The Land Sale Contract Flashcards
What is the general rule regarding the formation of land sale contracts?
Subject to general contract requirements
What is a real estate broker?
An agent who owed his principal duties of loyalty, care, competence, diligence, disclosure, and confidentiality to the party they represent.
What are the types of agents that exist under the land sale contract?
Seller’s agent’s
- listing broker - helps set the asking price and advertise the property
- selling broker - subagent of the listing broker; finds a buyer
- listing broker and selling broker generally share commission
Buyer’s agent - may also receive a commission
Dual agent - represents both buyer and seller; prohibited in many jurisdictions
Transactional broker - doesn’t represent either buyer or seller, but instead facilitates the sale by performing various functions; owes each party the duty to perform with skill, care, and diligence and to deal fairly with each party, but doesn’t owe either party a duty of loyalty
How does the statute of frauds work under the land sale contract?
What other property interests does the SoF apply to?
Does a deed need to satisfy the SoF? What are the requirements of a deed?
Formalities - land sales K must be in
-> writing,
-> signed by the party to be charged,
AND
-> contain all of the essential terms (parties, property description, terms of price/payment).
SoF also applies to other property interests such
-> as assignments and options regarding the purchase of real property,
AND
-> leases over one year
A deed need not satisfy the SoF, but must be
-> in writing,
-> signed by the grantor,
-> contain a description of the property,
AND
-> identify the grantee;
AND
-> the deed must contain words of transfer
What are the exceptions to SoF under the land sale contract?
Part performance (SoF exception) - (most jurisdiction require 2/3 of the acts)
-> buyer takes possession of land,
-> buyer remits all or part of purchase price,
AND/OR
-> buyer makes substantial improvements.
Detrimental reliance - specific performance (SP) permitted when party seeking enforcement has reasonably relied on K and would suffer hardship
Detrimental reliance
Admission
What is a marketable title?
When must a seller delivery marketable title? Why allow them this time?
What remedies does a buyer have if title isn’t “marketable”?
Title is free from defects or unreasonable risk of litigation.
Seller generally not required to deliver marketable title until closing;
-> seller can use sale proceeds to pay off a existing mortgage, eliminating the related title defect
Buyer can rescind/recover out-of-pocket and earnest money payments, sue for breach, or sue for significant performance (SP) with an abatement of purchase price
Is the time of essence for performance enforceable?
What if time is not of the essence, and there has been a failure to perform by the closing date?
Not enforced unless part of K (express/implied) that time is actually of the essence).
If time is not of the essence, then failure to perform by closing date won’t provide grounds for a contract rescission.
-> Nevertheless, party failing to perform on closing date is in breach and can be sued for damages.
What is the implied warranty of fitness in a land sale contract?
Only for new homes, warrants use of adequate materials and workmanship; includes latent construction defects.
What is the duty to disclose all defects (all homes) under the land sale contract?
Seller must disclose all KNOWN material physical defects not readily observable.
How does tender of performance work in a land sale contract:
-> Are both the seller and buyer’s performance concurrent? What does this mean and what happens if one doesn’t perform?
What happens to the obligations of the other party if one party repudiates?
What happens if neither party performs or repudiates by the closing date?
Both the seller’s and buyer’s performance are concurrent conditions meaning that if one doesn’t perform then the other doesn’t have to either.
If one party repudiates then non-repudiating party is excused from performing.
If neither party performs nor repudiates by the closing date then the closing date is extended until one of the parties either performs or repudiates.
How does a merger work under the land sale contract?
Land sales K obligations (e.g. duty to deliver marketable title) merge into deed upon delivery
-> UNLESS parties intend otherwise or the obligations are collateral to/independent of conveyance.
What are the remedies for breach of a land sale contract?
Damages for buyer
-> difference between K price and market value (some jurisdictions: limited to B’s out-of-pocket expenses if seller is unable to deliver marketable title but acted in good faith)
Damages for seller - buyer’s deposit as liquidated damages - generally, deposits of no more than 10% of the purchase price have been found to be reasonably liquidated damages,
-> but courts may consider factors relating to the transaction or refuse to enforce liquidated-damages clauses WHEN the S suffers no actual loss
-> when the K is silent, courts consider the same factors, and usually allow S to retain the deposit when reasonable
Specific performance (mutuality of remedies)
What is equitable conversion under the land sale contract?
Who bears the risk of loss between signing of K and closing?
S’s interest converted by K into interest in proceeds of sale not in real property.
Once K is signed, B is owner of land subject to the condition he pay the purchase price at closing, but in interim between K and closing, B bears risk of loss if land is destroyed.
How do options and rights of first refusal work in land sale contract?
Are they subject to SoF?
Options -> options K that keeps offer open in exchange for consideration
Right of first refusal -> preemptive right that gives its holder the ability to buy property before someone else has the ability to do such.
They’re subject to SoF.
