The Land Sale Contract

Question 1

Formation of Land Sale Contract

Answer 1

Subject to general contract requirements

• Offer
• acceptance
• consideration AND
• subj. to the SOF

Question 2

Real Estate Brokers & Agents

Answer 2

The majority of real prop. sales are negotiated by RE brokers

• Both S & B can hire brokers to conduct the transaction on their behalf

Question 3

Real Estate Broker - Duty to Disclose

Answer 3

As agents, RE brokers have a duty to disclose material information that they have actual knwoledge of

Question 4

Real-Estate Broker - Seller’s Agent

Answer 4

• Broker who gets the listing from the seller & is responsible for assisting in the sale of the prop.
• Owes Fiduciary Duty to Seller
• entitled to commission for finding a “ready, willing and able” buyer

Question 5

Real-Estate Broker - Buyer’s Agent

Answer 5

• Responsible for showing the buyer properties that he might be interested in buying
• Receives commission-based fee upon slae of the prop.

Question 6

Real-Estate Broker - Dual Agent

Answer 6

Serves as agent for both buyer & seller

• Many states prohibit a person from serving as dual agent due to likelihood of conlict of interest

Question 7

Land Sale K & SOF

Answer 7

The land sale K must:

1. Be in writing
2. Be signed by the party to be charged, AND
3. Contain all of the essential terms
   
   • Parties
   • property description
   • terms of price and payment

also applies to other prop. int.

• Assignments & oprions regarding the purchase of real prop.
• Leases over one year
• Deed

Question 8

Exceptions to the SOF

Answer 8

1. Part Performance
2. Detrimental Reliance
3. Admission

Question 9

Exceptions to SOF - Part Performance

Answer 9

Under Doctrine of Part Performance, Courts will recognize an oral K for the sale of land if there has been part performance. Requires 2 of the following:

1. Payment of all or part of the purchase price,
2. Poss. by the purchaser AND/OR
3. Substantial improvement of the prop. by the purchaser

Question 10

Exceptions to SOF - Detrimental Reliance

Answer 10

Specific perf. may be permitted when:

1. the party seeking enforcement
2. has reasonably relied on the K and
3. would suffer such hardship
4. Other party will be estopped from asserting SOF as a defense to the K

Question 11

Exceptions to SOF - Admission

Answer 11

Party may be able to enforce an oral land sales contract when the other party admits the existence of the K

Question 12

What is the covenant of Marketable Title ?

Answer 12

Implied Promise by seller to deliver title to the prop. that is:

• free from defects or unreasonable risk of litigation
• at the time of closing

Question 13

How can a covenant of marketable title be contracted for?

Answer 13

It is implied, unless the K says otherwise

Question 14

When does the seller have to have marketable title?

Answer 14

On the date of closing

Question 15

What types of marketable title defects generally occur?

Answer 15

1. Unpaid mortgage or lien
2. Covenants & easements which restrict the use of the land
3. Title acquired by adverse poss. (need judicial decree declaring they are owner)
4. An existing zoning or ord. violation of the prop.

Question 16

At the date of closing what happens to the land sale K?

Answer 16

It merges into the deed

Question 17

What is the merger doctrine?

Answer 17

On the date of closing, the land-sale contract merges in to the deed

Question 18

When is the only time a buyer can claim a defect in marketable title under the land-sale contract?

Answer 18

Only on date of closing

• Raising claim later is too late b/c it becomes the deed
• Raising it earlier is too early b/c claim doesn’t manifest until closing

Question 19

If buyer finds defect in the title after the date of closing what are their options?

Answer 19

They can only sue on a warranty deed

Question 20

Time is of the essence Clause

Answer 20

• Not enforced unless part of K (express/implied)
• Party fails to perform on closing day = breach

Question 21

Implied Warranty of Fitness and workmanlike construction

Answer 21

Implied in land sale K for purchase of new construction homes

• Seller asserts he used adequate materials & goods workmanship in working on the residence
• Covers latent construction defects (can’t be discovered by reas. observation)
• Can be disclaimed by builder or waived by homeownerif done so with lang that is clear & unambig. BUT gen. disclaimer is not sufficient

Question 22

Suit for breach of implied warranty of fitness - Timing & Damages

Answer 22

Must be brought within a reas. timae after discovering the defect & damages based on the cost of repairs to bring the home into compliance with the warranty

Question 23

Duty to Disclose Defects

Answer 23

ALL Homes

• Seller must disclose all known material physical defects not readily observable

Question 24

Tender of Performance

Answer 24

Concurrent Conditions

• If one party repudiates then the non repudiating party is excused
• B must give S sufficient time to cure title defect

Question 25

Remedies for Breach

Answer 25

1. Damages
2. Specific Performance

Question 26

Remedies for Breach - Damages

Answer 26

• Difference b/w K price and market value
• Some juris. - limited to B’s out of pocket expenses if seller is unable to deliver marketable title but acted in good faith

Question 27

Remedies for Breach - Liquidated Damages

Answer 27

For a liquidated damges clause to be enforceable:

• Amount of LD must be reasonable
• deposits of no more then 10% of the purchase price have been found to be reasonable
• Courts can consider factors relating to the transaction or refuse to enforce LD clauses when S suffers no actual loss

Question 28

Remedies for Breach - Specific Performance

Answer 28

Buyer entitled to SP for seller’s breach of a K to sell land b/c B’s remedy at law is considered inadequate b/c of unique nature of land

• Theory of Mutuality of remedies - S permitted to seek SP & force buyer to purchase

Question 29

Doctrine of Equitable Conversion

Answer 29

Doctrine of Equitable Conversion - When the land sale K is signed:

• B of real prop. becomes the equitable owner of title to the prop., binding her to purchase the land at a later date (Equitable title passes to B)
• Seller has pers. prop. int. (legal title remains with seller until it passes to B at closing)

Question 30

Death after equitable Conversion

Answer 30

Seller - Heir or devisee entitled to pers. prop. int. only b/c there is no more real prop. int. after execution

Buyer - Heir or devisee entitled to real prop. int. b/c buyer gets this int. after execution

Question 31

Damages or Destruction After Equitable Conversion

Answer 31

Who risks any loss between the signingof the K & closing?

Majority View - Buyer bears ROL unless K expressly provides otherwise

Minority View - Risk of loss on Seller, unless B has title or poss. when the loss occurs.

Question 32

Option Contract

Answer 32

One party gets the right to purchase property, usually during a specific time pd., in exchange for consideratin

Question 33

Right of First Refusal

Answer 33

• Preemptive right that gives its holder the opportunity to get prop. b/f its transfer to another
• Valid unless unreasonable

Question 34

What is seller’s duty of care to the buyer?

Answer 34

• Must disclose material latent defect
  
  • Defects known to seller but not readily observable or known to the buyer