Doctrine of Equitable Conversion – once a contract is signed, equity regards the buyer as the owner of the property. The seller’s interest is looked at as personal property. The legal title of the property remains with the seller and is considered to in trust and the risk is on the seller. The right of possession follows the legal title; the seller is entitled to possession until closing. Risk of Loss – there is a split of authority on risk of loss when a contract is signed, equity is passed to buyer through escrow and the risk of loss is on buyer. If property is destroyed before closing, the majority rule places the risk on the buyer. If the property is damaged or destroyed, the seller is to credit any monies from the insurance against the purchase price the buyer is required to pay.
Because Birdwell did not rescind the contract he will be required to pay the $90,000 because he did not consult an attorney and because the real estate agent put a new price on the property of $50,000. However, since the contract was silent at risk, the Uniform Vender and Purchaser Risk Act, Birdwell could request this option. However, neither party had insurance on the property.
Here, no one had insurance on the property. If property is destroyed and the seller has insurance, the seller will be required to reduce the sale price by the amount of damage. Because there was no insurance on the property, and the agreement was silent, the risk of loss would be on the buyer and Birdwell’s option would have to be under contract law or marketable title.
Statute of Frauds (SOF)– The terms of a land contract must be in writing and signed by the parties, including full names of the parties, words showing intent, a meeting of the minds for the transaction to buy or sell property, the price, and sufficient description of the property.
Astor and Birdwell entered into a contract for the sale of Roseacre, which was for $100,000 with a down payment of $10,000 and $90,000 at closing set for August 1. Under the SOF, Roseacre must have a description of the land that is sufficient for identification. Here, there was no description that sufficiently described the land for sale and this would violate the SOF. Because there is no description another option would be to allow extrinsic evidence of property to allow for the description of the land to be added to the contract regarding Roseacre.
Here, Birdwell is to be the equitable owner of the land beginning with and during the period between forming the contract and closing.
Question #2 –Assuming a Uniform Vendor and Purchaser Risk Act jurisdiction what were Birdwell’s options on August 2 when he finally gets around to consulting an attorney?
Breach of covenant of marketable title and breach of covenants of title is determined by which jurisdiction it follows on equitable conversion or the Uniform Vendor and Purchaser Risk. Under the equitable conversion, equity title and risk of loss passes to buyer as soon as the contract is signed. Seller could force buyer to pay and take titled to the damaged property. Under the Uniform Act, seller retains the risk of loss until title or possession passes. Buyer can rescind and sue for restitution of the deposit. On August 2, Birdwell cannot rescind the contract because he can only sue for breach of warranty of marketable title.
Because closing is done and completed under the Uniform Vendor and Purchaser Risk jurisdiction, Birdwell’s attorney would advise that he has taken legal title or possession of the property and would not be cleared from his contractual duty.
Here, because, Birdwell has the deed and because of an accident and the property was completely destroyed and a new value placed on the property, this would be a loss and Birdwell would have to sue under covenant of title.
Question #3 – When Birdwell discovers the gas bill...