C: Real Estate Contracts

LAND SALE CONTRACT

1. Requirements for Validity

2. Time for Performance

3. Remedies for Breach

1. (i) describes the property
   (ii) identifies the parties
   (iii) lists purchase price
   (iv) Statute of Frauds*

2. Even though a land sale contract may specify a closing date, IF a party makes a request, THEN the time for performance can be changed, UNLESS the contract contains a “time is of the essence” clause.

3. (i) damages, OR
   (ii) specific performance UNLESS property is sold to a BFP

EQUITABLE CONVERSION

1. Rule

2. Risk of Loss

1. Once a land sale contract is signed…
   (i) buyer has equitable title
   (ii) seller has legal title AND holds the property in trust for the buyer

2. In a majority of jxns, risk of loss transfers to the buyer once the contract is signed. In a minority of jxns, risk of loss transfers to the buyer when legal title or possession passes to the buyer.

WARRANTY OF MARKETABLE TITLE

1. Definition

2. Remedy for Breach

1. On the closing date, the seller has a duty to convey marketable title to the buyer. Marketable title is title that is…
   (i) reasonably free of defects
   (ii) delivered on the closing date

2. damages, measured by the reduced value of the land

MERGER DOCTRINE

On the closing date, the deed is executed and delivered. Once delivered, the buyer can only sue on the deed (bc the contract is considered to have “merged” with the deed).

DUTY TO DISCLOSE LATENT DEFECTS

IF a commercial builder or developer sells a new home, THEN that person has a duty to disclose defects…
(i) known to the seller
(ii) could not have been discovered by reasonable inspection

IMPLIED WARRANTY OF QUALITY

IF a builder or developer sells a new or remodeled home, THEN the home must be safe and fit for human habitation at the time of sale.