• Buyer’s duty to pay purchase
price and Seller’s duty to
deliver deed are concurrent
conditions
• One party ordinarily can’t sue
to enforce a contract to
purchase/sell land unless that
party tenders performance
first
Closing and
“Tender”
Cure of Title Defect and Tender
• Unless K provides otherwise, Myers can’t place Litton in breach
before October 1 (the closing date), when Myers would have to
tender the price
– Until then, Litton can cure the encroachment problem, unless K
requires him to cure prior to October 1
– Thus, if Litton can cure title defect and then tender deed on October 1,
Litton would be in a position to enforce K or seek damages if Myers
does not pay remaining price
• Litton agrees to sell land to Myers
for $300K cash, closing October 1
• August 1: Myers discovers that a
neighbor’s fence is encroaching on
the land, and neighbor refuses to
move it (a defect that renders
Litton’s title unmarketable)
• That same day, Myers tells Litton: “I
don’t intend to perform; return my
deposit.” Must Litton do so?
Title Example
When Tender Is Excused: Review
• Exception: obligation to make tender is excused if
– The counterparty has committed an anticipatory repudiation of
the contract, or
– Tender would be futile under the circumstances
• Can Litton argue that Myers’s statement “I don’t intend to
perform” is anticipatory repudiation that excuses Litton’s
obligation to cure the defect and tender performance?
• It is doubtful, in this context, that Myers’s statement would
be viewed as an anticipatory repudiation of the contract?
– If Myers said, “I won’t perform the contract, even if you get the
neighbor to acknowledge the fence is encroaching and move it
prior to closing?” [If so, that’s a repudiation]
– If Myers is saying “Unless you can get the neighbor to move the
fence (i.e., to cure the defect), I won’t perform.” [This is not a
repudiation, but merely a statement articulating his legal rights
in this context.]
– In context, Myers’s actual statement is likely too equivocal to
constitute a repudiation
Closing and Time for Closing
• If contract specifies a specific closing date (e.g., August 1)
and states that “Time is of the essence of this agreement,”
then each party must tender performance by August 1
– If so, Buyer cannot extend time for performance without
Seller’s consent (and vice-versa)
– If contract does not make time “essential,” either party can
extend the closing for a “reasonable” period
Cooperative Structure
Miller v. Almquist (p. 65)
• Almquist (p. 73) dispute involves a co-op apartment
• In a housing co-op, the building is owned by a co-op association
in fee simple absolute
• Almquists contract to buy Apt. 4T from the Millers for $545,000 (with
10% deposit)
– Residents don’t get fee ownership (as in a condo)
– Instead, residents get:
• Ownership of a proportionate share of the co-op association, and
• A lease for their unit (association is landlord; “rent” = resident’s
proportionate cost of the association’s owning and maintaining
building and the association)
– Closing was to be April 1, but K did not say “time of the essence”
– Almquists had problems with loan approval; asked to move closing to
Apr. 16; Millers agreed, but only if “time is of the essence”
• Further delays then prevented Almquists from closing until April 23
– Almquists offered to pay $300/day for delay
– Millers refused to close late (and kept the deposit), claiming that the
Almquists did not make timely performance
Miller v. Almquist
• Miller court notes that one party to the contract
can make time of the essence, even if it wasn’t
originally so, just by giving unilateral notice to
the other party, as long as the new “essential”
date is not unreasonable [p. 76]
• Is that statement correct/appropriate? Does it
give one party (like the Millers) the right to
modify the contract unilaterally?
Miller v. Almquist
• Note: Almquists had asked to extend closing date to
April 16, but subject to availability of co-op’s transfer
agent (who has to facilitate transfer of co-op share)
– In fact, the co-op transfer agent was never available to close
until April 23
– Thus, court would have treated any extended closing date
before April 23 to be per se unreasonable
Miller v. Almquist
• Millers didn’t unilaterally modify the contract
– Under original K, Almquists had a “reasonable” time
in which to close (“gap-filler,” as K did not make
time essential)
– If the Millers’ new “essential” date is a reasonable
one, then it is within the parties’ original agreement
and not a modification of it
• Why wasn’t 15-day extension “reasonable,”
given that the Buyers agreed to it?
Almquist
• Note 1, page 78: Casebook says that
the Almquists “could have obtained
specific performance [of the contract] if
they had wanted it.”
– How can this statement be correct, given
that the court also states that the Millers
sold the land to a 3rd party (page 77)? Why
wouldn’t the 3rd party buyer be a BFP?
The Lis Pendens Doctrine
• Someone who buys land during the pendency of litigation
involving title to that land is deemed to have notice of the
litigation, and takes title subject to the end result of that
litigation
– Thus, unless the sale to 3rd party had already taken place
when the Almquists filed their suit on April 27, 3rd party buyer
took subject to result in Miller v. Almquist, under lis pendens
Equitable Conversion
• Once there’s a binding K for the sale of land, the buyer has
“equitable” ownership rights (even if buyer does not have “legal
title” yet)
– Rationale: the buyer has an interest in the land that a court of
equity could protect, in appropriate cases, by an award of specific
performance
– Thus, in appropriate cases, “equity regards as [already] done what
ought to be done”
Death of a Party
• Seller and Buyer sign K for sale of land, to close on May 1
• Seller dies on April 1
– K is silent about the death of either party
– Seller’s will (drafted 2 years ago) leaves all of Seller’s land to A and
all of Seller’s personal property to B
• Questions: (1) Did Seller’s death terminate K? (2) If not, and
Buyer performs, who gets the purchase price? A or B?
Death of the Seller
• Unless contract explicitly provides that the death of the Seller
terminates the contract, the contract remains in effect after
Seller’s death
– Legal title passes into the Seller’s estate, but subject to Buyer’s
rights under the contract (including the right to obtain specific
performance of the contract from Seller’s estate)
– Equitable conversion thus functions as “gap-filling” rule under
circumstances where the contract was silent regarding the
consequences of the Seller’s death prior to closing
Equitable Conversion as Default Rule
• Equitable conversion would also apply as default rule in
dispute over Seller’s estate
– Once Seller entered into binding contract, Seller’s “legal” title to
the home was “equitably converted” into equitable ownership of
the purchase money (which is personal property)
– Thus, under Seller’s will, the purchase price paid by Buyer goes
to B (devisee of Seller’s personal property), not to A (the devisee
of Seller’s real property)
• Held: Kahn did not have a judgment lien against the
home, and could not force its sale
– Under equitable conversion, at time of Kahn obtained judgment,
land had been “equitably converted”
– Equitable ownership of land was thus in Grant, not Ganz
– Even though contract was subject to financing contingency,
Grant could/did waive it, and thus was in a position to obtain
specific performance
• Questions: (1) Is this the right result? (2) How should the
Kahns have acted differently?
Grant v. Kahn
• May 29: Grant contracts to buy home from Ganz for
$320,000
– Contract contains financing contingency
• July 20: Kahn gets $172K judgment vs. Ganz
• July 31: Grant completes purchase of home
• Later, Kahn tries to enforce judgment lien vs. home by sale,
claiming Grant took the home subject to Kahn’s judgment lien
Grant v. Kahn
• On the one hand, Grant didn’t need application of
equitable conversion to protect him
– He could have refused to close due to judgment, unless Ganz
paid it off and obtained release of lien (lien would have
rendered title unmarketable)
• Other states do not apply equitable conversion in this
situation (e.g., Schleuter Co. v. Sevigny (S.D. 1997)), and
allow judgment creditor to assert lien
Grant v. Kahn
• On the other hand, application of equitable conversion
does not mean Kahns have no rights
– Ganz’s interest in the land was “equitably converted” into an
equitable interest in the right to receive the purchase price
(personal property)
– Kahns could have enforced their judgment against this right to
payment by garnishment action against the buyer, Grant
Installment Land Contract Compared
• Suppose Crouch is purchasing a home from Litton under
an installment contract
– Contract was executed 5 years ago; Crouch has been in
possession and making monthly payments for 5 years
– After 5 years, Mitchell obtains a $100K judgment vs. Litton,
and asks the court to order an execution sale of the home
• In this situation, is the case for applying equitable
conversion more or less compelling?
Installment Land K and Earnest Money K
Compared
• Under ILK, Buyer goes into
possession of the land at time K
is executed, and begins paying
installments
• Buyer does not receive deed
(legal title), until all payments are
made
• Earnest money K: Buyer doesn’t
take possession at execution of K
• Closing: Buyer takes
possession/legal title
– Buyer grants mortgage (if it
obtained financing)
• In this situation, court should apply equitable conversion to
protect Crouch (i.e., to hold that Mitchell’s judgment against
Litton did not attach to the land, which is “owned” by Crouch
• Litton is just financing Crouch’s purchase of the land (ILK is a
“mortgage substitute” or financing device)
– If Litton had deeded the land to Crouch at time of K, and had taken
back a mortgage to secure payment of the price, then Crouch
would’ve had legal title, and Mitchell’s judgment against Litton
wouldn’t have attached to the home
– In substance (if not in legal form), Crouch has the real risks/benefits of
ownership, and thus should be treated as the owner of the land
• Risk of loss due to casualty is
a risk of ownership of land
(one which owner typically
insures against)
• When a casualty (like a fire
that destroys improvements
on the land) occurs during the
gap period, does that risk of
loss fall upon the Seller, or
the Buyer?
Risk of Loss
• Equitable conversion is dubious as a useful default rule in
risk of loss situations
– 1) Typical buyer expects no material change in condition of property
prior to closing
– 2) Seller is “cheaper cost avoider”
• Seller is in possession, can more easily insure or take
precautions vs. fire
• Parties would typically expect risk to be borne by the party best
suited to bear it
• Contrast “Massachusetts rule”: risk remains on seller until
closing or buyer takes possession
Equitable Conversion and Casualty
• If contract explicitly allocates this risk as between Seller and
Buyer, that contractual allocation is binding
– E.g., If Seller has the risk of loss, and the property is damaged
during gap period, Seller cannot obtain specific performance of K
• If contract is not explicit, how should court fill the gap?
• If court applies equitable conversion:
– Buyer is “equitable owner” at time of K
– Thus, buyer would bear risk of uninsured loss!
Risk of Loss (Installment Land Contract)
• Where Buyer is purchasing under an installment land
contract, applying equitable conversion as a default rule
to allocate risk of loss makes sense
– Once Buyer goes into possession, Buyer is the superior risk
avoider, and logically should bear loss
– Parties are free to contractually allocate that risk in some other
way if they wish to do so
UVPRA [p. 110]
• Until closing or buyer taking possession, seller bears risk of
loss due to casualty or condemnation (unless contract
provides otherwise)
• If all or a material part of the subject matter of contract is
destroyed without the fault of buyer, buyer may cancel and
recover deposit
– After closing/delivery of possession, risk shifts to buyer (unless
contract provides otherwise)