Transactions

Question 1

Four Stages of Transactions

Answer 1

1) Locating buyer or property
2) Negotiating a contract
3) Preparing for closing
4) Closing transaction

Question 2

Remedies for Breach of Contract

Answer 2

1) Recission: The K is canceled and is of no further legal effect. The non-breaching party is excused from performance.
2) Restitution: The parties are restored to the position they held before the K. This is accomplished by returning the benefits of performance that was made.
3) Specific performance: An alternative choice available to the non-breaching party.
4) Damages

Question 3

Recoverable as Damages?

Facts: Buyer pays travel costs to meet to negotiate the K with the seller.

Answer 3

Unless the buyer specifically informed the seller of the need to incur this cost, it is not an expense within the reasonable contemplation of the parties, therefore NOT recoverable.

Question 4

Recoverable as Damages?

Facts: Buyer pays month-to-month lease expenses to find a residence after the seller breached.

Answer 4

Buyer CAN recover moving expenses, but since the buyer had to live somewhere, the rental costs are NOT recoverable as damages.

Question 5

Recoverable as Damages?

Facts: 1) Additional carrying costs?

2) Repair Expenses while trying to resell after buyer breached?

Answer 5

Carrying costs (mortgage, taxes, insurance, and utilities) ARE recoverable

The cost of repairs are NOT recoverable because they were unforeseeable.

Question 6

Recoverable as Damages?

Facts: Seller resells after buyer’s breach and must pay a second commission.

Answer 6

The SELLER would have paid the first commission even without a breach – so NO recovery for that amount.

The BUYER must pay the second commission as that is a reasonably foreseeable cost of resale following buyer’s breach.

Question 7

Recoverable as Damages?

Facts: Buyer buys a replacement home but interest rates increased after seller’s breach.

Answer 7

The courts are split on this issue.

In cases where the market is volatile, and the other party is specifically aware of the impact on the non-breaching party at the time the K is signed, some courts have allowed recovery.

Question 8

Four types of damages?

Answer 8

1) Benefit of Bargain damages: Difference between K price and market price at the time of the breach.
2) Incidental damages: Out of pocket expenses incurred in reliance on K.
3) Consequential damages: Foreseeable loss incurred by non-breaching party.
4) Liquidated damages: Actual damages are difficult to determine in advance and amount was reasonable estimate of damages at the time.

Question 9

Builders Implied Warranty

Answer 9

Traditional Rule: Caveat Emptor.
Modern Trend: Implied Warranty
–warranty of quality, fitness or habitably
–first owner & successor covered for a reasonable or specified period of time.

Question 10

Seller’s Disclosure Duty

Modern Trend?

Answer 10

Duty to Disclose

1) Material Physical Defects
2) Legal Defects
3) Off Site Conditions (odors, noise)
4) Psychological impacts on property

Question 11

Seller’s Disclosure Duty

Modern Trend for broker or sellers agent in disclosing latent defects?

Answer 11

Seller’s agent or broker has an independent duty to make the same disclosure required of the seller.

The broker and the seller may be held liable for the broker’s breach of this duty.

Question 12

Seller’s Disclosure Duty –Modern Trend

Answer 12

1) The seller of RESIDENTIAL property has a duty to disclose known latent defects that substantially affect the value or desirability of the property.
2) The seller of residential property must provide a written seller disclosure form as required by state statutes.
3) Commercial property does not apply this rule.

Question 13

Seller’s Disclosure Duty –Traditional Rule

Answer 13

Caveat Emptor

1) “Let the Buyer Beware”–seller has no duty to disclosure.
2) However, seller could not make fraudulent misrepresentations.
3) If the buyer asked, the seller could not lie.

this traditional rule applies in most commercial transactions

Question 14

Elements of Fraudulent Misrepresentation

Answer 14

• -seller makes a false statement of material fact.
• -Known by seller to be false.
• -Made with intent to induce buyer to purchase.
• -on which buyer justifiably relies in purchasing, AND
• -causing detriment or loss to buyer.

Question 15

Gap Period or Executory Period

Answer 15

The time between execution of the sale/purchase contract and the closing of the transaction.

1) Seller researches his/her/its title
2) Seller discloses property conditions or defects
3) Buyer inspects property
4) Buyer obtains final financing approvals

Question 16

Statute of Frauds for Negotiating Transactional Ks

Answer 16

• -Evidentiary: clear evidence of existence of context and key terms of agreement.
• -Cautionary: Signing a writing cautions parties they are entering into an important relationship.
• -Channeling: Distinguishes between mere negotiations and an enforceable K with legal impact.

Question 17

Statute of Frauds Exceptions for Transactions

Answer 17

1) Part Performance

2) Equitable Estoppel

Question 18

Statute of Frauds Exceptions: Part Performance elements

Answer 18

1) Buyer pays some or all of purchase price
2) Buyer takes possession of the property
3) Buyer makes improvements

Most courts require 1 AND 2, or 3 to meet this exception.

Question 19

Statute of Frauds Exceptions: Part Performance standard to evaluate conduct.

Answer 19

1) The conduct reflecting part performance must be “unequivocally referable” to a K for the sale of property.
2) If there are other possible explanations for the conduct, this standard is not met.

Question 20

Statute of Frauds Exceptions: Equitable Estoppel Elements

Answer 20

1) One party makes an oral promise that induces
2) Another party to substantially change position
3) In justifiable reliance on the oral K, AND
4) Serious or irreparable injury will result if the oral contract is not enforced.

Question 21

Statute of Frauds Exceptions: Equitable Estoppel Standard to Evaluate Conduct

Answer 21

This is a reliance based standard and only reasonable reliance will be redressed by this exception.

Question 22

Statute of Frauds for Transactions

Answer 22

Applies to any sale of an interest in real property, including easements, covenants, liens, mineral and timber rights etc.

Requires a “writing” signed by the “party to be charged” and containing the “essential terms.”

Designed to prevent fraud, so it is subject to equitable exceptions.