Land Sale Contract Flashcards
Statute of frauds
certain Contracts must comply with the statute of frauds in order to be valid. Contracts that fall within the statute of frauds include 1. those in consideration marriage 2. does that cannot be performed within one year 3. land sales contracts 4. executor agreements 5. contracts for the sales of goods of $500 or more 6. suretyship agreements
To satisfy the statute of frauds a land sales contract must be in writing, signed by the party to be charged with the breach, contain all of the essential terms. The essential terms include the parties the property description, and the price
The statute of frauds also applies to other property interests such as assignments and options for the purchase of real property leases over one year, and the deed must also be in writing
If the property is not adequately described in the land sales contract Florida will allow the use of extrinsic evidence to identify that property when the contract indicates that the parties were contemplating a particular piece of property
Exceptions to statute of frauds
Part performance- an exception to the statute of frauds. Contract will be enforced even if it doesn’t comport with statute of frauds requirements if the buyer
1. takes possession of the land
2. pays all or part of the purchase price
3. make substantial improvements to the land
Florida requires all three of these, and it recognizes the doctrine and inequitable action but not an action at law
In Florida promissory estoppel does not permit a enforcement of the land sales contract that does not comply with the statute of frauds
if the party admits to the existence of the contract, the court will force it even if it does not comply with the statute of frauds
Marketable title
Absence language to the contrary and find covenant of marketable title as part of the land sales contract regardless of the type of deed created. Marketable title is a title that is free from unreasonable risk of litigation
- unless otherwise agreed, the sellers not required to deliver marketable title until the closing
- once the deed is delivered, the terms of the contract merged with the deed and the Deed controls. This is known as a merger. Once merger takes place, the purchaser is not able to enforce provisions of the purchase contract
Defects that lender title on marketable include
Title acquired by adverse possession I Has not been quieted, future interests where the holders of those interests have not agreed to the transfer, private encumbrance such as the mortgage covenant option or easement, violation of the zoning ordinance, significant physical defect
Remedies for unmarketable title: buyer may rescind the contract recover out-of-pocket costs and earnest money payments sue for breach, Bring an action for specific performance with an abatement of the purchase price
Time is of the essence
Generally a court will assume that time is not of the essence in the real estate contract unless the contract specifically states that time is of the essence such notice must be given at a reasonable time before the date designated for closing.
If time is not of the essence strict inherence to the closing date set in the contract will not be required in equity thus a Failure to perform will generally not be grounds for rescission of the contract. A party that fails to render performance on the date set for closing in the contract will be in breach and liable for damages in action at law for incidental losses such as taxes or interest
Implied warranty of fitness for new homes
Warranty of fitness or suitability is implied in a land sales contract for the purchase of newly constructed residence
Seller asserts that he used adequate materials in good workmanship and working on the residence the warranty covers a latent construction defects buyer has a reasonable duty to conduct inspection for patent defects but the buyers not required to employ an expert home inspector
The warranties are implied against commercial builders developers and contractors of residences
Most jurisdictions allow the initial homeowner and subsequent purchasers do not directly contract with commercial developer or builder to recover the damages
Suit for breach of this warranty must be brought within a reasonable time after discovery of the defect
Damages are based on the cost of repairs to bring the residents into compliance with the warranty but if the defects cannot be corrected without substantial destruction of the residents then the damages will be based on the difference between the value of the residents with the warranty and the value of the residents as built
This implied warranty maybe disclaimed by the builder or waived by the homeowner but the language must be clear and unambiguous the general disclaimer is not sufficient
The Duty to disclose defects in all homes
A residential seller has no duty to disclose the existence of defects that would be discovered by an ordinary inspection
Under Florida law the seller has a duty to disclose facts (that he knows or should know about) that materially affect the value of the property that are not readily observable and are not known to the buyer
Tender of performance
The sellers and buyers performance are concurrent conditions this means that one is not obligated to perform without the others performance if the buyer or seller repeats the contract the non-repudiating party is excused from performing.
However if both parties fail to perform and the closing date is simply extended until one of the parties performance
The inability of the seller to produce marketable title does not automatically create a breach rather the buyer must give the seller sufficient time to cure the title defect
Merger
Under the doctrine of merger obligations contained in the contract of sale such as the seller’s duty to deliver marketable title are merged into the deep and cannot there after be enforced unless the deed contains the obligation
remedies For breach of the land sales contract
- damages- the difference between the contract price and the market value. The buyers deposit can act as liquidated damages generally deposits of no more than 10% of the purchase price are reasonable the courts can refused and enforced liquidated damages clauses when the seller suffers no actual loss
- specific performance
Buyer can force seller to sell
Under the theory of mutuality of remedies the seller is also permitted to seek specific performance and force the buyer to purchase the land
Equitable conversion
Once the buyer and seller enter into a purchase agreement the buyer is deemed to be the equitable owner and she has equitable title
The seller has legal title to the property meaning the property is legally in the seller’s name and the seller has the right to possession until closing. A seller with legal title is holding the property in trust for the benefit of the buyer and cannot commit waste during this period
At closing the buyers equitable title merges with the seller’s legal title and the buyer becomes the full owner this is called equitable conversion
Risk of loss
Is during the inspection. Before closing if the property is damaged or destroyed the buyer bears the risk of loss.
If the seller has an insurance he is required to credit the insurance proceeds to the buyer
The parties can contract out of this default risk allocation
Buyer will not bear the risk of loss the loss is attributable to the sellers intentional or negligent actions
Florida has NOT adopted the uniform vendor and purchaser asked which keeps the risk of loss with the seller until the buyer takes possession for Title is transferred
Real estate broker
A seller’s agent helps set the selling price and advertises the property he is entitled to commission once he finds a buyer that is ready willing and able
The buyers agent can also receive a commission
A dual agent represents both the buyer and the seller and is prohibited in many jurisdictions
