10. Real Estate Contracts

Question 1

What is the Rule of Statute of Frauds for Land-Sale Contracts?

Answer 1

The Statute of Frauds requires a writing for a transfer or sale of an interest in real property, signed by the party to be charged, including:

1. Description of the property
2. Description of the parties
3. Price
4. Any conditions of price or payment, if agreed on.

Question 2

What happens if the description of the property is not adequate?

Answer 2

If there is no real agreement as to the amount or location of land to be sold, the contract will not be enforced.

Question 3

What are the Three Exceptions to the Statute of Frauds to enforce an oral agreement for the transfer or sale of land?

Answer 3

The three exceptions are:
1. Doctrine of Part Performance
2. Equitable Estoppel
3. Promissory Estoppel

Question 4

What is the Doctrine of Part Performance to prove an oral Land-Sale Contract?

Answer 4

It enforces an otherwise invalid oral contract if acts clearly prove its existence.

Question 5

How is the Doctrine of Part Performance in a Land-Sale Contract Satisfied?

Answer 5

By showing at least two of the following three facts:
1. Payment of all or part of the purchase price
2. Taking of possession
3. Making substantial improvements on the land.

Question 6

What is Equitable Estoppel to prove an oral land-sale contract?

Answer 6

It is based on an act or a representation.

Question 7

What is Promissory Estoppel to prove an oral land-sale contract?

Answer 7

It is based on a promise.

Question 8

What if no time is stated to perform in a land-sale Contract?

Answer 8

Performance is to occur within a reasonable time.

Question 9

What is the ‘Time-is-of-the-Essence’ Clause in a land-sale contract?

Answer 9

It means that nonperformance at the specified time will be considered a material breach.

Question 10

Can a ‘Time-is-of-the-Essence’ clause in a land-sale contract be waived?

Answer 10

Some courts will consider an acceptance of a late payment as a waiver.

Question 11

How is a ‘Time-is-of-the-Essence’ clause drafted in a land-sale contract?

Answer 11

‘Time-is-of-the-Essence’ may be essential through express stipulation or implied by the course of dealing.

Question 12

Does every land-sale contract have a ‘Time-is-of-the-Essence’ Clause?

Answer 12

No, there is no rule requiring parties to agree in writing to the timing of performance.

In such a case, a court will infer that performance within a reasonable time was intended.

Question 13

Where the sale contract does not indicate that “time is of the essence,” however, the seller’s performance need only occur within:

Answer 13

a reasonable time after the scheduled closing date. As such, a buyer under that contract will not be able to rescind or seek damages until that reasonable time (sometimes as much as several months) has passed without the seller providing marketable title.

Question 14

When can Specific Performance be ordered for a land-sale contract despite a Breach of the ‘Time-is-of-the-Essence’ Clause?

Answer 14

If:
1. The breach wasn’t gross negligence or deliberate
2. Compensation is possible for the injury
3. Forfeiture would be harsh.

Question 15

What are the Six Remedies at law for a Seller when a Buyer Breaches a land-sale contract?

Answer 15

The six remedies are:
1. Expectation damages
2. Foreseeable consequential damages
3. Reasonable reliance damages
4. Retention of any down payment
5. Liquidated damages
6. Punitive damages (if breach was willful).

Question 16

What is a ‘Liquidated Damages’ clause in a Land-Sale Contract?

Answer 16

It is enforceable if:
1. Damages will be difficult to ascertain
2. The liquidated damages are a reasonable forecast of the harm caused by the breach.

Question 17

What happens when a Buyer Repudiates early on a land-sale Contract and makes improvements to the property?

Answer 17

Improvements made during early possession aren’t reimbursable if the buyer backs out.

Question 18

What are the Two Remedies in Equity for a Seller when a buyer breaches a Land-Sale Contract?

Answer 18

The two remedies are:
1. Rescission of the contract
2. Specific performance.

Question 19

What are the Five Remedies for a Buyer when the Seller Breaches a Land-Sale Contract?

Answer 19

The five remedies are:
1. Expectation damages
2. Foreseeable consequential damages
3. Reasonable reliance damages
4. Restitution of any down payment
5. Punitive damages (if breach was willful).

Question 20

What is the ‘American Rule’ for a Buyer’s remedy under a land-sale contract?

Answer 20

The buyer may recover expectation damages plus reasonably foreseeable consequential damages if the seller fails to deliver marketable title.

Question 21

What are two Remedies in Equity for a Buyer when a Seller breaches a land-sale contract?

Answer 21

The two remedies are:
1. Rescission of the Contract
2. Specific Performance.

Question 22

What additional remedy does a Buyer receive in suing for Specific Performance when a Seller fails to deliver marketable title in a land-sale contract?

Answer 22

An abatement in the purchase price that reflects the decrease in value caused by the title defect.

Question 23

What if a buyer dies before closing on the purchase of a land-sale contract?

Answer 23

The executor or heirs complete the transaction.

The taker of his real property can demand a conveyance of the land at the closing of the contract. The majority rule is that takers of the real property will take it subject to the vendor’s lien for the purchase price.

Question 24

What if a seller dies before closing on the purchase of a land-sale contract?

Answer 24

Legal title passes to the seller’s devisee, who must honor the sale.

they must give up the title to the buyer when the contract closes.

Question 25

Does the death of a party to a land-sale contract give rise to grounds for termination or rescission?

Answer 25

No, unless the party's continued existence was necessary for performance.

Question 26

What is Marketable Title in a land-sale contract?

Answer 26

All land-sale contracts include an implied promise to convey marketable title which is title that is reasonably free from doubt in both fact and law.

Question 27

May a buyer waive the right to have marketable title?

Answer 27

Yes.

Question 28

What are the Four defects of Marketable Title in a land-sale contract?

Answer 28

Defects include: 1. Defects in the chain of title 2. Encumbrances 3. Significant encroachments 4. Zoning violations and restrictions.

Question 29

What are four Encumbrances that render a Title Unmarketable in a land-sale contract?

Answer 29

Encumbrances include: 1. Mortgages 2. Liens 3. Easements that reduce the property's value 4. Covenants and servitudes.

Question 30

What Type of Easements do not effect Marketable Title in a land-sale contract?

Answer 30

Easements that benefit the burdened estate and are visible or known to the buyer.

Question 31

Does a Seller Satisfying a Mortgage or Lien at closing render a Title Marketable in a land-sale contract?

Answer 31

Yes, if satisfaction happens during the land transfer.

Question 32

Can a Seller use the proceeds of the sale to remove a cloud on the title to make it marketable in a land-sale contract?

Answer 32

Yes.

Question 33

What type of Encroachments render Marketable Title in a land-sale contract?

Answer 33

1. A slight encumbrance, such as a boundary overlap of several inches; or 2. if the owner says she will not on the encroachment as a basis for suit.

Question 34

Do Physical Defects in the Property such as terminates render Marketable Title in a land-sale contract?

Answer 34

No.

Question 35

How much Time does a Seller have to render Marketable Title in a land-sale contract?

Answer 35

Until the time of closing.

Question 36

What are the Three Remedies for a Buyer When a Seller fails to deliver marketable Title in a land-sale contract?

Answer 36

The remedies are: 1. Rescission of contract 2. Money damages for breach 3. Specific performance with an abatement of the purchase price.

Question 37

Where the contract does not state that "time is of the essence," then the seller is required to provide marketable title within:

Answer 37

a reasonable time after the scheduled closing date. If the seller is able to do so, the buyer has no grounds for refusing to perform and the seller may sue for damages or specific performance.

Question 38

Doctrine of Equitable Conversion; When does a Buyer become an equitable owner of title in a land-sale contract? What is Seller's interest?

Answer 38

Once a contract is signed, equity regards the purchaser as the owner of the real property. The seller's interest, which consists of the right to the proceeds of the sale, is considered to be personal property.

Question 39

Who bears the risk of loss if damage or destruction occurs to the real property after formation but before closing?

Answer 39

The buyer.

Question 40

What is the Majority Rule for Risk of Loss on Buyer in a land-sale contract?

Answer 40

The buyer assumes the risk of loss upon signing the land-sale contract.

Question 41

How is the passage of title transfer if the seller dies before the contract has been completed?

Answer 41

If the seller dies, the bare legal title passes to the takers of his real property, but they must give up the title to the buyer when the contract closes. When the purchase price is paid, the money passes as personal property to those who take the seller's personal property.

Question 42

What is the Uniform Vendor and Purchaser Risk Act in a land-sale contract?

Answer 42

The risk of loss remains with the seller until the buyer takes possession or title is transferred.

Question 43

Is there a Duty to Carry Insurance on a land-sale contract?

Answer 43

No, unless a provision establishes a duty.

Question 44

What is a Seller’s Duty to Disclose Defects to a Buyer in a land-sale contract?

Answer 44

A seller must disclose material latent defects not readily observable or known to the buyer.

Question 45

What Type of Sellers are bound to Disclose Defects to a Buyer in a land-sale contract?

Answer 45

All commercial builders, developers, sellers, and brokers.

Question 46

What is an Implied Warranty of Quality in a land-sale contract?

Answer 46

It includes latent defects from poor workmanship, discovered within a reasonable time after construction.

Question 47

What is the Merger Doctrine in a Land-Sale Contract?

Answer 47

After the deed is delivered and accepted, one can no longer sue on title matters contained in the contract of sale.

Question 48

What happens if a buyer finds a TITLE problem after closing?

Answer 48

They can't sue the seller for a breach of the implied covenant of marketable title since it's merged with the deed. They must sue based on any title covenant in the deed, not the sales contract.

Question 49

What does the deed typically replace after closing?

Answer 49

The deed typically replaces the real estate contract as the embodiment of the parties’ relationship. This is due to the doctrine of merger.

Question 50

What is the doctrine of merger?

Answer 50

Most obligations imposed by the contract of sale are discharged unless they are repeated in the deed. This means that once the deed is delivered, the original contract's terms may no longer be enforceable.

Question 51

What happens if a purchaser accepts a quitclaim deed?

Answer 51

The purchaser would not be able to sue on the contractual provisions if the title turns out to be defective. They would be limited to the provisions on the deed.

Question 52

When are real estate contracts relevant?

Answer 52

Real estate contracts are only relevant during the gap between its signing and the delivery of the deed.

Question 53

Does the Merger Doctrine cover physical conditions of a house in a land-sale contract?

Answer 53

No, the Merger Doctrine relates to title issues, not to the physical conditions of the house.

Question 54

What if the deed does not contain any covenants of title in a land-sale contract?

Answer 54

If the deed does not contain any covenants of title (i.e., a quitclaim deed), then the buyer has no course of action.