The real estate contract Flashcards
Basic requirements of a real estate contract?
- Parties have contractual capacity
- Contract has legal purpose
- Offer
- Acceptance
- Consideration (or equitable equivalent)
- Statute of frauds compliance ( the contract or some memorandum therof must be in writing, and signed)
Texas rules for estate contract
- The specific statute of frauds for residential sales:
a. K must be in writing
b. Signed by the party to be bound
c. Must contain a special disclosure indicating that the K is final (to protect consumers) (no parole evidence)
Required contents of real estate contract? 4 things
- Names of the parties – buyer/seller
- Terms: price and date of sale
- Description of the property
a. Adequacy of description is decided y the court (not the jury)
b. An imcoplete description will satisfy the requirement if a person who is familiar with the localitycould identify the property with reasonable certainty from the description - Signature
When does part performance a contract come into play?
Contract enforceable if proof of oral contract plus other factors
What are the important factors in part performance?
a. Possession by purchaser; possession plus payment; possession plus valuable improvements; possession plus change in position causing irreparable injury ;
What are the texas elements of part performance? the purchaser must have?
a. (1) taken possession
b. (2) paid consideration, and
c. (3) One of the following two things:
i. Makes valuable and permanent improvements on the land with the sellers consent, or
ii. Other factors exist to show that the transaction would be fraud on the alleged purchaser if the contract were not enforced.
When there is no time stated, when should time of performance occur?
reasonable time from contract date (based on exact facts of case)
In Texas what is the mortgaging instrument?
Deed of trust
What are the two tests to determine merchantable/marketable title?
i. 1. Reasonable person test (Texas rule): Title not be perfect, just not subject to doubt by reasonable person purchasing the property
ii. 2. Specific performance test: Title good enough that a court would order specific performance of sales contract.
Examples that make title unmerchantable
- Interest less than fee simple absolute
- Encumberances (mortgage, tax lien)
- Restrictions (easements, covenant)
- Break in chain of title (lack of vertical privity)
Before seller can be held in breach, the buyer must do 2 things…?
- Give seller notice of defects, and
2. Allow seller a reasonable time to fix.
What is a quiet title suit?
- Remedy for unmerchantable title
2. Bring all claimants to court and have claims resolved.
What are the purchasers remedies if real estate contract goes wrong?
a. 1. Terminate the contract – just trying to return to pre-contract status - recover down payment and out of pocket expenses
i. was time of the essence
ii. was seller given reasonable time to fix title problem
b. 2. Specific performance – unique to real property
c. 3. Damages
i. Modern Law (American & Texas rule) = benefit of bargain
1. Market value minus contract price
2. As if contract had been fully performed. (make whole)
What are the sellers remedies if a real estate contract goes wrong?
a. 1. Specific performance
b. 2. Damages
i. benefit of bargain – contract price minus market price
ii. out of pocket
iii. liquidated damages (keep down payment if buyer breaches) – must be in contract
1. often deemed void as a penalty
c. 3. Terminate contract – may wish to sell to someone else.
What are the three equitable conversion risk of loss rules?
i. 1. Majority (English) rule: purchaser has risk of loss because of equitable conversion.
ii. Minority (massachuesets) rule: seller has risk of loss because of implied condition that premises will be transferred as they existed on date of contract.
iii. Uniform Vender and purchaser Act (Texas rule) – seller has risk of loss unless purchaser has taken possession.
