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70 Cards in this Set

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What are the essential terms for a real estate contract?
a. Identify the parties
b. Include words showing an intent to buy or sell
c. Specify the purchase price; and all agreed terms
d. Adequately describe the land (this isn’t as much as what is needed for a deed, often just the street address is sufficient).
e. Signed party the party to be charged.
i. A formal signing isn’t necessary (a nickname would suffice)
Can an oral agreement be enforced as a real estate k?
i. Even an oral agreement will be enforced if its essential terms are set forth in an adequate memorandum or other writing
Is the court allowed to imply certain terms in a real estate K?
ii. Though key terms are required, the court can imply certain terms.
1. Reasonable time for performance
2. consideration will be paid in cash
Can the writing consist of several documents?
The writing may consist of more than one document (they just have to relate)
Must the writing be formal?
No. The writing can be quite informal
Why is the SOF needed?
i. Ensures clear evidence about the existence and key terms of K.
ii. Avoid perjury and faulty memory.
iii. Helps to distinguish between negotiations (oral) and an enforceable K (written)
What are the steps to avoiding the SOF?
i. (Most Importantly) Must prove there was an oral K.
ii. Show part performance pursuant to the K (see below), OR
iii. Show Detrimental Reliance (below)
Under the Doctrine of Part Performance what are the 5 views of acts that under an oral K will be sufficient to take the K out of the SOF?
1. Possession alone is sufficient
2. Possession + payment
3. Possession + making of valuable and lasting improvements
4. Possession + change of position by purchaser that irreparable injury will result unless the oral K is enforced.
5. No acts will be recognized to take an oral K out of SOF
What is the reference theory under the Doctrine of Part Performance?
acts of taking possession and of making part payment, when they are performed under or in reliance upon the oral contract as to be unequivocally referable to the vendor-vendee relationship and not referable to any other relation between the parties, are sufficient to remove the contract from the statute of frauds
What is the fraud theory under the Doctrine of Part Performance?
the plaintiff must show that his acts of part performance in reliance upon the contract so altered his position that he would incur an unjust and irreparable injury in the event the defendant were permitted to rely on the statute of frauds
What is the Restatement Principle under the Doctrine of Part Performance
to the effect that the taking of possession, coupled with the making of part payment, in reliance upon and with unequivocal reference to the vendor-vendee relationship, without proof of irreparable injury through fraud, is sufficient to avoid the statute
What is the Doctrine of Unequivocal Referability?
Part performance must itself supply the key to what is promised.
When is equitable estoppel available?
1. The party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that
2. Injustice can be avoided only by specific enforcement
How does equitable estoppel differ from part performance?
1. Traditional hallmark requirements of PP (possession, payment, improvement) are not required.
2. You need an admitted or clearly proven K.
3. Eg: selling your own property in reliance of having it
Is it possible to have a binding real estate k when the parties are still negotiating and haven't executed a formal, written document?
No. Where the intent of the parties is clear that they are negotiating with an understanding that the terms of the contract are not fully agreed upon and a written formal agreement is contemplated a binding contract does not come into existence in the absence of execution of the formal document. (And the opposite is also true)
How does a court determine whether parties have become bound to an informal agreement prior to drafting and executing a writing?
ii. Whether parties to an informal agreement become bound prior to the drafting and execution of a contemplated formal writing is largely a question of intent on their part. The intent of the parties is to be determined by the surrounding facts and circumstances of each case
Can a rescission be done via parole in a real estate k?
Yes. The statute of frauds concerns the making of contracts only, and does not apply to the matter of their revocation. Therefore, a rescission may be done via parole
What is the general rule as far as time being of the essence in a real estate k?
i. General rule, time is not of the essence.
1. It may be made of the essence either by express provision, or circumstances [such as if a party insists on strict performance] of the transaction.
2. Time is of the essence can be added when there is enough notice.
ii. If time is of the essence, equity will not save a default party
What sort of defense may be raised when a time of essence provision is used against him/her?
Time of essence terms can be waived
Why would one have financing arrangements in a real estate k?
The buyer is rarely willing or able to pay the entire purchase price in cash. Accordingly, he will try to ensure that the K protects his ability to obtain adequate financing
Why is it important to not have vague/indefinite language in a financing agreement that's part of a real estate k?
1. A land sale contract or an offer to purchase containing a subject-to-financing clause, but which does not indicate a standard by which the proper amount of financing can be judged is void for indefiniteness
What is the buyer's obligation under a real estate k in obtaining financing arrangements?
1. Courts generally hold that a buyer must make a reasonable effort to satisfy the financial condition.
2. Breach: if the buyer fails to make the required effort, it is treated as a breach.
3. Since financing clauses are for the benefit of buyers, they should be able to waive their rights thereunder
Define merchantable title
• A title is unmarketable if a reasonably careful and prudent person, familiar with the facts, would refuse to accept the title in the ordinary course of business because of a doubt or uncertainty that could reasonably form the basis of litigation.
• It does not equate with market value or saleability
Is merchantable/marketable title usually something that the parties agree on?
When a vendor agrees to sell a piece of land the law imputes to him a covenant that he will convey a marketable title unless the vendee stipulates to accept something less
By when must the vendor have a title that is marketable in a real estate tx?
Title need only be merchantable on the day performance is due.
How can one fix an unmerchantable title?
The suit to quiet title is the classic remedy. It is designed to bring all possible claimants within the jurisdiction of the court of equity so that their claims may be eliminated as clouds on the title, if they are found to be without merit
What is the general rule of tender between seller and buyer?
i. Generally, the seller’s obligation to deliver the deed and the buyer’s obligation to pay are concurrent conditions
When does tender occur for the seller?
ii. For Seller, tender occurs when:
1. Able to deliver title as required by the K.
a. The tender must be such as to manifest a willingness to perform in compliance with the agreement and must be reasonably necessary to apprise the other
2. Clearly offers to deliver such title
When does tender occur for the buyer?
iii. For Buyer:
1. After seller tenders
2. B pays purchase price (this is an implied unconditional offer to pay a sum not less than what is due)
When there has been a breach of performance on part of seller (b/c of faulty title), when is the vendee barred from recovering his deposit?
A vendee is barred from recovering his deposit from a vendor whose title defects were curable in a reasonable time and whose performance was never demanded
Can a real estate k be assigned?
Yes. Assignment of real estate K involves same principles as assignment of a lease
What is the effect of a provision against assignment in a real estate k?
ii. A provision against assignment in a land sale contract is designed merely to secure performance, and when the vendor has received the purchase price, he has received all that the provision against assignment was intended to secure and a forfeiture will, therefore, not be allowed
What remedies are available for breach of real estate k?
Specific Performance
Loss of Bargain
What are the majority and minority rules on specific performance of real estate Ks?
1. Majority: land is unique and as money damages are not adequate, SP is granted. This standard is always met with the buyer, and usually met with the sellers.
2. Minority: If not unique, SP will not be enforced (condo’s)
What are the English and American Rules for Loss of Bargain damages?
1. English Rule: Buyer can only recover any payment made to the seller, plus incidental damages. This assumes the breach was caused by good faith inability to convey marketable title.
2. American Rule: Buyer recovers full loss of bargain damages regardless of seller’s good faith. He gets benefit-of-the-bargain damages, i.e., market value of the property at the time of the breach, less the contract price to the vendee
Define mortgage.
A conveyance of land given as security for the payment of a debt.
What are the elements of a mortgage?
i. Like a deed, it is a conveyance of land
ii. The object is to provide security for the payment of a debt.
1. Promissory note: evidence of the debt
What are regular mortgages?
Encountered in most states, it is in form a deed or conveyance of land by the borrower to the lender followed or proceeded by a description of the debt and including a provision to the effect that such mortgage shall be void on full payment of such debt. Here there are only 2 parties, the borrower and the lender
What is a deed of trust mortgage?
the borrower conveys the land, not to the lender, but to a third party, in trust for the benefit of the holder of the note or notes that represent the mortgage debt
What are equitable mortgages?
any instrument in writing by which the parties show their intention that real estate be held as security for the payment of a debt will constitute an equitable mortgage, which can be foreclosed in a court of equity
What are deeds absolute given as security?
when a landowner borrows money he gives as security an absolute deed to the land. It looks like a sale and conveyance of land, but the court treats such a deed as a mortgage
Explain the title theory view of mortgages.
1. A mortgage gives the mortgagee some sort of legal title to the land.
2. There is a theoretical right to take possession of the land, and thus obtain rents and profits – without foreclosure
Explain the lien theory view of mortgages.
1. The mortgagee has merely a lien to secure his debt.
2. Thus, the mortgagee is entitled to foreclose on the property if a default occurs, but is not entitled to possession before foreclosure
Explain the intermediate theory view of mortgages.
1. the mortgagee is entitled to possession of the property only upon the mortgagor’s default but before foreclosure is complete
In a foreclosure proceeding, what is an equitable right of redemption (aka Equity of Redemption)?
the right of the mortgagor to pay his debt even after default and in this manner to recover his property
In a foreclosure proceeding, what was a waiver of the right of redemption?
to remove the right of redemption, the mortgagee would insert in their mortgages clauses reciting the mortgagor waived his right of redemption. Courts later considered these clauses void
Is a mortgagor given any time to repay his debt in a foreclosure proceeding?
Yes. Immediately upon default the mortgagee would file a petition in court, and the judge would enter an order called a decree, allowing the mortgagor additional time to pay the debt. If he failed again, his equitable right of redemption is barred and foreclosed
Explain the foreclosure process
i. Miss payment:
1. Waive:
2. No notice:
Strict Foreclosure or
Judicial Foreclosure or
Foreclosure by power of sale
How does strict foreclosure occur?
only occurs in two states. It is a result of the mortgagor failing to pay after a court decree
Explain judicial foreclosure.
iii. Judicial Foreclosure: available in all J’s, and is the dominant method in ½ the states.
1. The mortgagee will begin this by filing a complaint against mortgagor and anyone else with an interest in the property.
2. The complaint alleges that a default has occurred.
3. Request is made that the mortgage be foreclosed
4. After service, mortgagor has time to answer
a. No answer, get default and it is foreclosed
b. Answer, hearing are held to determine if fair.
5. Successful mortgagee receives judgment that states amount due, direct property to be sold at public auction.
6. Notice of pending sale is given to public
7. The mortgagor is entitled to pay off the entire debt and thus redeem the property until late in this process.
8. Land is sold
9. Judicial conformation of sale
Explain foreclosure by the power of sale.
This is a purely private procedure. This power is given by right of the K. States that permit this usually have statutory safeguards (since there can be abuse). *see below. The process varies for this, and is usually governed by State law
How do mortgage protection laws operate?
i. Statutory Redemption:
1. The mortgager may regain title by paying a set amount (typically the foreclosure sale price plus other expenses) to the successful bidder within a specific period.
2. During the redemption period, the mortgagor remains in possession of the property
Define land contract
An agreement where the vendor has not conveyed title but the vendee, ordinarily, has been given possession
In land contracts, where is there a need for notice?
Need for notice: Vendors must give fair notice of a possible forfeiture
How may a vendor waive his right to foreclosure under a land k?
By accepting late payments, the vendor has waived his right to declare forfeitur
How may a purchaser redeem his land in a foreclosure?
By paying the full price
How does a purchaser gain his right to reinstate in a foreclsore?
by paying the past due installments
What is the rule regarding a subject to financing clause in land sale K's or an offer to purchase?
A land sale contract or an offer to purchase containing a subject-to-financing clause, but which does not indicate a standard by which the proper amount of financing can be judged, is void for indefiniteness
What is equitable conversion?
Generally: the buyer is deemed the equitable owner of the land until close of escrow unless the K specifies otherwise. “Equity regards as done that which ought to be done.”
How do you determine whether equitable conversion has occurred, and what does it to to a land K?
1. Was there a K? If Yes, there is EC. If no, there isn’t EC.
2. Can good title be given?
a.Equitable conversion does not occur until a vendor can convey good title and is entitled to specific performance;
ii. Time: EC occurs at the moment the K is singed. It doesn’t end until the give of legal title.
iii. Installment Land K: EC still exists until the giving of legal title
iv. Option K: Equitable conversion cannot occur prior to the exercise of an option, for until then no duty rested on anyone in connection with the land. Remember, and option K isn’t a K in respect to the land itself.
v. Foreclosure: it will end EC.
vi. Security for Loan: A purchaser can mortgage his equitable title as security for a loan
What happens to the roles of buyer and seller when equitable conversion has occurred?
Roles switch: As soon as a valid contract is made for the sale of an estate, equity considers
i. the buyer as the owner of the land, and
ii. the seller as a trustee for him; and,
iii. it considers the seller as the owner of the money, and
iv. The buyer as a trustee for him
What are some of the limitations placed on equitable conversion?
i. To cases where the enforcement of the contract is in accord with the intention of the parties, free from fraud, misrepresentation and the like, and where it will not produce inequitable results.
ii. Limited where hardship and injustice are forced upon one of the parties through a change in circumstances not contemplated by them when the contract was made.
iii. It does not exist as a matter of right and is not applicable to all circumstances. It is a fiction invented by courts of equity to be applied only when necessity and justice require its exercise. When it arises from a contract, as distinguished from a will, the general rule is that the legal fiction is based upon the presumed intent of the parties.
iv. Note: EC does not give the right of possession
What happens when a vendor is selling land under an executory K and dies?
When a vendor sells land under an executory contract, his property, as viewed by equity, is no longer real estate in the land, but personal estate in the price. If he dies before payment, it goes to his administrators, and not to his heirs
What is the majority view on who the risk of loss will fall on in a land sale K?
After a contract for the sale of realty and acceptance of title, the risk of loss is upon the vendee. The rule, however, is not applicable unless there is an ability, as well as a willingness, on the part of the vendor to convey, the purchaser not being considered as the owner from the date of the contract unless the vendor is prepared to convey a clear title and is not in default
What is the minority view (AKA MA Rule) on who the risk of loss will fall on in a land sale K?
There is a failure of consideration which turns the vendee loose and leaves the vendor with his ruins
What happens if during the gap period a loss occurs as the result of the vendor's negligence?
Vendor is liable for cost of repair
Who gets the risk of loss if the vendor isn't entitled to specific performance?
Equitable conversion does not occur until a vendor can convey good title and is entitled to specific performance; therefore, the risk of loss remains with the vendor
What happens to the risk of loss when the land K requires the vendee to purchase insurance?
When a contract to purchase land requires the vendee to keep the property insured against fire, insurance recovered by the vendor for a fire that occurred before performance of the contract was completed is to be applied to any remaining balance of the purchase price
What is the general rule regarding whether a real estate broker has a right to commission?
The general rule regarding whether a broker is entitled to a commission from one attempting to sell real estate is that, absent special circumstances, the broker is entitled to a commission if he produces a customer ready, able, and willing to buy upon the terms and for the price given the broker by the owner
What is another rule regarding whether a real estate broker has a right to commission?
When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract. If the contract is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his there is no right to commission against the seller. On the other hand, if the failure of completion of the contract results from the wrongful act or interference of the seller, the broker's claim is valid and must be paid