Case Problems: Contract Provisions
Task:
- The following is a list of contract provisions. Do these provisions favor the seller or the purchaser?
Seller is to convey insurable title to the real property at closing.
In my opinion, this contract provision favors the seller and not the purchaser. Based on my readings on what insurable title means, any additional cost that comes with a home is paid for by the purchaser but not by the seller. For example, the buyer is responsible for extra costs such as upside taxes and any liens.
Seller is to convey title to the real property subject to utility easements and other restrictions of record.
In my opinion, this contractual provision is more favorable to the purchaser; this is because a buyer has broader ideas over his or her expectations when making a real property purchase. If the buyer is forewarned over any utility easements, then it is the buyer’s responsibility to make arrangements with the seller/ owner of the property housing these easements. At the point of conveying the title, the seller has nothing to do with these utility easements. Also, the buyer is required to inform the seller that there are easements attached to the real property; thus the buyer cannot negotiate anything.
Seller shall not alter or encumber the title to the real property after the date of the contract without the prior written consent of purchaser.
The buyer is more favored with this contractual provision. This contractual provision that the seller does not encumber the real property’s title after the contractual date without a written consent by the purchaser; agreed prior to the contract is in favor of the purchaser. In my opinion, if it were possible for sellers to edit contracts without buyers consent, then the seller would always edit contracts to ensure they suit his or her needs. However, this is against the law of contract.
The real estate contract is freely assignable.
This contractual provision does not address whether either party (seller or the buyer) has the legal right to assign its rights to and in the contract. Under the general rules governing real estate assignments, if a contractual provision does not prohibit assignment, then it is freely assignable.
The contract is silent as to risk of loss between date of contract and date of closing.
The default rule requires that the seller bears/ incurs the risk of loss until possession or title gets transferred to the purchaser. But, in case the purchaser acquires its possession early, then the purchaser could find him/ herself with an uninsured loss.