Land-Sale Contracts Flashcards
What is the Statute of Frauds?
A statute that requires a writing for a transfer of an interest in real property. It must be signed by the party to be charged and must include the essential terms: 1. description of the property; 2. description of the parties; 3. price; and 4. any conditions of price or payment if agreed on.
What exception is there to the Statute of Frauds?
The Doctrine of Part Performance may be used to enforce an otherwise invalid oral contract for sale, if the acts of part performance unequivocally prove the existence of the contract. To satisfy this doctrine, a showing of at least two of the following must be made:
- payment of all or part of the purchase price;
- taking of possession; and
- making substantial improvements.
Equitable and promissory estoppel may be used to prove an oral contract for sale of land. Equitable estoppel is based on an act or a representation. Promissory estoppel is based on a promise.
Oklahoma RP Distinction - Oklahoma courts will enforce an oral agreement for the sale of real property where there has been such part performance of the contract as would make it impractical to place the parties in their original positions and thus make it a fraud upon one of the parties not to enforce the agreement.
To apply the doctrine of equitable estoppel, the moving party must not have been guilty of laches, and specific performance will only be decreed where the moving party has fully performed the terms of the contract.
What are the Seller’s Remedies for a Buyer’s Breach?
Traditionally, expectation damages are awarded, that is, the difference between the contract price and the market price at the time of breach. If a falling market, they are measured based on the difference between the contract price and the resale price.
The seller may recover foreseeable consequential damages, such as mortgage interest payments.
The seller may recover reasonable reliance damages, such as repairs and cost of inspections.
Traditionally, the seller may retain the down payment. Modern law states that seller must return the down payment that exceeds he damages caused by the buyer’s breach.
If the contract contains a liquidated damages clause, then a seller will receive that. Such a clause is reasonable if 1. the injury caused by the breach is one that is difficult or incapable of accurate estimation, and 2. the liquidated damages are a reasonable forecast of harm.
Punitive is available if the breach was willful.
The seller may elect to seek a recission.
Traditionally, specific performance was granted in the name of mutuality of remedy. However, some courts question specific performance for sellers.
What are the Buyer’s Remedies for Seller’s Breach?
Expectation damages.
Reliance damages.
Restitution of down payment.
Punitive damages.
Rescission.
Specific performance.
What is Equitable Conversion?
At the signing of the contract for a sale of land, the buyer receives equitable title while the seller retains legal title.
At common law, the risk of loss was on the buyer until closing. This is the majority rule.
Under the Uniform Vendor and Purchaser Risk Act, the risk of loss is placed on the seller unless legal title or possession of the property has passed to the buyer. This is the minority rule.
Oklahoma RP Distinction - Oklahoma has adopted the Uniform Vendor and Purchaser Risk Act.
What is Marketable Title?
All contracts for the sale of real property include an implied promise to convey marketable title.
It is title that is reasonably free from doubt in both fact and law.
What doubt or defects makes a title unmarketable?
- Unpaid mortgage or lien.
- Encumbrances.
- Title acquired by adverse possession until adverse possessor quiets title.
- Present zoning code violation.
- Defective execution of the deed.
- Significant variation of the description of the land.
- Significant encroachments.
What damages for an unmarketable title?
- Rescission
- Monetary damages for breach of contract
- Specific performance with abatement of purchase price.
What is the Merger Doctrine?
The land-sale contract is deemed to merge into the deed. Covenant of marketable title is implied in the contract, and the contract merges into the deed, so the buyer cannot assert it. Rather, the buyer must sue on the deed.
This does not apply to collateral matters.
What are the types of deeds?
Quitclaim deed - It is an “as-is” deed. This deed contains no warranties, including warranty of marketable title.
Warranty deed - A deed where the grantor guarantees he or she holds clear title and has a right to sell it to the grantee.
General warranty deed - A deed that contains six covenants of title hat cover all the period prior to the seller selling to the buyer.
Special Warranty deed - A deed that contains some or all of the covenants. It may limit liability to a period of grantor’s ownership of the land.
What are the covenants in a warranty deed?
Present Covenants (breached at the time of closing)
- Seisin - promise by the grantor that they actually own the property.
- Right to convey - promise that they have the power to convey the property.
- Encumbrances - promise that there are no encumbrances either visible or invisible on the property.
Future Covenants (breached at closing or afterwards)
- Quiet Enjoyment - Promise that the grantee will not be disturbed by a third party asserting a valid claim to the land.
- Warranty - Promise by the grantor that they will defend grantee against any third party claim.
- Further assurances - Promise that he will do everything reasonably necessary to perfect the grantee’s title.
What is Fitness and Suitability?
A seller has a duty to disclose to the buyer material latent defects known to the seller but not readily observable and not known to the buyer.
Generally, this applies to commercial builders/developers of new residential homes. Some states extend this to all sellers. Real estate agents and brokers may also be included by some states. Some states extend this to used homes as well.
Material is any defect that affects the health and safety of the occupants. Some states extend this to include any defects that affect value. Some states use an objective standard. In other states, they use a subjective standard.
Defect is a physical defect on the premises. Few jurisdictions include on and off the premises defects.
Some states include physical and nonphysical defects (noise).
Oklahoma RP Distinction - the seller of residential property must provide to the buyer:
- a written property disclaimer statement which states that the seller has never occupied the property and makes no disclosures concerning the condition of the property, and has no actual knowledge of any defect; or
- a written property condition disclosure statement which must include an identification of items and improvements which are included in the sale of the property and whether such items or improvements are n normal working order, as well as a statement of whether the seller has actual knowledge of defects or information in relation to such items and improvements.
If a seller fails to provide a disclaimer statement or misrepresents the condition of the property in a disclosure statement, the buyer’s sole remedy is an action for actual damages, which must be commenced without 2 years following the date of transfer of the real property.
What is the implied warranty of quality?
The warranty covers significant latent defects caused by the defendant’s poor workmanship. The defects must be discovered within a reasonable time. Applies to contractors, developers, and other commercial vendors of real property. Applies to new or remodeled homes.
A disclaimer must be unambiguous. Some jurisdictions do not give effect to general disclaimers.
Statute of limitations begins to run when construction is completed in some jurisdictions. Other jurisdictions, the statute of limitations begins to run when the buyer takes possession . Other jurisdictions, the statute of limitations does not begin to fun until the defect is discovered.
