Contract Remedies: Specific Situations: K to Buy/Sell REAL PROPERTY Flashcards
What types of remedies are available in K’s to buy/sell real property?
- Damages
- Restitution
- Specific Performance
With regards to money damages in a sale of REAL PROPERTY:
What would be a typical money damages award if SELLER breaches?
What would be a typical money damages award IF BUYER breaches?
If SELLER breaches –> Buyer gets:
1. benefit of the bargain; OR
2. out of pocket loss
(depends on jurisdiction)
if BUYER breaches –> Seller gets:
Difference between [market value] and [contract price], plus consequential damages
NOTE –> Alternatively, restitution may be available
With regards to sale of real property, when is restitution available?
What rules apply to limit recovery by Buyer?
What rules apply to limit recovery by Seller?
P (buyer or seller) can RESCIND and get RESTITUTION of benefits conferred if there is:
- Fraud; or
- a material breach of K
Recovery by Buyer –> offset by value of the use of the land
Recovery by Seller –> conditioned on refunding payments made (less damages suffered)
With regards to a sale of REAL PROPERTY and restitution, can a defaulting buyer recover payments made in excess of Seller’s damages?
Yes.
In general, what are the requirements for granting the remedy of “specific performance”?
- inadequacy of legal remedy
- feasibility of enforcing decree
- satisfaction of conditions (ie.. P must have performed or be ready to perform)
- no defenses
With regards to “specific performance” and “inadequacy of legal remedy” - what special considerations apply to sales of real property?
For Buyer —> ALL land is unique. So this is automatically satisfied.
For Seller –> Best argument is that damages are inadequate bc Seller wished to be rid of land and now would need a new buyer.
With regards to “specific performance” and “feasibility of enforcing decree” - what special considerations apply to sales of real property?
Suit by Buyer –> if land is within jdxn (even if there is no in personam jdxn), court can effect a conveyance. However, if land is outside of jdxn, then court cannot directly affect title. The decree is only enforceable by contempt (if D is subject to in personam jdxn) or by suing on the decree at the situs of the land (full faith and credit afforded.
Suit by Seller –>
- contempt for failure to pay is NOT available (bc of prohibition against imprisonment for debt)
-HOWEVER –> decree IS enforceable by levy of execution or foreclosure of Seller or Grantor’s lien
HOWEVER –> if there is no in personam jdxn, decree is void since it is an in personam order to pay money
With regards to “specific performance” and “satisfaction of conditions” (ie.. P must have performed or be ready to perform) - what special considerations apply to sales of real property?
- Seller must be able to show marketable title
NOTE –> this is only as of CLOSING - IF there IS a “time is of the essence” condition (express or implied):
(i) If K is WHOLLY executory –> no specific performance for late P
(ii) if K is PARTIALLY executory –> equity MAY grant a defaulting buyer specific performance to provide relief from forefather IF:
(1) payment is forthcoming within reasonable time;
(2) seller’s loss is slight;
(3) full compensation is tendered for the delay; and
(4) enforcing time condition is not unconscionable
(3) if there is NO “time of the essence” condition –> specific performance will be granted if:
(i) tender is made within a reasonable time; and
(ii) D is compensated for the delay
What is “partial performance/payment with abatement”?
This arises when a SELLER cannot fully perform
Example –> Seller doesn’t have all the land he originally promised to convey
What is the rule with regards to “specific performance” and “partial performance/payment with abatement”:
- if Buyer Sues?
- if Seller sues?
If Buyer sues –>
Specific Performance WITH abatement –> WILL be granted EVEN if defect is material UNLESS deficiency is so large that court would be “making a new contract”
HOWEVER–> if selling price is based on income generated from property, and income is unaffected by defect, then Buyer can get specific performance WITHOUT abatement
IF SELLER sues –> Specific performance is granted to seller ONLY IF:
1. defect in Seller’s performance is immaterial; AND
2. Buyer can be compensated for deficiency
NOTE –> determinative factor is BUYER’S intended use of land
What are the potential DEFENSES to specific performance in K’s for sale of land?
- SOF (land section & 1 year section)
- laches
- unclean
- Sale to BFP
What is the rule w regards to specific performance and SOF in a land sale?
General rule –> If K for sale of an interest in land is ORAL –> specific performance will be DENIED
Exception –> specific performance IS available where there is PART PERFORMANCE by buyer consisting of:
1. possession; PLUS
2. payment or possession; PLUS
3. improvements
NOTE –> in CA, adverse possession = sufficient
With regards to specific performance and SOF in a land sale, what happens if the K also violates the one-year provision of the SOF?
The land section of SOF controls
What is the “equitable conversion doctrine” ?
Holds that when K is entered into:
- Buyer becomes EQUITABLE OWNER of real property;
- Seller becomes owner of PERSONAL PROPERTY (right to payment of purchase price SECURED by legal title to land)
Under the equitable conversion doctrine, what happens when seller dies?
When buyer dies?
if Both die before closing?
If seller dies –>
- title goes to person entitled to Seller’s real property (heir or devisee)
- right to prove goes to person entitled to Seller’s personal property
- Buyer must join seller’s administrator and heir in suit
If buyer dies –>
- Buyer’s interest in land goes to person entitled to his real property (heir or devisee)
- Seller must join buyer’s administrator and heir in suit
If BOTH die –>
- all four parties (administrators/heirs) must be joined for specific performance
