Contracts of Sale and Closing Flashcards
Contract of sale must satisfy
(1) Statute of Frauds (unless part performance exception applies)
(2) implied warranty of marketable title
Statute of Frauds
Contract must be: (1) in writing, (2) signed by the party to be charged, and (3) contain the essential terms (identity of parties, description of land, and price)
Part performance exception
Exception to SoF: (1) a contract exists and all conditions precedent have been fulfilled, AND (2) the actions of the parties clearly show there is a contract because the claimant has done TWO of the following: (i) takes possession, (ii) paid in full or a substantial portion of the purchase price, (iii) improves the property in a significant way
Implied warranty of marketable title
title is marketable if it is reasonably free of defects such that a reasonable person would accept it
marketable title must be given on day of closing
Title is unmarketable if
- Defect in chain of title,
- Encumbrance not mentioned in K,
- Violation of zoning ordinance, OR
- Title acquired by adverse possession
Doctrine of equitable conversion
once K is signed, the buyer’s interest is real property (land) and the seller’s interest is personal property (money from sale). risk of loss shifts to the buyer, even if seller remains in possession and control of the land
MI rule: Uniform Vendor and Purchaser Risk Act states buyer is not liable if the property is destroyed while seller is in possession and control
Closing date
When title officially passes. Seller must give marketable title on closing date, but if unable to, has reasonable time to cure any defects as long as the K or circumstances do not indicate that time is of the essence
Quitclaim deed
grantor promises nothing and the grantee gets whatever the grantor has. grantee takes risk, cannot successfully sue on the deed
Warranty deed
Grantor gives grantee six implied covenants that must be satisfied: present covenants (right to convey, covenant of seisin, and no encumbrances) and future covenants (covenant of further assurances, covenant of quiet enjoyment, covenant of warranty)
Covenants can be specifically excluded
Present covenants
Covenants that are given at the time the deed is handed over and breached if not fulfilled. Do not run with the land (only the grantee that the grantor conveyed property to can sue on these)
- Right to convey: grantor promises that grantor can convey title
- Seisin: grantor promises that grantor has title and possession
- No encumbrances: grantor promises that there are no easements, liens, or encumbrances on the property that are not stated in the deed
Future covenants
Can only be breached in the future. run with land (a more remote grantor can be liable to a future grantee)
- Covenant of further assurances: grantor states that if he forgets to do something to pass title, he will do so
- Covenant of quiet enjoyment: grantor promises that grantee will not be disturbed by a third party asserting a valid claim
- Covenant of warranty: grantor will defend grantee if there is such a third party claim
Estoppel by deed
aka after acquired title doctrine
if grantor transfers property by warranty deed to grantee (but grantor does not yet have title), when grantor acquires title, it will pass directly to grantee who should have initially received it
exceptions: quitclaim deeds, if grantor gave land to a bona fide purchaser after transferring it to initial grantee
Damages for breach of contract
Buyer’s remedies:
(1) Rescission
(2) Damages (money for whatever is alleged to be defective)
(3) Specific performance
Seller’s remedies:
(1) Damages (difference between the K price and value of the land)
(2) Liquidated damages (buyer’s deposit, but no more than 10% of sale price)
(3) Specific performance (enforcing land sale K)
