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.
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?
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, 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; the deed must contain words of transfer
Part performance (SoF exception) - buyer takes possession of land, buyer remits all or part of purchase price, and/or buyer makes substantial improvements (most jurisdictions require at least two acts)
Detrimental reliance - specific performance (SP) permitted when party seeking enforcement has reasonably relied on K and would suffer hardship
What are the exceptions to SoF under the land sale contract?
Part performance - (need to have at least 2 of the 3) consider payment of all or party of purchase price; possession by purchaser; substantial improvement by purchaser
Detrimental reliance
Admission
What is a marketable title? 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
What is the time of essence for performance?
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.
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?
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 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.
However, B must give S sufficient time to cure title defect (not marketable title) unless time is of the essence, at which point failure to cure by closing date would be a breach.
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 - difference between K price and market value (some jurisdictions: limited to B’s out-of-pocket expenses if seller (S) is unable to deliver marketable title but acted in good faith)
–> 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?
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?
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.
