Land Sale Contracts

Question 1

Basics of Land Sale Contracts

Answer 1

• 2 stages
  
  • Contract stage
    
    • Any liability during this phase must be based on contractual provision
  • Deed stage
    
    • Any liability during this phase must be based on a deed warranty
• Doctrine of Merger:
  
  • Covenants under the K merge into the deed and thus can’t be enforced unless specifically mentioned in the deed

Question 2

Statute of Frauds Requirements for Deeds

Answer 2

• Must be in writing
• Must contain essential terms
  
  • price & payment info; the parties; description of property (doesn’t have to be legal description)
• Must be signed by party to be charged
• Exceptions to SOF:
  
  • Partial performance
    
    • by either seller or buyer; look for payment, possession or improvements by purchaser
  • Detrimental reliance
    
    • Estoppel doctrine; applied when one party has reasonably and detrimentally relied on the agreement and would suffer hardship if not enforced

Question 3

Implied Covenant of Marketable Title

Answer 3

• Title that is free from unreasonable risk of litigation
• Present in every land sale K
• Reasonable buyer standard used to judge if title is unmarketable
• Buyer may rescind K if seller cannot deliver marketable title
  
  • Defects must be remedied before closing, when K and deed merge
• Examples of defects:
  
  • Private encumbrances (mortgage, easements, etc)
  • Violation of zoning ordinance
  • Piece of land acquired by adverse possession where title has not yet been quieted

Question 4

Implied Warranty of Fitness or Suitability

Answer 4

• Applies to new constructions; contractor warrants that construction will be done with reasonable care so as to make the building fit for its intended purpose
• In most jdx both original homeowner and subsequent purchasers can recover damages
  
  • Some jdx limit recovery to original owner
• Generally suit must be brought within reasonable time after defect is discovered
  
  • Some jdx have SOL

Question 5

Duty to Disclose Defects

Answer 5

• Most jdx impose on seller the duty to disclose to buyer all known, physical material defects
• Concerned with latent or hidden defects here
• Material defect must substantially effect the value of the home, health & safety of occupants, or desirability of the home (haunted house case)
• General disclaimers (“as is”) won’t relieve seller of this duty

Question 6

Seller’s Remedy for Breach by Buyer

Answer 6

• damages
  
  • difference between contract price and market price
• recission
  
  • seller can sell to someone else
• specific performance
  
  • can’t have if you get damages; one or the other

Question 7

Buyer’s Remedy for Defects by Seller

Answer 7

• damages
  
  • difference between contract price and market price on date of breach
  • unless seller breaches in good faith; then damages are only out-of-pocket costs for buyer
• recission
  
  • payments returned to buyer, K cancelled
• specific performance
  
  • can’t have if you get damages; one or the other

Question 8

Equitable Conversion and Risk of Loss

Answer 8

• Majority Rule: buyer holds equitable title between execution of contract and delivery of the deed
  
  • buyer is responsible for loss/damage during this time
  • Seller holds legal title and is still entitled to possession
• **Minority Rule: **Risk of loss is on seller until closing and delivery of deed
  
  • This is the Uniform Vendor and Purchaser Risk Act