Land Finance Outline
v Contracts for the Sale of Land
Ø Statute of Frauds
§ Requirement of Writing – SoF requires that the contract “or some memo or note thereof” be in writing. Some cases dispense with the requirement of the party resisting enforcement of the contract admits its existence.
§ Multiple Pieces of Paper – The writing may be shown by more than one piece of paper, so long as all of the essential elements are present in the papers considered together.
§ Consequences of a Lack of Writing – If there is no sufficient writing, neither party can enforce the contract, either at law for damages or in equity for specific performance. However, the contract is not void (by the majority view) and it may be the basis for an action for rescission and restitution.
§ 3 Elements which the Writing Must Contain
· The names of the parties or some other ID of them
· An ID of the land AND
· Words indicating an intent to sell the land
§ Unnecessary Elements
· The price need not be mentioned if the parties did not yet agree on one (otherwise it must be included)
· The date of closing need not be included even if the parties agreed to a date. If no date was agreed to, then the Court will assume that a reasonable time after the contract signing was intended.
§ The Signature
· The writing must be signed by the “party to be charged” – the person who is resisting its enforcement in the lawsuit.
Ø Rescission and Modification
§ Oral Rescission
· The courts nearly always enforce oral rescissions, on the ground that the parties’ action has not created (but rather, has eliminated) a contract for the sale of land, and hence, does not fall within the statute.
§ Oral Modifications
· If a new contract, as orally modified, would fall within the SoF, courts conclude that the new contract cannot be enforced; the old contract (if supported by a writing) is still in effect.
§ Enforcing Oral Modifications by Estoppel
· If a party detrimentally relies upon an oral modification, the other party may be estopped from enforcing the original contract terms.
Ø Part Performance – judicially-created exception to the SoF, and permits Courts to enforce a contract in equity even though there is no sufficient writing to satisfy the Statute. It is only available in equity.
§ Acts of Part Performance – 3 Types (all by the purchaser) are generally recognized by the Courts: NOTE – most courts require two of the acts, and some require all three
· Payment of all or of a substantial part of the purchase price
· Taking possession of the property
· Making substantial improvements on the land
§ Rationales for Part Performance
· Evidentiary Rationale
¨ Part Performance is a substitute for the evidence which a writing would provide, and thus see the acts as justifying enforcement of the contract. Courts taking this approach usually say that the acts of part performance must be “unequivocally referable” to the contract – that is, they cannot be explained on any ground o
overy of actual damages unless the contract specifically provides otherwise. Such a clause normally will not bar specific performance unless the clause makes it very clear that retention of the deposit was regarded by the parties as the seller’s only remedy.
· Election of Remedies
¨ Seller is commonly required to elect to retain or return the deposit within a short time after the breach has occurred: If the deposit isn’t returned, seller is probably precluded from seeking other remedies.
§ Specific Performance – Either the vendor or the purchaser may generally obtain an order for specific performance compelling the other party to complete the contract.
· Rationale – Property Unique
¨ SP is generally justified on the ground that real property is unique, and that damages are thus inadequate.
· Circumstances Under Which Specific Performance is Unavailable
¨ Seller lacks title
¨ Contract itself excludes specific performance as a remedy
¨ Property was purchased simply for resale
· Fairness and Vagueness
¨ A higher standard of contract specificity is required when SP is sought.
¨ SP is not granted when to do so would be overreaching or harsh dealing.
· Damages in Addition to SP
