Contracts Flashcards
Mortgage
The conveyance of title to property to secure the repayment of a debt
Law Day
The day on which the final payment on a mortgage is due
Mortgagor
The party giving the security; the one who borrowed the money; the “owner”
Mortgagee
The party getting the security; the one who lent the money, the bank or mortgage company
Acceleration Clause
The provision in a mortgage that makes all payments due immediately if the mortgagor defaults on a monthly payment
Default
The failure of the mortgagor to pay the final payment on the law day
Equity of Redemption
The right of the mortgagor to pay the balance owed on a mortgage after a default has occurred
Foreclosure
The legal action that terminates the equity fo redemption. It will usually result in the property being sold as auction
Vendee’s Remedies for Breach
Equity: A decree of specific performance is usually available because each parcel of land is considered unique.
Law: Out-of-Pocket damages ate always available being the amounts paid to the vendor with interest plus contract associated expenses. Half the States also allow benefit-of-the-bargain damages equal to the market value of the property less the amount promised in the contract; the other half require that breach be willful, fraudulent, or in bad fait
Vendor’s Remedies for Breach
Equity: Most jurisdictions allow the vendor specific performance under the theory of mutuality of remedy.
Law: The amount promised by the vendee less the amount that the vendor received, or should have received, in mitigation by selling the land to another.
Statute of Frauds
A requirement that an agreement that affects real estate title be:
- In writing (this can be the full agreement or “some note or memorandum thereof)
- Signed by the party to be charged (The party against whom enforcement is sought)
Exceptions to the Statute of Frauds
Broadly recognized
- Part Performance
- Fraud
Minority Rule: Estoppel
Part Performance
A. The vendee is in possession of the land with the permission of the seller, and
B. The vendee has made a payment, has substantially relied on the sales contract, and
C. A & B above only make sense if there was a real estate contract
Fraud
If the statute of frauds was used to commit fraud, the contract will be enforced. This usually requires that the party committing the fraud have a special obligation to the other so that reliance is justifiable as where the party committing the fraud is an attorney.
Estoppel
If a party has relied on the oral contract and the only way to avoid an injustice is by enforcing the contract, it will be.
Binder
A preliminary statement of the details of a real estate transaction. If the parties so intend and the statute of frauds is satisfied, a binder can be an enforceable real estate contract.
Purchase & Sale Agreement
A comprehensive contract controlling the conveyance of real estate.
Marketable or Merchantable Title
The quality of title that a vendor must deliver if the contract doesn’t say otherwise. Marketable title cannot have any defects that lower the market value of the property.
Marketable Title and Good Title Distinguished
Good title has no defects while marketable title can have defects as long as they do not adversely affect market value.
Unmarketable Title and Bad Title Distinguished
Unmarketable title can be perfectly good without defects as where the individual took title by adverse possession which is not marketable because it is not recorded on the land records.
Tender & Demand
The obligation on a party who wishes to sue for breach of contract to show his or her own compliance with the contract. The party must offer to perform at least the minimum performance required (the tender) and request that the other party do the same (the demand)
Equitable Conversion
The axiom under which equity treats contractual obligations. As a general matter, equity treats all promises as if they have been performed. The vendor gets equitable title to the purchase proceeds while the vendee gets equitable title to the real estate. The doctrine is used in two primary circumstances:
- If a party to a binding real estate contract dies between the time the contract is executed and it is closed. The vendor treats the land as personalty in the vendor’s estate while the vendee treats the money to be used to acquire the land as realty.
- Under the Majority Rule, if a fixture is damaged on the land after the contract is signed but before it is closed the vendee absorbs the loss
