Land Sales Contracts

Question 1

What must a contract for the sale of land contain?

Answer 1

It must be written, contain the signature of the party to be charged, and the essential terms of the contract.

Question 2

When does a contract for the sale of land not necessarily need to be written?

Answer 2

Partial performance, which satisfies the statute of frauds.

Question 3

Doctrine of Equitable Conversion

Answer 3

once a contract is signed, equity regards the buyer as the owner of the real property. The seller’s interest in the property (proceeds of the sale) are personal property. The buyer holds that interest in trust for the seller.

Question 4

Even after a contract is signed, the seller has the right of _____________ until closing.

Answer 4

possession

Question 5

If the property to a land sale contract is destroyed without fault of either party before closing, the risk of loss is on the _________.

Answer 5

buyer

Question 6

If a seller dies before closing, what effect?

Answer 6

Title passes to his heirs, who must give up title at closing.

Question 7

If a buyer dies before closing, what effect?

Answer 7

His heirs can demand a conveyance of the land at closing.

Question 8

Implied Covenant of Marketable Title

Answer 8

every contract for the sale of land contains an implied covenant that title will be marketable, i.e. that there are no encumbrances on the land when it is sold.

Question 9

Must title be perfect to be marketable?

Answer 9

No, just reasonably free from doubt; i.e. free from questions that present an unreasonable risk of litigation.

Question 10

Title acquired by adverse possession is __________.

Answer 10

unmarketable

Question 11

Where a holder of a future interest is unborn or unascertained, is it possible to convey marketable title?

Answer 11

No

Question 12

What kind of encumbrances make title unmarketable?

Answer 12

mortgages, liens, restrictive covenants, easements, and significant encroachments.

Question 13

What kind of encroachment does not render title unmarketable?

Answer 13

An easement which is beneficial, visible or known to the buyer.

Question 14

Do zoning restrictions affect marketability?

Answer 14

No, but violations of them do.

Question 15

If a seller has agreed to furnish title at the date of closing, may a buyer rescind prior to the date of closing on the grounds that the title is unmarketable?

Answer 15

No, it must be done at the time of closing.

Question 16

In an installment land contract, when must title be transferred to the buyer?

Answer 16

When the buyer has made his last payment.

Question 17

If title is unmarketable, what must a buyer do?

Answer 17

The buyer must notify the seller that title is not marketable and give them a reasonable time to cure the defect.

Question 18

If title remains unmarketable after a reasonable period of time to cure, what are the buyer’s remedies?

Answer 18

The buyer can seek damages, rescission, specific performance with abatement, and a quiet title suit.

Question 19

Is the closing date absolutely binding on the parties?

Answer 19

Only if the contract so states, the circumstances evidence that it is binding, or one party gives notice of time being of the essence.

Question 20

If the closing date is not absolutely binding on the parties, when must the seller give title to the buyer?

Answer 20

Within a reasonable time.

Question 21

If one party to a land sale contract does not tender performance, what result?

Answer 21

The other side is relieved of their duty to tender performance.

Question 22

What happens if neither party tenders their performance?

Answer 22

The closing date is extended until one of them tenders performance.

Question 23

What kind of damages can a non-breaching party seek if the other side does not tender their performance?

Answer 23

Damages

Question 24

What kind of damages can a non-breaching party seek if the other side does not tender their performance and the land is unique?

Answer 24

specific performance

Question 25

Liquidated Damages

Answer 25

a deposit of money with the seller from the buyer which provides that if the buyer defaults in performance, the seller can keep the liquidated damages.

Question 26

Do land sale contracts contain an implied warranty of fitness or quality?

Answer 26

No, except for sales of new houses.

Question 27

Where a builder fails to perform properly in a land sale contract, what can the buyer sue them for?

Answer 27

Negligence

Question 28

When can a seller of real estate be held liable for defects in the property?

Answer 28

Where the seller 1) fraudulently misrepresented the condition of the property that the buyer relied on and which materially affected the value of the property; 2) where the seller actively concealed a defect; and 3) where the seller failed to disclose a defect which they knew or has reason to know of, the defect was not apparent, and was serious enough that the buyer would probably reconsider purchasing the property.

Question 29

Is a general disclaimer of liability valid?

Answer 29

No

Question 30

What kind of disclaimer for defects will be upheld by courts?

Answer 30

A disclaimer which disclaims liability for specific defects.

Question 31

Title Insurance

Answer 31

an insurance policy which ensures that a good record title of the property exists as of the policy’s date and promises to defend the record title if litigated.

Question 32

A title insurance policy only protects . . .

Answer 32

the person owning the policy.

Question 33

A seller of land covenants that the land is free of encumbrances at the time of sale. However, where a seller still owes money on property she is trying to sell, can she use the proceeds of the sale to pay off the remaining debt?

Answer 33

Yes. The seller has an implied right to use the proceeds to clear title to land she is trying to sell. While a seller is obligated to transfer a title free of encumbrances, a seller may nonetheless use proceeds of the sale of the land received at closing to pay off mortgages, and thus deliver clear title to the buyer.

Question 34

Must a grantor of land defend the grantee’s interest in the land under the warranty of title when someone is bringing a suit against the grantee, and the grantor is certain that the title in the grantee is proper?

Answer 34

no. The warranty of title does not require the grantor to defend the grantee’s interest against suits which have no merit.