Property Contracts

Question 1

What are the five elements of a land sale contract under the Statute of Frauds?

Answer 1

Under the Statute of Frauds, a land sale contract must:
1. be in writing;

2. identify the parties;
3. be signed by the party to be bound;
4. describe the property; AND
5. list the purchase price.

AdaptiTip: The doctrine of part performance is an EXCEPTION to the general rule that land sale contracts must
be evidenced by a signed writing that satisfies the Statute of Frauds.

Question 2

What is “equitable conversion”?

Answer 2

Once a contract for the sale of land is executed, the doctrine of “equitable conversion” gives equitable title to
the BUYER, who will then be considered the owner of the land in equity, while legal title and right to possession
remain with the SELLER until the closing.

AdaptiTip: The majority rule is that if the property is destroyed before closing, without fault from either party, the
risk of loss remains with the buyer.

Question 3

What is required to establish “part performance” under a land sale contract?

Answer 3

“Part performance” under a land sale contract occurs if the buyer has taken possession of the land AND either:

1. made substantial improvements to the land; OR
2. paid all or part of the purchase price.

AdaptiTip: This is the majority approach to part performance, and it is based on the idea that the facts show the buyer is entitled to specific performance, even if they are not contained in a writing.

Question 4

Which party carries the “risk of loss” under equitable conversion?

Answer 4

The majority rule is that, if the real property is destroyed prior to closing through no fault of either party, the risk
of loss is on the BUYER because they are considered the owner.

AdaptiTip: In this scenario, the buyer must pay the seller the full contract price, unless the contract specifies

Question 5

What is the preferred remedy when a seller breaches a land sale contract?

Answer 5

Since land is unique, the preferred remedy when a seller breaches a land sale contract is specific performance.

Question 6

What is “marketable title”?

Answer 6

Marketable title” is title that is free from reasonable doubt about whether the seller can convey the rights they
want to convey.

AdaptiTip: “Marketable” does not mean perfect title, but title that is reasonably likely not to be litigated.

Question 7

What are the two types of defects that will make title unmarketable?

Answer 7

Defects that may make a title unmarketable include:

1. defects in the chain of title; AND/OR
2. encumbrances (i.e., mortgages, liens, easements, etc.)

Question 8

In a real estate contract, will “time be of the essence” by default?

Answer 8

Generally, no. In a real estate contract, the default rule is that time is NOT of the essence, even if the contract
picks a particular date for the closing.

Question 9

May a real estate contract require the title to be marketable prior to closing?

Answer 9

Yes. The real estate contract may provide for a different point in time when the seller must furnish the buyer with
good and marketable title.

AdaptiTip: If no such provision exists, title must be marketable at the date of closing

Question 10

What happens at a “closing” in real estate transactions?

Answer 10

The “closing” is the time when the seller gives the deed to the buyer, and any other documents required by
local laws, and the buyer tenders payment.

Question 11

What is the measure of monetary damages for a breach of a land sale contract?

Answer 11

The measure of damages for the breach of a land sale contract is the difference between the market price and
the contract price.

AdaptiTip: This is also called the “benefit of the bargain” rule.