Land Sale Contracts Flashcards
Two-Stage Framework for Land Sale
1) The Contract Stage (where parties negotiate terms)
2) The Deed Stage (where parties transfer property)
Doctrine of Merger
Covenants under the contract are merged into the deed and any remedy will flow from the deed.
Land Sale Contracts and SOF
Land sale contracts are subject to the SOF.
Three Requirements:
1) Must be in writing
2) Musty be sighted buh the party against whom enforcement is sought
3) Must include essential terms:
- The parties (ie, the seller and buyer)
- Description of the property
- Price and payment info
Part Performance Exception to SOF
Partial performance by either the seller or the buyer is treated as evidence that then contract existed
Look for acts of performance:
- payment of all or part of the purchase price
- possession by the purchaser, or
- improvements by the purchaser
*Many states require at least two of the above acts of performance for partial performance to apply
Detrimental Reliance (Estoppel) and SOF
An estoppel doctrine that applies where a party has reasonably relied on the contract and would suffer hardship if the contract were not enforced
*This is often used in tandem with partial performance
Marketable Title
Every land sale contract includes an implied covenant of marketable title; this is title that is free from an unreasonable risk of litigation.
Examples of defects in title that would render title unmarketable:
- title acquired by adverse possession that hasn’t been quieted
- private encumbrances (mortgage, covenant, easement)
- violation of a zoning ordinance
A defect in title must be cured or fixed BEFORE closing, at which point the contract and deed merge and the deed controls.
In judging whether title is unmarketable, the standard is that of a reasonable buyer.
If the seller cannot deliver marketable title, the buyer’s remedy is recession of the contract.
Delays in Land Sales
Basic Rule: Unless the contract or parties notify, time is NOT of the essence
When time is not of the essence, the failure to close on the date set for close may be a breach of the contract, but is NOT grounds for recession of the contract.
Specific performance is still available.
Implied Warranty of Fitness or Suitability
Applies to defects in new construction
Most Jurisdictions: Both the initial homeowner-purchaser and subsequent purchasers may recover damages
Minority Jurisdictions: Only the original buyer can enforce this warranty
Generally, suit for breach of this warranty must be brought within a reasonable time after discovery of the defect (but some jurisdictions have a statutory time period).
Duty to Disclose Defects
Most jurisdictions impose a duty on the seller to disclose to the buyer all known, physical and material defects.
Concerned with latent/hidden defects
Material defect must substantially affect the value of the home, healthy and safety of the occupants, or the desirability of the home
General disclaimers (“as is”) will not satisfy the seller’s duty to disclose
Seller’s Remedies on Buyer’s Breach
Remedies that are available to the seller:
1) Damages: measure the difference between the contract price and market price
2) Recession: seller can sell the property to someone else
3) Specific performance
*Seller must choose between damages and specific performance - CANNOT have both!
Buyer’s Remedies own Seller’s Breach
Remedies that are available to the buyer:
1) Damages: measure is the difference between the contract price and market value on the date of the breach
- BUT if the seller breaches but acted in good faith, then the buyer can only recover out-of-pocket expenses
2) Recession: returns payments to the buyer and cancel the contract
3) Specific performance
*Buyer must choose between damages and specific performance - CANNOT have both!
Equitable Conversion and Risk of Loss
Concerns the issue of who bears the risk of loss if there is damage to or destruction of the property during the time between the contract and closing.
Majority Rule: The buyer holds equitable title during the period between the execution of the contract and closing and delivery of the deed.
- Buyer is responsible for any damage to the property that happens during that period.
- As a holder of legal title, the seller has a right to possess the property
Minority Rule: Places the risk of loss on the seller until the closing and delivery of the deed.
