Kaplan Pgs 567-573 - Contracts Flashcards
If a buyer breaches a land sale contract, what are all of the different remedies the seller can get?
– Expectation damages: difference between the contract price and the market price at the time of breach
– foreseeable consequential damages: things like having to now make a mortgage payment
– reasonable reliance damages: repairs and the cost of inspection
– can elect to retain the entire down payment: most courts now say you can only keep a down payment that is 10% or less of the purchase price or modernly you can only keep the amount of actual damages
– liquidated damages: if there is a clause for this, the seller can retain the down payment if the clause was reasonable
– Punitive damages: these can be included if the breach was wilful
When is the reasonableness of a liquidated damages clause judged?
Usually at the time of the contract, but the second restatement of contracts says that it is judged at the time the contract was made or it can be judged by the loss that actually occurred
What are the legal remedies that a buyer can recover if a seller breached a contract of sale?
– Expectation damages: the difference between the market price at the time of the breach and the contract price
– foreseeable consequential damages: like lost profits
– reliance damages: things like the cost of inspections
– restitution of the down payment:
• English rule: if the seller doesn’t deliver marketable title, the buyer can get restitution of his down payment plus interest and reasonable expenses. But the buyer can’t get expectation damages exceeding the down payment unless the seller acted in bad faith. Minority rule
• American rule: buyer can recover expectation damages plus reasonably foreseeable consequential damages. Majority rule
- punitive damages: if the breach was wilful
What are different things that make title not marketable?
- If it was gotten by adverse possession and not perfected: although the new minority view does say that it can be marketable if:
• possession was for a long time
• The risk that the record owner would sue is remote
• The probability of the record owner’s success is minimal - defective execution of the deed
– significant variation in the description of the land from one deed to the next
What is an encumbrance?
A right or interest another person has in real property that diminishes the value of the property. Includes: mortgages, liens, easements, covenants, servitudes
How do zoning restrictions and zoning violations affect marketable title?
A zoning restriction does not make title unmarketable, but a zoning violation does
How do you determine whether a defect is material enough that the seller should’ve disclosed it?
This is limited to defects that affect the health and safety of the occupants, but some states include defects that affect value too
What are the two possible standards that could be used to judge whether a defect was material enough that the seller should have revealed it?
– some states apply an objective standard: asks whether a reasonable person would attach importance to the defect in determining whether to purchase the home
– other states apply a subjective standard: asks whether the defect actually affected the value or desirability of the property to the buyer
What is an implied warranty of quality?
This is also referred to as an implied warranty of workmanlike quality and it applies to the sale of new or remodeled homes. This does not extend to commercial structures. Essentially homes must be built and remodelled with workmanlike quality
It is imposed on contractors, developers, and other commercial vendors of real property. It covers significant latent defects caused by the defendant’s poor workmanship as long as the defects are discovered within a reasonable time of construction.
Jurisdictions are split about whether it extends to subsequent purchasers that are not in privity and about whether economic loss can be recovered for breach.
