Property II Spring 2011
I. CONTRACT & BROKERS:
• 2 key dates-
1. date the parties enter into a sales contract
2. closing date
• the sales contract:
– identifies the parties,
– sets the sale price or at least a method to determine the sales price,
– describes the property to be conveyed,
– sets the closing date,
– delineates the manner of payment including cash and seller-financing,
– records the deposit or earnest money paid at the time the parties sign the sales contract, and
– explains what happens to the deposit at closing or if the buyer defaults or repudiates the contract
– If property is mortgaged, the contract should provide either that the purchaser will assume the debt or take the property subject to the debt, or that the seller will pay off the debt at or before closing
• often hired by sellers of property to attract prospective buyers and facilitate real estate transactions
• owe fiduciary duties to the seller, although broker is a seller’s agent.
• Types of listings/agreements:
a. Open or nonexclusive- seller uses more than one broker or agent
b. Exclusive agency- broker is the only broker representing the seller. The seller is free to find her own purchaser; and if the seller finds a purchaser without broker, seller owes no fee to the broker.
c. Exclusive right to sell- broker receives a fee no matter who locates a purchaser
• traditionally broker earns the commission once he introduces a ready, willing, and able purchaser and both seller and purchaser execute the contract
✸ Licari v. Blackwelder: The plaintiffs hire a real estate broker who in turn makes misrepresentations and withhold information from the plaintiffs regarding the true market value of the home. The broker enters into a sub-broker agreement with the defendants and they buy the plaintiffs home at a price of $115,000, only to sell the property six days later at a profit of $45,000.
• Rule: A real estate broker has a fiduciary duty to act in the best interest of their client, and cannot withhold information of negotiations from other prospective buyers. Real estate brokers must act within the code of conduct required by the laws of Connecticut in the General Statues.
II. S of F; MARKETABLE TITLE; DUTY TO DISCLOSE:
• Statute of Fraud:
• sought to make people more secure in their property and their contracts by making deceitful claims unenforceable
• to satisfy statute a memorandum of sale must at minimum, be signed y the party to be bound, describe the real estate, and state the price.
• when a price has been agreed upon, most courts regard it as an essential term that must be set forth.
• If no price has been agreed upon a court may imply a reasonable agreement to pay
• courts have crafted exceptions to the writing requirement to the SOF, based on equitable principles
• moving party:
1. must prove an oral contract exist
2. must persuade a court to excuse the party’s failure to produce a writing containing the essential elements of the contract
A. Part Performance: allows the specific enforcement of oral agreements when particular acts have been performed by one of the parties to the agreement.
• some courts limit the part performance theory tot he following:
1. pays the contract price
2. takes possession of the property: entails more than delivery and acceptance of title, buyer must physically move onto the proprty and perhaps even incur substantial moving expenses from another location
3. Improves the property: entail more than clearing, digging wells, fencing, cultivating, or planting trees
B. Estoppel: applies when unconscionable injury would result from denying enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the contract.
• also applies when unjust enrichment would result if a party who has received the benefits of the others performance were allowed to rely upon the statute.
• usually invoked in cases involving persons, often family members, who also lives there, on the oral promise that the owner at her death will devise the property to the moving party.
• Requirements for Estoppel:
1. a certain and definite oral contract
2. acts that refer to, result from, or are made in pursuance of the agreement; and
3. a refusal to fully execute the oral contract would operates as a fraud on, and place the moving party in, a situation not remediable by damages.
✸ Hickey v. Green: Green listed her lot S and Hickey offered to buy it, Green accepted, and the two entered an oral agreement, with consideration to be a $500 check. Hickeys told Greens they wanted to buy their property to build on it. Check given to Mrs. Green, but the payee line was blank b/c of uncertainty as to whom to fill the check out. Hickeys advertised their home for sale, and entered into an agreement with another party, receiving a $500 check as well. Later that month, Green tells Hickey she's selling to someone else; a higher price was offered and denied.
• Rule: Rule of estoppel as an exception to SOF: A K for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the SOF if it is established that the party seeking enforcement, in reasonable reliance on the K, and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific performance. (restatement second)
• Marketable Title: a title free from reasonable doubt as to the promised title’s validity
• allows for some possibility the purchaser’s title will be successfully challenged, but the title is solid enough that a reasonable person knowing all the facts would accept and pay for the title.
• every land sales contract contains an implied condition that the seller will convey “marketable title” to the purchaser
• title is unmarketable, if there is a reasonable probability the seller does not own the full titled alleged, the property
(2) interests you missed because down payment was held by seller and not in bank
(3) reasonable expenses incurred doing title research
III. CONTRACT WARRANTY & REMEDIES:
• Implied Warranty of Quality: permits a purchaser to recover from the contractor, developer, or other commercial vendor for defective construction or construction not done in a workmanlike quality.
• exception to the doctrine of caveat emptor
• Elements for Claim on Implied Warranty of Quality
1. latent defects
2. after house was bought
3. cannot be found through prudent discovery
4. within a reasonable time after sale
• Two different types of Claims (Every Implied Provision is under K)
1. building code=statutory
2. contract based on building code=contract provision
✸ Lempke v. Dagenais: The Plaintiffs, Mr. and Mrs. Lemke (Plaintiffs), brought suit to recover damages from a builder who constructed a garage on a house they built. The garage was found to have several substantial defects after the Plaintiffs had purchased the property.
• Reasoning: The court then outlined numerous practical and policy reasons for its holding that there did not need to be privity. They were:
1) latent defects will not manifest themselves for a considerable period of time after the house has been sold to a subsequent unsuspecting buyer.
2) Society is changing and an ordinary buyer is not in a position to discover hidden defects
3) Subsequent purchaser has little opportunity to inspect and little experience and knowledge about construction
4) The builder is obliged to construct the home in a workmanlike manner and the extension to a subsequent purchaser will not take him by surprise.
5) Inserting a first purchaser as to bar recovery might encourage “sham first sales so as to insulate builders from liability.”
• Rule: The court outlined limitations as to privity:
1) no privity necessary only when there are latent defects which manifest themselves after purchase and were not discoverable by inspection before purchase and
2) They are discovered in a reasonable period of time and
3) The customary standard for workmen (that they use customary skill and care) is met
4) The burden of proof is on the P to show that the defects were caused by the D
5) The D (builder) has defenses such as wear & tear or that previous owners made substantial changes.
• Privity of K is founded when
1. 3rd party beneficiary
2. contract made between two parties otherwise there is no P of K