fees. An athlete agent found liable under this section forfeits any right of payment for anything of benefit or value provided to the student-athlete and shall refund any consideration paid to the agent by or on behalf of the athlete.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-16. Civil penalty.

The secretary of state may assess a civil penalty against an athlete agent not to exceed fifty thousand dollars for a violation of this chapter.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-17. Uniformity of application and construction.

In applying and construing this uniform Act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

9-15.2-18. Relation to the Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001 et seq., but does not modify, limit, or supersede section 101(c) of that Act, 15 U.S.C. 7001(c), or authorize electronic delivery of any of the notices described in section 103(b) of that Act, 15 U.S.C. 7003(b).

Source:

S.L. 2017, ch. 79, § 1, effective August 1, 2017.

CHAPTER 9-16 Electronic Transactions

9-16-01. Definitions.

In this chapter:

  1. “Agreement” means the bargain of the parties in fact, as found in the parties’ language or inferred from other circumstances and from rules and procedures given the effect of agreements under laws otherwise applicable to a particular transaction.
  2. “Automated transaction” means a transaction conducted or performed, in whole or in part, by electronic means or electronic records, in which the acts or records of one or both parties are not reviewed by an individual in the ordinary course in forming a contract, performing under an existing contract, or fulfilling an obligation required by the transaction.
  3. “Computer program” means a set of statements or instructions to be used directly or indirectly in an information processing system in order to bring about a certain result.
  4. “Contract” means the total legal obligation resulting from the parties’ agreement as affected by this chapter and other applicable law.
  5. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
  6. “Electronic agent” means a computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances, in whole or in part, without review or action by an individual.
  7. “Electronic record” means a record created, generated, sent, communicated, received, or stored by electronic means.
  8. “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.
  9. “Governmental agency” means an executive, legislative, or judicial agency, department, board, commission, authority, institution, or instrumentality of the state.
  10. “Information” means data, text, images, sounds, codes, computer programs, software, data bases, or the like.
  11. “Information processing system” means an electronic system for creating, generating, sending, receiving, storing, displaying, or processing information.
  12. “Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.
  13. “Security procedure” means a procedure employed for the purpose of verifying that an electronic signature, record, or performance is that of a specific person or for detecting changes or errors in the information in an electronic record. The term includes a procedure that requires the use of algorithms or other codes, identifying words or numbers, encryption, or callback or other acknowledgment procedures.
  14. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band, or Alaskan native village, which is recognized by federal law or formally acknowledged by a state.
  15. “Transaction” means an action or set of actions occurring between two or more persons relating to the conduct of business, commercial, or governmental affairs.
  16. “Writing” or “written” includes blockchain technology as defined in section 9-16-19.

Source:

S.L. 2001, ch. 108, § 1; 2019, ch. 94, § 1, effective August 1, 2019.

9-16-02. Scope.

  1. Except as otherwise provided in subsection 2 or 3, this chapter applies to electronic records and electronic signatures relating to a transaction.
  2. Except as provided in subsection 3, this chapter does not apply to a transaction to the extent the transaction is governed by:
    1. A law governing the creation and execution of wills, codicils, or testamentary trusts;
    2. The Uniform Commercial Code other than section 41-01-20 and chapters 41-02 and 41-02.1; and
    3. Chapters 41-03, 41-04, 41-04.1, 41-05, 41-07, 41-08, or 41-09.
  3. Section 9-16-19 applies only to title 10 and transactions governed by chapters 41-02, 41-02.1, and 41-07.
  4. This chapter applies to an electronic record or electronic signature otherwise excluded from the application of this chapter under subsection 2 or 3, to the extent it is governed by a law other than those specified in subsection 2 or 3.
  5. A transaction subject to this chapter is also subject to other applicable substantive law.

Source:

S.L. 2001, ch. 108, § 2; 2007, ch. 354, § 1; 2019, ch. 94, § 2, effective August 1, 2019.

9-16-03. Prospective application.

This chapter applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored after July 31, 2001.

Source:

S.L. 2001, ch. 108, § 3.

9-16-04. Use of electronic records and electronic signatures — Variation by agreement.

  1. This chapter does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form.
  2. This chapter applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct transactions by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.
  3. If a party agrees to conduct a transaction by electronic means, this chapter does not prohibit the party from refusing to conduct other transactions by electronic means. This subsection may not be varied by agreement.
  4. Except as otherwise provided in this chapter, the effect of any of this chapter’s provisions may be varied by agreement. The presence in certain provisions of this chapter of the words “unless otherwise agreed”, or words of similar import, does not imply that the effect of other provisions may not be varied by agreement.
  5. Whether an electronic record or electronic signature has legal consequences is determined by this chapter and other applicable law.

Source:

S.L. 2001, ch. 108, § 4.

9-16-05. Construction and application.

This chapter must be construed and applied:

  1. To facilitate electronic transactions consistent with other applicable law;
  2. To be consistent with reasonable practices concerning electronic transactions and with the continued expansion of those practices; and
  3. To effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

Source:

S.L. 2001, ch. 108, § 5.

9-16-06. Legal recognition of electronic records, electronic signatures, and electronic contracts.

  1. A record or signature may not be denied legal effect or enforceability solely because the record or signature is in electronic form.
  2. A contract may not be denied legal effect or enforceability solely because an electronic record was used in the contract’s formation.
  3. If a law requires a record to be in writing, an electronic record satisfies the law.
  4. If a law requires a signature, an electronic signature satisfies the law.

Source:

S.L. 2001, ch. 108, § 6.

9-16-07. Provision of information in writing — Presentation of records.

  1. If parties have agreed to conduct transactions by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, the requirement is satisfied if the information is provided, sent, or delivered, as the case may be, in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or the sender’s information processing system inhibits the ability of the recipient to print or store the electronic record.
  2. If a law other than this chapter requires a record to be posted or displayed in a certain manner, to be sent, communicated, or transmitted by a specified method, or to contain information that is formatted in a certain manner, the following rules apply:
    1. The record must be posted or displayed in the manner specified in the other law.
    2. Except as otherwise provided in subdivision b of subsection 4, the record must be sent, communicated, or transmitted by the method specified in the other law.
    3. The record must contain the information formatted in the manner specified in the other law.
  3. If a sender inhibits the ability of a recipient to store or print an electronic record, the electronic record is not enforceable against the recipient.
  4. The requirements of this section may not be varied by agreement, but:
    1. To the extent a law other than this chapter requires information to be provided, sent, or delivered in writing but permits that requirement to be varied by agreement, the requirement under subsection 1 that the information be in the form of an electronic record capable of retention may also be varied by agreement; and
    2. A requirement under a law other than this chapter to send, communicate, or transmit a record by United States mail first-class postage prepaid may be varied by agreement to the extent permitted by the other law.

Source:

S.L. 2001, ch. 108, § 7.

9-16-08. Attribution and effect of electronic record and electronic signature.

  1. An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.
  2. The effect of an electronic record or electronic signature attributed to a person under subsection 1 is determined from the context and surrounding circumstances at the time of the record’s or signature’s creation, execution, or adoption, including the parties’ agreement, if any, and otherwise as provided by law.

Source:

S.L. 2001, ch. 108, § 8.

9-16-09. Effect of change or error.

If a change or error in an electronic record occurs in a transmission between parties to a transaction, the following rules apply:

  1. If the parties have agreed to use a security procedure to detect changes or errors and one party has conformed to the procedure, but the other party has not, and the nonconforming party would have detected the change or error had that party also conformed, the conforming party may avoid the effect of the changed or erroneous electronic record.
  2. In an automated transaction involving an individual, the individual may avoid the effect of an electronic record that resulted from an error made by the individual in dealing with the electronic agent of another person if the electronic agent did not provide an opportunity for the prevention or correction of the error and, at the time the individual learns of the error, the individual:
    1. Promptly notifies the other person of the error and that the individual did not intend to be bound by the electronic record received by the other person;
    2. Takes reasonable steps, including steps that conform to the other person’s reasonable instructions, to return to the other person or, if instructed by the other person, to destroy the consideration received, if any, as a result of the erroneous electronic record; and
    3. Has not used or received any benefit or value from the consideration, if any, received from the other person.
  3. If neither subsection 1 nor subsection 2 applies, the change or error has the effect provided by other law, including the law of mistake, and the parties’ contract, if any.
  4. Subsections 2 and 3 may not be varied by agreement.

Source:

S.L. 2001, ch. 108, § 9.

9-16-10. Notarization and acknowledgment.

If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record.

Source:

S.L. 2001, ch. 108, § 10.

9-16-11. Retention of electronic records — Originals.

  1. If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which:
    1. Accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and
    2. Remains accessible for later reference.
  2. A requirement to retain a record in accordance with subsection 1 does not apply to any information the sole purpose of which is to enable the record to be sent, communicated, or received.
  3. A person may satisfy subsection 1 by using the services of another person if the requirements of that subsection are satisfied.
  4. If a law requires a record to be presented or retained in the record’s original form, or provides consequences if the record is not presented or retained in the record’s original form, that law is satisfied by an electronic record retained in accordance with subsection 1.
  5. If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with subsection 1.
  6. A record retained as an electronic record in accordance with subsection 1 satisfies a law requiring a person to retain a record for evidentiary, audit, or like purposes, unless a law enacted after July 31, 2001, specifically prohibits the use of an electronic record for the specified purpose.
  7. This section does not preclude a governmental agency of this state from specifying additional requirements for the retention of a record subject to the agency’s jurisdiction.

Source:

S.L. 2001, ch. 108, § 11.

9-16-12. Admissibility in evidence.

In a proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.

Source:

S.L. 2001, ch. 108, § 12.

9-16-13. Automated transactions.

In an automated transaction, the following rules apply:

  1. A contract may be formed by the interaction of electronic agents of the parties, even if no individual was aware of or reviewed the electronic agents’ actions or the resulting terms and agreements.
  2. A contract may be formed by the interaction of an electronic agent and an individual, acting on the individual’s own behalf or for another person, including by an interaction in which the individual performs actions that the individual is free to refuse to perform and which the individual knows or has reason to know will cause the electronic agent to complete the transaction or performance.
  3. The terms of the contract are determined by the substantive law applicable to the contract.

Source:

S.L. 2001, ch. 108, § 13.

9-16-14. Time and place of sending and receipt.

  1. Unless otherwise agreed between the sender and the recipient, an electronic record is sent when the record:
    1. Is addressed properly or otherwise directed properly to an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record;
    2. Is in a form capable of being processed by that system; and
    3. Enters an information processing system outside the control of the sender or of a person that sent the electronic record on behalf of the sender or enters a region of the information processing system designated or used by the recipient which is under the control of the recipient.
  2. Unless otherwise agreed between a sender and the recipient, an electronic record is received when:
    1. The record enters an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record; and
    2. The record is in a form capable of being processed by that system.
  3. Subsection 2 applies even if the place the information processing system is located is different from the place the electronic record is deemed to be received under subsection 4.
  4. Unless otherwise expressly provided in the electronic record or agreed between the sender and the recipient, an electronic record is deemed to be sent from the sender’s place of business and to be received at the recipient’s place of business. For purposes of this subsection:
    1. If the sender or recipient has more than one place of business, the place of business of that person is the place having the closest relationship to the underlying transaction.
    2. If the sender or the recipient does not have a place of business, the place of business is the sender’s or recipient’s residence, as the case may be.
  5. An electronic record is received under subsection 2 even if no individual is aware of the record’s receipt.
  6. Receipt of an electronic acknowledgment from an information processing system described in subsection 2 establishes that a record was received but, by itself, does not establish that the content sent corresponds to the content received.
  7. If a person is aware that an electronic record purportedly sent under subsection 1, or purportedly received under subsection 2, was not actually sent or received, the legal effect of the sending or receipt is determined by other applicable law. Except to the extent permitted by the other law, this subsection may not be varied by agreement.

Source:

S.L. 2001, ch. 108, § 14.

9-16-15. Transferable records.

  1. In this section, “transferable record” means an electronic record that:
    1. Would be a note under chapter 41-03 or a document under chapter 41-07 if the electronic record were in writing; and
    2. The issuer of the electronic record expressly has agreed is a transferable record.
  2. A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.
  3. A system satisfies subsection 2, and a person is deemed to have control of a transferable record, if the transferable record is created, stored, and assigned in such a manner that:
    1. A single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in subdivisions d, e, and f, unalterable;
    2. The authoritative copy identifies the person asserting control as:
      1. The person to which the transferable record was issued; or
      2. If the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable record was most recently transferred;
    3. The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
    4. Copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
    5. Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
    6. Any revision of the authoritative copy is readily identifiable as authorized or unauthorized.
  4. Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in section 41-01-09, of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under title 41, including, if the applicable statutory requirements under subsection 1 of section 41-03-28, section 41-07-30, or section 41-09-29 are satisfied, the rights and defenses of a holder in due course, a holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively. Delivery, possession, and endorsement are not required to obtain or exercise any of the rights under this subsection.
  5. Except as otherwise agreed, an obligor under a transferable record has the same rights and defenses as an equivalent obligor under equivalent records or writings under title 41.
  6. If requested by a person against which enforcement is sought, the person seeking to enforce the transferable record shall provide reasonable proof that the person is in control of the transferable record. Proof may include access to the authoritative copy of the transferable record and related business records sufficient to review the terms of the transferable record and to establish the identity of the person having control of the transferable record.

Source:

S.L. 2001, ch. 108, § 15; 2007, ch. 354, § 2.

9-16-16. Creation and retention of electronic records and conversion of written records by governmental agencies.

The state records administrator shall provide guidelines to determine whether, and the extent to which, a governmental agency will create and retain electronic records and convert written records to electronic records.

Source:

S.L. 2001, ch. 108, § 16.

9-16-17. Acceptance and distribution of electronic records by governmental agencies.

  1. Except as otherwise provided in subsection 6 of section 9-16-11, the state records administrator shall provide guidelines to determine whether, and the extent to which, a governmental agency will send and accept electronic records and electronic signatures to and from other persons.
  2. To the extent that a governmental agency uses electronic records and electronic signatures under subsection 1, the state records administrator, giving due consideration to security, may specify:
    1. The manner in which the electronic records must be sent, communicated, received, and stored and the systems established for those purposes;
    2. If electronic records must be signed by electronic means, the type of electronic signature required, the manner and format in which the electronic signature must be affixed to the electronic record, and the identity of, or criteria that must be met by, any third party used by a person filing a document to facilitate the process;
    3. Control processes and procedures as appropriate to ensure adequate preservation, disposition, integrity, security, confidentiality, and auditability of electronic records; and
    4. Any other required attributes for electronic records which are specified for corresponding nonelectronic records or reasonably necessary under the circumstances.
  3. Except as otherwise provided in subsection 6 of section 9-16-11, this chapter does not require a governmental agency of this state to use or permit the use of electronic records or electronic signatures.

Source:

S.L. 2001, ch. 108, § 17.

9-16-18. Interoperability.

The state records administrator shall encourage and promote consistency and interoperability with similar requirements adopted by other governmental agencies of this and other states and the federal government and nongovernmental persons interacting with governmental agencies of this state. If appropriate, those standards may specify differing levels of standards from which governmental agencies of this state may choose in implementing the most appropriate standard for a particular application.

Source:

S.L. 2001, ch. 108, § 18.

9-16-19. Signatures and records secured through blockchain technology — Smart contracts — Ownership of information — Definitions.

  1. A signature secured through blockchain technology is considered to be in an electronic form and to be an electronic signature.
  2. A record or contract secured through blockchain technology is considered to be in an electronic form and to be an electronic record.
  3. Smart contracts may exist in commerce. A contract relating to a transaction may not be denied legal effect, validity, or enforceability solely because the contract contains a smart contract term.
  4. Notwithstanding title 10 or chapters 41-02, 41-02.1, and 41-07, a person in or affecting interstate or foreign commerce using blockchain technology to secure information the person owns or has the right to use retains the same rights of ownership or use with respect to that information as before the person secured the information using blockchain technology. This subsection does not apply to the use of blockchain technology to secure information in connection with a transaction to the extent the terms of the transaction expressly provide for the transfer of rights of ownership or use with respect to that information.
  5. As used in this subsection:
    1. “Blockchain technology” means distributed ledger technology that uses a distributed, decentralized, shared, and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless and which is protected with cryptography, is immutable, and auditable and provides an uncensored truth.
    2. “Smart contract” means an event-driven program, with state, that runs on a distributed, decentralized, shared, and replicated ledger and which can take custody over and instruct transfer of assets on that ledger.

Source:

S.L. 2019, ch. 94, § 3, effective August 1, 2019.