Contracts

Question 1

Equitable Conversion

Answer 1

When a land-sale contract is formed, at that point there is a bifurcation of title.
* Equitable title passes to the buyer.
* Legal title remains with the seller until the deal closes.

Majority = risk of loss passes to buyer
Minority/UVPA = risk of loss remains with seller until legal title/possession passes to buyer

Question 2

Marketable Title

Answer 2

Every land sale contract, unless expressly stated otherwise, contains an implied covenant of marketable title. This means that the seller must deliver a title at closing that is reasonably free from defects in both fact and law (not perfect title). This covenant only manifests at closing.

Defects may include:
1. Unpaid mortgage or lien;
1. Covenant or easement that restricts use of the land;
1. Title acquired by adverse possession until the adverse possessor quiets title; or
1. Existing condition on the land that violates a zoning ordinance.

Question 3

Merger Doctrine

Answer 3

Because the covenant of marketable title is implied in the contract, and the contract merges into the deed, the buyer cannot assert it after closing and must sue on any covenants now contained in the deed.

Question 4

Quitclaim Deed

Answer 4

The buyer cannot sue because this is an “as-is” deed (no warranties/covenants), and the seller conveys whatever interest he or she has.

Question 5

General & Special

Warranty Deed

Answer 5

The buyer can sue on the deed through one of the covenants of title contained in the warranty deed.

General Warranty Deed: Contains all six covenants of title, which covers the period prior to the sale. The seller warrants there are no defects in the chain of title.

Special Warranty Deed: May contain some, or all, of the covenants and typically limits liability only to the period of the seller’s ownership of the land. The seller warrants that no defects have occurred during his or her ownership.

Question 6

Present Covenants

Answer 6

Present Covenants: Do not run with the land and can be breached only at the time of closing. The buyer’s successors in interest are unable to sue on these covenants.
1. Seisin: The grantor promises he or she owns the property.
1. Right to Convey: The grantor promises he or she has the power to convey the property.
1. Covenant against Encumbrances: The grantor promises there are no encumbrances (visible or invisible) on the property.

Question 7

Future Covenants

Answer 7

Future Covenants: Run with the land and breach can be at the time of closing or afterwards.
1. Quiet Enjoyment: The grantor promises that the grantee will not be disturbed by a third party asserting a valid claim to the land.
1. Warranty: The grantor promises to defend the grantee against any third-party claim.
1. Further Assurances: The grantor promises to do everything reasonably necessary to perfect the grantee’s title.