Contracts Flashcards
Creation and Construction: SOF
The Statute of Frauds requires a writing for a transfer of an interest in real property
i) The writing must be signed by the party to be charged and must include:
(1) Description of the property;
(2) Description of the parties;
(3) Price; and
(4) Any conditions of price or payment, if agreed on
Creation and Construction: Exceptions to the SOF
Exceptions to the Statute of Frauds:
i) Doctrine of Part Performance
(1) May be used to enforce an otherwise invalid oral contract of sale, provided the acts of part performance unequivocally prove the existence of the contract. A showing of at least two of the following three facts must be made:
(a) Payment of all or part of the purchase price;
(b) Taking of possession;
(c) Making substantial improvements
ii) Equitable and, under the modern trend, promissory estoppel may be used to prove an oral contract for the sale of land
(1) Equitable estoppel is based on an act or a representation
(2) Promissory estoppel is based on a promise
Creation and Construction: Equitable Conversion
Definition: When a land-sale contract is formed, at that point there is a bifurcation of title
i) Equitable title passes to the buyer ii) Legal title remains with the seller until the deal closes
a) Majority Rule: The risk of loss is deemed to follow equitable title; therefore, the risk of loss is on the buyer
b) Uniform Vendor and Purchaser Act (Minority Rule): The risk of loss remains with the seller until the legal title or possession of the property passes to the buyer
Creation and Construction: Marketability of Title
a) Marketable Title = The seller must deliver a title at closing that is reasonably free from defects in both fact and law (not perfect title)
i) Defects may include:
(1) Unpaid mortgage or lien;
(2) Covenant or easement that restricts use of the land;
(3) Title acquired by adverse possession until the adverse possessor quiets title; or
(4) Existing condition on the land that violates a zoning ordinance
b) This covenant only manifests itself at the date of closing
i) Majority Rule: A seller may use the proceeds of the sale to remove a cloud on title and make it marketable
Creation and Construction: Merger Generally
Merger Doctrine: Because the covenant of marketable title is implied in the contract, and the contract merges into the deed, the buyer cannot assert it and must sue on any covenants now contained in the deed
Creation and Construction: Quitclaim Deed
The buyer cannot sue because this is an “as-is” deed (no warranties/covenants), and the seller conveys whatever interest he or she has
Creation and Construction: Warranty Deed
General Warranty Deed
The buyer can sue on the deed through one of the covenants of title contained in the warranty deed
Contains all six covenants of title, which covers the period prior to the sale
(a) The seller warrants there are no defects in the chain of title
Creation and Construction: Warranty Deed
Special Warranty Deed
The buyer can sue on the deed through one of the covenants of title contained in the warranty deed
May contain some, or all, of the covenants and typically limits liability to only the period of the seller’s ownership of the land
(a) The seller warrants that no defects have occurred during his or her ownership
Creation and Construction: Covenants of Title in General Warranty Deeds
Present Covenants
Do not run with the land and can be breached only AT the time of closing
(1) Seisin: The grantor promises he or she owns the property
(2) Right to Convey: The grantor promises he or she has the power to convey the property
(3) Covenant against Encumbrances: The grantor promises there are no encumbrances (visible or invisible) on the property
Creation and Construction: Covenants of Title in General Warranty Deeds
Future Covenants
Run with the land and breach can be at the time of closing or afterwards
(1) Quiet Enjoyment: The grantor promises that the grantee will not be disturbed by a third party asserting a valid claim to the land
(2) Warranty: The grantor promises to defend the grantee against any third-party claim
(3) Further Assurances: The grantor promises to do everything reasonably necessary to perfect the grantee’s title
Creation and Construction: Fitness and Suitability
Residential Homes
Duty to disclose material latent defects known to the seller but not readily observable and not known to the buyer
i) Applies to commercial builders and developers of new homes
ii) Some states extend the duty to all sellers of homes, new or used
iii) If the seller fails to follow through or has an ongoing duty to make sure the premises are habitable or fit, it may lead to tort liability
Creation and Construction: Fitness and Suitability
Implied Warranty of Quality
i) Applies to the sale of new or remodeled homes by builders and developers (does not apply to commercial structures)
ii) Defects must be discovered within a reasonable time after construction or remodeling (covers significant latent defects)
Real Estate Brokerage: Seller’s Agent
Owes the seller a fiduciary duty of disclosure—must disclose any information obtained that would be beneficial to the seller in negotiating the sale of the property
Real Estate Brokerage: Buyer’s Agent
Owes the buyer fiduciary duties of loyalty and obedience—requires the broker to give his or her undivided loyalty to the buyer and requires the agent to put the buyer’s interests before their own interests. Buyer’s agent is also required to follow the buyer’s lawful orders
Real Estate Brokerage:
c) A real estate broker who lists a seller’s real property for sale is liable to the buyer for any intentional misrepresentations of facts known to the broker
