Green Mixed Set Flashcards
A homeowner and a contractor duly executed a contract providing that the contractor was to construct a residence on a specified lot. No date was included in the contract for completion of the home. After the contractor completed 5% of the residence, a tornado demolished the construction but left the lot undamaged.
Which of the following states the probable legal consequences of the tornado damage?
A
The contract is void because the subject matter of the contract was destroyed through no fault of the parties.
B
The contractor’s duty of performance is discharged because of impossibility.
C
The contractor remains obligated to construct the residence, but he is entitled to a quantum meruit recovery for the work done prior to the tornado.
D
The contractor remains obligated to perform under the original contract without any compensation for the work done prior to the tornado.
D
The contractor remains obligated to perform under the original contract without any compensation for the work done prior to the tornado.
(D) is the correct answer. The contractor remains bound under the original contract, and he is not entitled to compensation for the work that was destroyed. The general rule is that a contractor is responsible for destruction of the premises under construction prior to completion. Once the residence is completed, risk of loss shifts to the owner. (A) is wrong because the subject matter was not destroyed. Note that even if the subject matter were destroyed, it would not void the contract; it would merely discharge the contractor’s duties under the contract. (B) is wrong because performance is not impossible; the contractor can rebuild the residence. (C) is wrong because the contract is still enforceable because the contractor can rebuild the residence.
An advertising agency specializing in aerial banners and skywriting signed a contract with a film production company that was premiering a new blockbuster film. The contract provided that the agency would advertise the film by flying over the city towing a giant streamer belonging to the film company heralding the film’s catch phrase and title in large letters. This contract specified that the flight was to be conducted on the first Saturday in June at noon (the day of the local premier), and the film company was to pay the advertising agency $500 for the flight.
On the designated Saturday, the advertising agency was unable to fly because of a defective fuel pump. The defective condition was entirely unforeseeable and did not occur through any negligence or fault of the agency. The film company did not pay the agency, and each of the parties has sued the other for damages.
Which of the following best states the rights and liabilities of the parties?
A
The film company is entitled to recover damages from the advertising agency on account of the agency’s failure to fly.
B
The advertising agency is entitled to recover from the film company the $500 contract price, as the incapacity of the airplane was not the agency’s fault.
C
Neither party is entitled to recover against the other, because the advertising agency’s duty to fly was discharged by impossibility, and the film company’s duty to pay was contingent on the agency’s flight.
D
Neither party is entitled to recover against the other, because the film company’s offer to pay $500 for the flight was in effect an offer for an act, and because the act was not performed, there was no valid acceptance.
A
The film company is entitled to recover damages from the advertising agency on account of the agency’s failure to fly.
The film company will be able to recover damages from the advertising agency because the agency’s failure to fly constituted a breach of contract. The parties entered into a bilateral contract-the agency promised to fly with the streamer and the film company promised to pay for the flight. The agency breached the contract by failing to fly on the designated Saturday. Its duty to fly was not discharged by impossibility. A contractual duty to perform may be discharged by objective impossibility (i.e., no one could have performed), but subjective impossibility (defendant could not perform) is insufficient. Here, the defect in the plane constituted only subjective impossibility (if it amounted to impossibility at all) because the agency could have obtained another plane to pull the streamer. If the agency had been unable to fly the plane because of weather (e.g., a severe ice storm), its performance would have been objectively impossible, and the agency would have been discharged. However, under these facts, the film company is entitled to damages for the agency’s breach. (B) is incorrect because the film company’s duty to perform (pay $500) was subject to the condition precedent of the agency’s performance (flying), and, as discussed above, the agency breached the contract by failing to fly. Therefore, the film company’s duty to pay never arose. The fact that the engine problem was not the agency’s fault does not change things. The agency’s inability to perform, even if it were due to impossibility, would merely discharge the contract, and each party would be excused from performance; the film company would not have to pay the $500. (C) is incorrect because, as determined above, the agency’s duty was not discharged because performance was still possible. (If there had been objective impossibility, (C) would have been the correct choice.) (D) is incorrect because it suggests that the contract was a unilateral one (the offer to pay could be accepted only by completion of performance). This interpretation is clearly contrary to the facts. Although the film company offered to pay $500 for the flight, the agency accepted that offer by signing the contract. A promise to pay was given in exchange for a promise to fly. Thus, there was a contract to which both parties were bound.
On April 1, a graduate student who owned an antique dictionary agreed to sell it to a buyer for $1,500. The written contract between the seller and the buyer provided that the dictionary would not be delivered to the buyer until April 20. Late on April 15, a fire swept through the seller’s apartment building, through no fault of the seller, and the dictionary was destroyed. Fortunately for the seller, he had insurance that covered all of his damages, including compensation for the destroyed dictionary. On April 20, the seller told the buyer of the fire, but still demanded payment, claiming that the buyer was the equitable owner of the dictionary when it was destroyed, and told her that she could have obtained insurance on the dictionary had she wanted to, because she had an insurable interest in the dictionary as soon as the contract was made. The buyer refused to pay. The seller brings an action against the buyer for the $1,500.
Who will prevail?
A
The buyer, because the seller was fully compensated for his dictionary and making the buyer pay would therefore result in unjust enrichment.
B
The buyer, because destruction of the dictionary avoids the contract and discharges her duty to pay.
C
The seller, because when he contracted with the buyer, the risk of loss passed to her.
D
The seller, because of the doctrine of equitable conversion.
B
The buyer, because destruction of the dictionary avoids the contract and discharges her duty to pay.
The buyer will prevail because complete destruction of the dictionary results in avoidance of the contract and discharge of her duty to pay, since the seller still had the risk of loss. Because the contract here is for the sale of goods, it is governed by the Uniform Commercial Code (“UCC”). Under the UCC, if a contract requires for its performance particular goods identified when the contract is made, and, before risk of loss passes to the buyer, the goods are destroyed without the fault of either party, the contract is avoided. [UCC §2-613] All of the elements of section 2-613 are present here. The contract required the seller’s particular dictionary, which was identified at the time the contract was made. The risk of loss had not yet passed to the buyer because, in a sale by a nonmerchant such as the seller, risk of loss does not pass to the buyer until tender [UCC §2-509], and the seller never tendered the dictionary here (there was no actual tender and delivery was not due until April 20). Finally, the goods were destroyed by a fire and without the fault of either party. Thus, the contract is avoided. (The same conclusion would result under the common law doctrine of impossibility-all executory duties are discharged when the subsequent destruction of the subject matter of a contract renders performance impossible.) (A) is wrong because the UCC contains no such rule. The only UCC remedy that depends on an injured party’s insurance involves the risk of loss after the buyer’s revocation of acceptance or wrongful repudiation under section 2-510. Here, the buyer does not have to pay because the destruction of the dictionary discharged her duty to do so. (C) is wrong because, as explained above, the risk of loss had not yet passed to the buyer. (D) is wrong because the UCC does not follow the doctrine of equitable conversion; rather, the Code contains very specific risk of loss rules, as detailed above.
The owner of a summer cottage contracted to put new vinyl siding on the cottage for $10,500. Two weeks before the work was to start, however, the contractor called to say that there was a clerical error in the bid and that he could not do the work for less than $12,000 or he would lose money. The cottage owner agreed to pay the additional $1,500 but told the contractor that he was being unfair. After the work was completed, the cottage owner handed the contractor a check for $10,500, telling the contractor that that was all he would pay him because he had no right to raise the price.
If the contractor sues the cottage owner for the additional $1,500, who will prevail?
A
The cottage owner, because the contractor was already under a preexisting legal duty to replace the siding on the cottage for $10,500.
B
The cottage owner, because the promise to pay the additional money was not in writing.
C
The contractor, because he relied on the cottage owner’s promise to pay the additional money to his detriment.
D
The contractor, because there was a valid modification of the parties’ original contract.
A
The cottage owner, because the contractor was already under a preexisting legal duty to replace the siding on the cottage for $10,500.
The cottage owner will prevail, because the contractor was already under a preexisting legal duty to replace the siding on the cottage for $10,500. Under the preexisting legal duty rule, the promise to perform or the performance of an existing legal duty will not be sufficient consideration. If the parties agree to modify their contract, consideration is usually found to exist where the obligations of both parties are varied. However, absent unanticipated circumstances, a modification solely for the benefit of one of the parties is generally unenforceable in contracts not governed by the UCC. Here, the contractor was already under a binding contract to replace the siding on the cottage for $10,500. The contract is primarily for services, and thus not governed by the UCC. Moreover, the obligations of both parties under the modified agreement are not varied; the modification (paying the contractor an additional $1,500) would benefit only the contractor. The contractor’s performance of a duty that he was already obligated to perform does not constitute sufficient consideration to support the modification. Therefore, the cottage owner is obligated to pay only the originally agreed-upon $10,500. Thus, (A) is correct and (D) is incorrect. (B) is incorrect because contracts for services do not come within the Statute of Frauds unless by their terms they cannot be performed within one year of their making, and performance of this contract could be completed in less than a year. (C) is incorrect because, in replacing the siding on the cottage, the contractor was simply fulfilling his contractual obligation, rather than acting to his detriment in reliance on the cottage owner’s promise to pay the additional money. Even where unsupported by consideration, a promise is enforceable under the promissory estoppel doctrine to the extent necessary to prevent injustice if: (i) the promisor should reasonably expect to induce action or forbearance of a definite and substantial character; and (ii) such action or forbearance is in fact induced. The contractor was legally bound to perform the work on the cottage regardless of whether the cottage owner agreed to pay the extra $1,500. Thus, the contractor did not incur a detriment in reliance on the cottage owner’s promise.
A professional baseball player visited a sick boy in the hospital. The player told the boy that in consideration of the boy’s courage, he would hit a home run for him in his next game. As the player was leaving the hospital, the boy’s father stopped the player and told him how important the home run could be in improving his son’s spirits and health. The father told the player he would pay him $5,000 if he did hit a home run in his next game. The player agreed and took extra batting practice before his next game to improve his chances. In his next game, the player hit two home runs. The player’s contract with his ball club does not forbid him from accepting money from fans for good performance. The player has now asked the father for the $5,000.
If the father refuses to pay and the baseball player brings an action against him for damages, which of the following is correct under the prevailing modern rule in contract law?
A
The player can recover the $5,000 because the preexisting duty rule does not apply where the duty is owed to a third person.
B
The player can recover the $5,000 if he can prove that the value of the home run to the boy is at least $5,000.
C
The player cannot recover from the father because the player had a preexisting duty to use his best efforts to hit home runs.
D
The player cannot recover from the father because, even under the modern trend, moral consideration is not valid.
A
The player can recover the $5,000 because the preexisting duty rule does not apply where the duty is owed to a third person.
The player can recover because, under the prevailing modern rule, the preexisting duty rule does not apply if the duty is owed to a third person. Generally, contracts must be supported by consideration. A promise to perform is valid consideration, but if a person already owes a duty to perform, traditionally that performance cannot be used as consideration for another promise. Thus, under the traditional rule, the player could not enforce the father’s promise to pay the player $5,000 if he hit a home run because the player gave no valid consideration in exchange for the father’s promise, since the player owed a preexisting duty to his ball club to exert his best efforts to hit home runs. However, under the modern view as formulated in Restatement (Second) of Contracts, section 73, and followed by a majority of courts, a duty is a preexisting duty only if it is owed to the promisee. Thus, a promise to perform a duty is valid consideration as long as the duty of performance is not already owed to the promisee. In other words, if the duty is owed to a third party, a promise to perform given to another is valid consideration as long as it was bargained for. (B) is incorrect because there is no exception to the preexisting duty rule-modern or otherwise-that allows the promisor to recover merely because his performance benefited a third party. The player can recover under the modern approach because his promise to the father was bargained for. Conversely, the player does not have to prove that the value of his home run to the boy was at least $5,000, because courts generally will not inquire into the adequacy of consideration. (C) would be correct under the traditional rule, but, under the modern trend, the promise here is valid consideration because the duty to hit home runs was owed to a third party (the ball club) rather than to the promisee (the father). (D) is incorrect because while it is true that moral consideration is not good consideration, the father did not rely on moral consideration, but rather exchanged a promise to pay $5,000 for the player’s performance.
A steelmaker purchased a tube rolling machine from a manufacturer of heavy machinery. The machine was sold unassembled for a price of $150,000, with $25,000 payable on delivery and the balance ($125,000) to be paid in 10 monthly installments of $12,500 each. After the machine parts were delivered, the steelmaker contacted an assembly company that specialized in assembly and installation of large and complex manufacturing machinery, and told the company that the machinery had to be up and running within 45 days, or the steelmaker would be in breach of a major contract that it relied on for much of its current revenue. The company agreed, in a written contract with the steelmaker, to assemble and install the tube rolling machine within 45 days at a price of $15,000.
Two weeks later, the manufacturer that sold the tube rolling machine to the steelmaker learned that the assembly company was planning to stop work, due to a strike by its labor union. The manufacturer orally offered the assembly company a $3,500 bonus if it would agree to finish the job for the steelmaker. The company accepted the manufacturer’s promise and completed the assembly and installation of the tube rolling machine with supervisory personnel within the 45-day time limit set in the agreement between the company and the steelmaker. However, the manufacturer refused to pay the assembly company the $3,500 bonus, so the company sued the manufacturer.
Which of the following would be the assembly company’s strongest argument to prevail?
A
The assembly company owed the manufacturer no preexisting duty to complete the job for the steelmaker, and such completion was sufficient bargained-for consideration for the manufacturer’s promise to pay the additional $3,500.
B
Because the $3,500 payment was characterized as a “bonus,” no further consideration was required and the manufacturer is bound to its promise.
C
The assembly company would not have completed the job for the steelmaker within the time limit except in reliance on the manufacturer’s promise to pay the additional $3,500.
D
By completing the job for the steelmaker, the assembly company conferred a benefit on the manufacturer worth at least $3,500, because such performance assured the steelmaker’s ability to pay the manufacturer the balance on the installment purchase agreement for the tube rolling machine.
A
The assembly company owed the manufacturer no preexisting duty to complete the job for the steelmaker, and such completion was sufficient bargained-for consideration for the manufacturer’s promise to pay the additional $3,500.
The assembly company’s best argument is that it owed the manufacturer no preexisting duty to complete the job, and such completion was sufficient bargained-for consideration. Generally, a promise is unenforceable unless it is supported by consideration; thus, for the manufacturer’s promise to be enforceable, there must be consideration supporting it. Consideration is defined as a bargained-for exchange of something of legal value. Most courts hold that the thing exchanged will have legal value if it causes the promisee to incur a detriment. A minority of courts hold that a benefit to the promisor is also sufficient. Thus, the company’s best argument would be one that includes the idea that it incurred a bargained-for detriment, and this is reflected by (A). The problem with (A) is the preexisting legal duty rule. Traditionally, courts have held that performance of an existing legal duty is not sufficient consideration. However, the rule is riddled with exceptions, and one exception recognized in most jurisdictions applies when, as here, the preexisting duty is owed to someone other than the promisor. Thus, (A) is the best argument because it provides for a full contract recovery. (D) is wrong because it merely reflects the fact that the manufacturer received a benefit. As indicated above, it is the presence of consideration-defined as a bargained-for exchange of something of legal value-that permits the contract to be fully enforced. (A) is a better answer than (D) because it more clearly reflects the basis for finding consideration here. (B) is wrong because merely identifying a promise to pay as a “bonus” does not obviate the need for consideration. For a promise to be enforceable, there must be consideration. (C) is wrong because mere reliance on a promise is not enough to make a contract enforceable. For reliance to provide a substitute for consideration, under the doctrine of promissory estoppel, the promisor must reasonably expect that its promise will induce reliance, and such reliance must reasonably be induced. However, the promise will be enforceable only to the extent necessary to prevent injustice. Here, because the company had a duty to complete the work even without the manufacturer’s promise, there is no indication that justice would require payment of the $3,500; there is nothing in the facts to show the company incurred more costs, etc. Thus, the recovery to the company under a promissory estoppel theory would undoubtedly be less than the contract recovery possible under (A).
A landowner advertised in the newspaper that he wished to sell 40 acres of land at $10,000 per acre. A rancher who was looking to expand his holdings was interested, so he came out to inspect the property. After the inspection, the rancher agreed to purchase the land for $400,000. A contract for the sale of the 40 acres was prepared and signed by the landowner and the rancher. The contract failed to state the purchase price. Later, the rancher had a change of heart and refused to complete the purchase.
In the landowner’s lawsuit for breach of contract, for which party would the court likely hold?
A
The landowner, because the parol evidence rule will not bar testimony that the rancher agreed to pay $400,000.
B
The landowner, because the Statute of Frauds can be satisfied by combining the original advertisement and the written contract.
C
The rancher, because the parol evidence rule will bar all evidence that he agreed to pay $400,000 for the land.
D
The rancher, because the Statute of Frauds would require the contract to contain the price in order to be enforced.
D
The rancher, because the Statute of Frauds would require the contract to contain the price in order to be enforced.
Under the Statute of Frauds, contracts for the sale of land must be in writing. The writing must contain all essential terms, and the price is considered an essential term. (A) is wrong because although the parol evidence rule might not bar the testimony, the Statute of Frauds will prevent recovery. (B) is wrong; the advertisement was not signed by the rancher, the party charged with breaking the contract. Thus, it is not a memorandum. Furthermore, the ad could not be considered part of the contract because there is nothing in the question indicating that it was attached to or referred to in the contract, or that it was assented to by the parties as part of the contract. In fact, an ad is a mere offer to deal; the actual price term may be very different by the time parties to a contract reach an agreement. (C) is wrong; the parol evidence rule would not bar the testimony, and in any event, that is not the reason the rancher will win.
A man and a woman met in a bar. While the two enjoyed a couple of drinks, the woman told the man that she greatly admired the diamond stickpin he had in his lapel. “Oh, this,” the man laughed. “It’s no diamond; it’s only a piece of glass.” The woman acknowledged his statement, but kept commenting on how nice it looked. After further conversation, the man orally agreed to sell the stickpin to her for $500. They agreed that in four days, the man would bring the stickpin to the same bar, and the woman would bring the $500 in cash. The woman wrote down her name and phone number on a napkin and asked the man to call her if there were any change in plans. The man duly appeared with the pin, but the woman failed to appear. The man filed suit against the woman for $500.
In an action by the man against the woman for breach of contract, which of the following would be the woman’s best defense?
A
$500 was an unconscionable amount to pay for a piece of glass.
B
The parties lacked capacity to contract because they were drinking alcohol.
C
The agreement violated the Statute of Frauds.
D
Neither the woman nor the man was a merchant.
C
The agreement violated the Statute of Frauds.
A promise for the sale of goods priced at $500 or more is not enforceable under the Statute of Frauds unless evidenced by a writing signed by the party to be charged. Here, the woman is the party to be charged, and her promise to pay $500 was only oral. The napkin with the woman’s name and number would not be sufficient to satisfy the Statute. To satisfy the Statute of Frauds, the UCC requires that the writing indicate that a contract has been made and specify the quantity term. Here, the napkin does not indicate that there is a contract. It merely contains a name and phone number. A court could not enforce a promise based on the writing. Thus, the woman’s promise is unenforceable. (A) is incorrect because the concept of unconscionability allows avoidance of a contract only where the terms are so one-sided as to indicate unfair surprise or a contract of adhesion. Here, neither party had superior bargaining power, and the woman knew exactly what she was buying when she made the agreement. (B) is incorrect because just having alcoholic drinks does not mean that parties no longer have the capacity to contract. To lack capacity due to intoxication, a party must be so intoxicated that the party does not understand the nature and significance of his promise. Nothing in the facts indicates that these parties were intoxicated, let alone so intoxicated that they did not understand what they were doing. (D) is incorrect because the parties’ status as nonmerchants is irrelevant. While the Code relaxes the Statute of Frauds rule in the case of a written confirmation between merchants, that exception does not apply here. There was no writing by either party that would satisfy the Statute of Frauds; thus, even if the parties were merchants, the agreement would be unenforceable.
Which of the following service contracts must satisfy the Statute of Frauds to be enforceable?
A
A contract for a specific task that will take approximately 12 months to complete
B
A contract for one month of service that is to begin 13 months in the future
C
A contract for the lifetime of the client
D
A contract for the client’s personal care during an illness of unknown duration
B
A contract for one month of service that is to begin 13 months in the future
A contract that by its terms cannot be performed within one year is subject to the Statute of Frauds. The date runs from the date of the agreement and not from the date of performance. Thus, a contract for one month of service that is to begin 13 months in the future must satisfy the Statute to be enforceable.
If the contract is possible to complete within one year, it is not within the one-year prong of the Statute of Frauds, even though actual performance may extend beyond the one-year period. A specific task that will take approximately 12 months to complete might be completed in less time. Likewise, a contract for the client’s personal care during an illness of unknown duration might be completed in less than a year if the client recovers quickly. A contract for the lifetime of the client is not within the Statute because it is capable of performance within a year since the client could die at any time.
Which of the following contracts must be evidenced in writing?
A
A contract to build a building
B
A mortgage contract
C
A six-month lease of a parcel of land
D
A contract between business partners to buy and sell real estate and divide the profits
B
A mortgage contract
Under the Statute of Frauds, a promise creating an interest in land must be evidenced by a writing. This includes not only agreements for the sale of real property, but also other agreements pertaining to land, such as a mortgage contract.
Some contracts may have an end result involving an interest in land, but they still do not come within the Statute. For example, a contract to build a building or a contract to buy and sell real estate and divide the profits do not come within the Statute.
A lease of a parcel of land for more than one year is also covered by the Statute, but a six-month lease is not.
At common law, the Statute of Frauds requires _____________ signed by ____________.
A
A writing or writings reflecting the material terms of the contract; the party to be held liable
B
A formal contract; the party to be held liable
C
A formal contract; both parties
D
A writing or writings reflecting the material terms of the contract; both parties
A
A writing or writings reflecting the material terms of the contract; the party to be held liable
To satisfy the Statute of Frauds, there must be one or more writings that reflect the material terms of the contract signed by the person sought to be held liable on the contract. The Statute does not require both parties to sign, only the party to be charged.
The Statute of Frauds does not require a formal written contract or the signature of both parties. For example, a letter, receipt, or a check containing the material terms (e.g., quantity for sale of goods) and signed by the party to be charged satisfies the Statute of Frauds.
Which of the following is not required for the burden of an equitable servitude to run to successors in interest?
A
The covenant touches and concerns the land.
B
There is vertical privity between the covenantor and his successor in interest.
C
The successor in interest has notice of the covenant if she has given value.
D
The covenanting parties intended that successors in interest be bound by the covenant.
B
There is vertical privity between the covenantor and his successor in interest.
Vertical privity between the covenantor and his successor in interest is not required for the burden of an equitable servitude to run to successors in interest. An equitable servitude is a covenant (i.e., a promise to do or not to do something on the land) that, regardless of whether it runs with the land at law, can be enforced in equity against assignees of the burdened land who have notice of the covenant. The burden of an equitable servitude will run to successors in interest if: 1. The covenanting parties intended that successors in interest be bound by the covenant; 2. The successor in interest has notice of the covenant (if she has given value); and 3. The covenant touches and concerns the land (i.e., it benefits the covenantor and his successor in their use and enjoyment of the burdened land). Horizontal privity between the original covenanting parties and vertical privity between the covenantor and his successor in interest are not required.
Which of the following is required for the burden of an equitable servitude to run to a subsequent purchaser of the land?
A
The restriction must be recorded in the buyer’s chain of title.
B
There must be a common scheme for development.
C
The purchaser must have notice of the covenant.
D
There must be horizontal privity between the original covenanting parties.
C
The purchaser must have notice of the covenant.
For the burden of an equitable servitude to run to a subsequent purchaser of the land, the purchaser must have notice of the covenant. An equitable servitude is a covenant (i.e., a promise to do or not do something on the land) that, regardless of whether it runs with the land at law, can be enforced in equity against assignees of the burdened land who have notice of it. The burden of an equitable servitude will run to a subsequent purchaser if:
1. The covenanting parties intended that successors in interest be bound by the covenant; 2. The purchaser has notice of the covenant; and 3. The covenant touches and concerns the land (i.e., it benefits the covenantor and his successor in their use and enjoyment of the burdened land). The requisite notice may be acquired through actual notice (direct knowledge of the covenants in the prior deeds); inquiry notice (the neighborhood appears to conform to common restrictions); or record notice (if the prior deeds are in the grantee’s chain of title he will, under the recording acts, have constructive notice of their contents). Thus, there the restriction need not be in the buyer’s record chain of title for the buyer to be burdened by it-as long as the buyer has some kind of notice.
Horizontal privity between the original covenanting parties is not required. Horizontal privity means the original parties to a real covenant shared some interest in the land independent of the covenant at the time they entered it (e.g., as grantor and grantee). Horizontal privity is required to enforce the burden of a real covenant at law, but it is not required to enforce the burden of an equitable servitude.
A common scheme for development is not required for the burden of a written equitable servitude to run to a subsequent purchaser. Generally, equitable servitudes are created by covenants contained in a writing that satisfies the Statute of Frauds. However, reciprocal negative servitudes may be implied absent a writing if there is a common scheme for the development of a subdivision and the grantee had actual, record, or inquiry notice of restrictions that do not appear in his deed. The common scheme exception applies only to negative covenants and equitable servitudes; affirmative covenants must be in writing.
A developer created an exclusive residential subdivision. In his deed to each lot, the following language appeared:
Grantee agrees for himself and assigns to use this property solely as a single-family residence, to pay monthly fees as levied by the homeowners’ association for upkeep and security guard services, and that the backyard of this property shall remain unfenced so that bicycle paths and walkways may run through each backyard, as per the subdivision master plan [adequately described], for use by all residents of the subdivision.
The developer sold lots to an actuary, a baker, and a coroner. All deeds were recorded. The subdivision was developed without backyard fences, with bicycle paths and walkways in place in accordance with the general plan. The actuary in turn sold to an accountant by a deed that omitted any mention of the covenants above, and the accountant had no actual knowledge thereof. Shortly thereafter, the accountant started operating a tax preparation business out of his home. The baker in turn sold to a barber, who knew of, but refused to pay, the monthly fees levied by the homeowners’ association. The coroner leased her property for 10 years to a chiropractor, who erected a fence around the backyard, unaware of the covenant against such fencing.
According to common law principles, which of the following statements is correct?
A
If the developer, still owning unsold lots, sues the accountant to have him cease operating the tax preparation business, the accountant would win because there is no privity between the developer and the accountant.
B
If the homeowners’ association sues the barber to collect the monthly fees for upkeep and security guard services, the homeowners’ association would win because the covenant regarding fees is enforceable in equity against the barber.
C
If the barber sues the chiropractor to obtain removal of her backyard fence, the barber would win because the covenant regarding fencing is enforceable in equity against the chiropractor.
D
If the chiropractor sues the accountant to have him cease operating the tax preparation business, the chiropractor would win because the covenant regarding single-family use is enforceable at law against the accountant.
C
If the barber sues the chiropractor to obtain removal of her backyard fence, the barber would win because the covenant regarding fencing is enforceable in equity against the chiropractor.
If the buyer of land determines that the seller’s title is unmarketable, the buyer:
A
May sue on the implied covenant of marketable title after closing
B
Must take title to the land “as is”
C
Must notify the seller and give a reasonable time to cure the defects
D
May sue for damages for breach as soon as the defect is discovered
C
Must notify the seller and give a reasonable time to cure the defects
If the buyer of land determines that the seller’s title is unmarketable, the buyer must notify the seller and give a reasonable time to cure the defects. Every land sale contract contains an implied covenant that the seller will provide marketable title at closing. Marketable title is title reasonably free from doubt, which a reasonably prudent buyer would accept. While it need not be perfect title, it must not present the buyer with an unreasonable risk of litigation. Generally, this means an unencumbered fee simple with good record title.
