Land Sale Contract

Question 1

Land sale contract

Answer 1

The contract for a conveyance of an interest in real estate typically governs the agreement until the time of closing, at which time the deed becomes the operative document governing the land transfer.

Question 2

Land Sale Contract-Contract law governs

Answer 2

Contract law governs a contract for the sale of an interest in land. Including:

1. Statute of Frauds (SOF) applies.
2. Need Marketable Title
3. The doctrine of Equitable Conversion
4. Remedy for breach of land sale contract

Question 3

Statute of Frauds (SOF) applies

Answer 3

1. SOF requirements:
   a. The contract must be in writing;
   b. Name the parties;
   c. Signed by the party to be bound;
   d. Sufficiently describe the land; and e. State some consideration (purchase price).
2. Part performance exceptions to the SOF
   a. Possession plus payment: Buyer has possession of the land and paid all or part of the purchase price.
   b. Substantial improvements are made to the premises.
   c. Conveyance made by the seller.

Question 4

Marketable Title

Answer 4

Marketable title: There is an implied promise in every land sale contract that the seller covenants to transfer marketable title at the time of closing. Marketable title is title free from reasonable doubt about the seller’s ability to convey what he purports to convey.

Question 5

The doctrine of Equitable Conversion

Answer 5

The doctrine of equitable conversion provides that once the contract is signed, the buyer is deemed the owner of real property, even though closing has not yet occurred. If the property is destroyed prior to closing, the risk of that loss is imposed on the buyer of the property. Some states have statutes that provide for the opposite result.

Question 6

Remedy for breach of land sale contract

Answer 6

The nonbreaching party to a land sale contract can sue for damages or specific performance. Specific performance is usually the preferred remedy because land is unique.

a. Damages: Typically, damages are calculated as the difference between the market price and the contract price.
b. Specific performance is a permanent injunction in contract where the court orders the defendant to perform on the contract as promised. The following requirements must be met:
1. Contract is valid.
2. Contract conditions imposed on the plaintiff are satisfied.
3. Inadequate legal remedy: Damages can be inadequate because they are too speculative to calculate with certainty, the defendant is insolvent, there is potential for a multiplicity of suits, or because property is unique so money damages are inadequate to compensate for the loss of that property. (Real property is always unique.)
4. Mutuality of performance: Both parties to the contract must be eligible to have their performance under the contract ordered by the court.
5. Feasibility of enforcement: The injunction cannot be too difficult for the court to enforce.
6. No defenses, such as laches, unclean hands, or any defenses to the underlying contract (e.g., lack of consideration, SOF, sale to a bona fide purchaser, etc.).