Sale of Land

STATUTE OF FRAUDS: When should you discuss the Statute of Frauds in a land sale contract, and what is the general rule?

• Whenever there is an agreement for the sale of land (or an interest in land), first discuss the Statute of Frauds.

• Rule:
  A contract for the sale of land must be in writing and signed by the party to be charged unless an exception applies.

STATUTE OF FRAUDS: What mnemonic helps determine whether a memorandum satisfies the Statute of Frauds? What does it stand for?

• DIPPS

STATUTE OF FRAUDS: What elements must a sufficient memorandum contain under the Statute of Frauds under DIPPS?

• D = Description of the land

• I = Identification of the parties

• P = Purchase price

• P = Payment terms

• S = Signature of the party to be charged

STATUTE OF FRAUDS: What common Statute of Frauds issues should you look for in land sale contracts/memorandums?

• Broker agreement is not sufficient memorandum - must be purchase agreement

• Option contract must be in writing

• Memorandum must prove the agreement

• Definite and certain terms

STATUTE OF FRAUDS: Does an agreement between a broker and seller satisfy the Statute of Frauds?

No

STATUTE OF FRAUDS: Must an option to purchase real property be in writing?

• Yes, to satisfy SOF

STATUTE OF FRAUDS: What happens if memorandum is insufficient?

• Plaintiff cannot obtain specific performance of the land sale contract

PARTIAL PERFORMANCE: When should you discuss the Doctrine of Partial Performance?

Whenever an oral land contract exists but one party has already begun performing. Partial performance may remove the agreement from the Statute of Frauds.

PARTIAL PERFORMANCE: What are the elements of the Doctrine of Partial Performance?

• PARTIAL PAYMENT

• POSSESSION

• VALUABLE IMPROVEMENTS

PARTIAL PERFORMANCE: What is the majority rule regarding partial performance?

Majority requires 2 of the 3 elements satisfied

PARTIAL PERFORMANCE: What is California's rule regarding partial performance?

California allows enforcement upon either:

• Possession, or

• Partial payment.

ESTOPPEL: When should you discuss estoppel to plead the statute of frauds?

Whenever one party relied on an oral land contract and would suffer an unjust hardship if the contract were not enforced.

ESTOPPEL: What are the elements of estoppel to avoid the Statute of Frauds?

The plaintiff must prove:

• Detrimental reliance

• Change of position

• Unreasonable result if the contract is not enforced

CONTRACT MODIFICATION: What is the rule regarding modifications to a land sale contract?

All modifications generally must also be in writing.

Always analyze formation problems:

• Offer

• Acceptance

• Consideration

TIME IS OF THE ESSENCE: When is time considered "of the essence" in a land sale contract?

Generally:

Time is not of the essence unless expressly stated.

Also consider whether the parties waived the requirement through their conduct.

MARKETABLE TITLE: What is marketable title?

• Every land sale contract contains an implied promise that the seller will deliver title reasonably free from defects

MARKETABLE TITLE: What are the two major exceptions to marketable title?

• Quitclaim deeds

• Adverse possession

MARKETABLE TITLE: Why does a quitclaim deed affect marketable title?

• The buyer accepts whatever interest the seller owns.

• The buyer assumes the risk of title defects.

MARKETABLE TITLE: Does title acquired by adverse possession automatically render title unmarketable?

• Generally NO

  • However, adverse possessor usually must quiet title via court before conveying good marketable title

MARKETABLE TITLE: What is “Law Day” in a land sale contract?

• Closing date when seller must tender marketable title

MARKETABLE TITLE: May a buyer rescind before Law Day merely because the seller currently lacks title?

• NO. Seller has until law day to cure defects

MARKETABLE TITLE: When may a buyer rescind before Law Day?

• If the seller’s conduct demonstrates prospective inability to deliver marketable title

MARKETABLE TITLE: What duty does the purchaser have regarding known title defects?

The purchaser should notify the seller so the seller has a reasonable opportunity to cure the defects before closing.

MARKETABLE TITLE: What defects render title unmarketable?

• Encumbrances

• Mortgages

• Assessments

• Dower

• Easements

• Covenants currently in breach

• Certain zoning violations

MARKETABLE TITLE: When can zoning defects make title unmarketable?

• Seller knows the intended use violates zoning, or

• Zoning changes before closing.

MARKETABLE TITLE: What is the doctrine of merger in land sale contracts?

• Once the buyer accepts the deed,

  the contract merges into the deed,

  and rights under the contract are generally extinguished.

MARKETABLE TITLE: When should you discuss the Doctrine of Equitable Conversion?

• Whenever property is damaged, destroyed, or one party dies after the contract is signed but before closing.

MARKETABLE TITLE: What is the Doctrine of Equitable Conversion?

• Once a specifically enforceable contract exists:

  • Buyer receives equitable title

  • Seller retains legal title as security for payment

MARKETABLE TITLE: Who bears risk of loss under equitable conversion?

• Majority: Buyer bears the risk after the contract is formed.

• Minority: Seller bears the risk.

• California (Uniform Vendor and Purchaser Act): Buyer bears the risk only after taking title or possession; otherwise, the seller bears it.

MARKETABLE TITLE: How does equitable conversion affect inheritance if seller or buyer dies before closing?

• If the seller dies, the right to receive the purchase money passes as personal property to the seller's estate.

• If the buyer dies, the equitable ownership of the land passes as real property to the buyer's heirs.