Ch 15: Land Sale Contracts

Question 1

Seller

Answer 1

Owner looking to unload property

Question 2

Buyer

Answer 2

Person looking to obtain the property

Question 3

Broker (or real estate agent)

Answer 3

An intermediary between the buyer and the seller

Question 4

Listing agent

Answer 4

The agent who assists the seller in promoting and selling the property

Question 5

Seller’s agent

Answer 5

A sub-agent for the listing agent who helps find buyers

Question 6

Buyer’s agent

Answer 6

The broker who serves as the representative of the buyer; will receive commission similar to seller’s agents fee

Question 7

Dual agent

Answer 7

Represents both buyer and seller (many states forbid dual agency as a conflict of interest)

Question 8

Two stages of a Landsale contract

Answer 8

1. Contract (where the parties negotiate the terms)
2. Deed (where the parties transfer property)

Question 9

Doctrine of merger

Answer 9

covenants under the contract are merged into the deed and any remedy will flow from the deed

Question 10

Liability is determined by?

Answer 10

the stage where the breach occurs

Question 11

What happens is a breach occurs in the contract stage vs. the deed stage?

Answer 11

Contract stage: any liability must be based on a contract provision; Deed stage: any liability must be based on a deed warranty

Question 12

Land sale contracts are subject to?

Answer 12

Statute of Frauds

Question 13

Three requirements for land sale contracts under statute of frauds?

Answer 13

1. Must be in writing
2. Must be signed by the party to be charged and
3. Must include essential terms (parties, description of property, and price and payment info)

Question 14

What are the 2 main exceptions to the statute of frauds

Answer 14

• Part performance
• Detrimental reliance (estoppel)

Question 15

Part performance

Answer 15

• Exception to the statute of frauds
• Partial performance by either the seller or the buyer is treated as evidence that the contract existed

Question 16

What are examples of acts to look for when looking for part performance?

Answer 16

• Payment of all or part of the purchase price
• Possession by the purchaser or
• Improvements by the purchaser

(Many states require at least 2 acts of performance for the doctrine of part performance to apply - On MBE, look for at least 2 acts)

Question 17

Detrimental Reliance

Answer 17

An estoppel doctrine that applies when a party has reasonably relied on the contract and would suffer hardship if the contract were not enforced

Question 18

Every land sale contract includes an?

Answer 18

implied covenant of marketable title

Question 19

Marketable title

Answer 19

Title that is free from an unreasonable risk of litigation

Question 20

Examples of defects that make a title unmarketable:

Answer 20

• Title acquired by adverse possession that hasn’t been quieted
• Private encumbrances
• Violation of a zoning ordinance

Question 21

A defect in a title must be cured _______

Answer 21

before closing

Question 22

What is the standard for seeing whether a title is unmarketable

Answer 22

Standard is that of a reasonable buyer

Question 23

If the seller cannot deliver marketable title, what is the buyer’s remedy?

Answer 23

Recession (basically ending) the contract

Question 24

What is the basic rule for delays

Answer 24

Unless the contract or parties notify, time is NOT of the essence (basically not closing on the date that is set is not immediately a breach, even though specific performance is still available)

Question 25

Implied Warranty of Fitness or Suitability

Answer 25

Applies to defects in new construction - Generally, suit for breach must be brought within a reasonable time after discovering the defect

Question 26

Duty to disclose defects

Answer 26

Most jurisdictions impose a duty on the seller to disclose to the buyer all known, physical and material defects

Question 27

What is duty to disclose defects concerned with

Answer 27

- Latent or hidden defects - Material defects that substantially affect the value of the home, health/safety of occupants, and desirability of the home

Question 28

What remedies are available to the seller if the buyer breaches

Answer 28

- Damages (measure is the difference b/w the contract price and market price) - Recession (seller can sell the property to someone else) - Specific performance

Question 29

What remedies are available to the buyer if the seller breaches

Answer 29

- Damages: measure is the difference b/w contract price and market value on the date of the breach - Recession: returns payments to the buyer and cancels the contract - Specific performance

Question 30

Buyers and sellers cannot have which 2 remedies at the same time?

Answer 30

damages and specific performance

Question 31

Who bears the risk of loss if there is damage to or destruction of the property?

Answer 31

- Majority rule: buyer holds equitable title during period between contract and deed; therefore buyer is responsible -Minority rule: risk of loss is with the seller until the deed is finished