- In most jurisdictions, who is correct?
Answer: Seller, because marketable title is judged at closing, and a mortgage discharged from the closing proceeds does not render title unmarketable.
When you see a question about marketable title, remember that the obligation to convey marketable title is judged at closing, not at contract signing. A seller can cure defects before closing. Here, the seller tendered a deed and a payoff letter showing the mortgage would be discharged immediately from closing funds. Since marketable title is assessed at closing, and the mortgage is being paid off, the title will be marketable, so the choice stating "Seller, because marketable title is judged at closing, and a mortgage discharged from the closing proceeds does not render title unmarketable" is correct.
The choice saying "Buyer, because a seller must be able to convey marketable title at the time the contract is signed" is wrong because the standard is at closing, not signing. The choice saying "Buyer, because a mortgage is an encumbrance that makes title unmarketable even if the seller intends to pay it off at closing" is wrong because a mortgage that is discharged at closing does not render title unmarketable at the moment of conveyance. The choice saying "Seller, because a mortgage does not affect marketability when the outstanding balance is less than the contract price" is wrong because the balance relative to price is irrelevant; a mortgage is a defect regardless of amount, but it is curable if discharged at closing.
Remember the "cure at closing" principle: a seller can generally cure any title defect (mortgage, lien, judgment) before or at closing, as long as the title is marketable at the moment of transfer. Watch for the seller's plan to clear title — that plan is usually valid.
- Is the liquidated damages clause enforceable?
Answer: Yes, because the clause is enforceable if the amount was a reasonable forecast of probable loss and actual damages were difficult to estimate at contract formation.
Whenever you see a liquidated damages question, ask whether the amount was a reasonable forecast of probable loss at the time the contract was made and whether actual damages were difficult to estimate then. That is the test — not hindsight.
Here, the parties knew a default near closing could cause uncertain marketing and carrying costs, so actual damages were genuinely hard to estimate up front. A $50,000 deposit on a $500,000 house is roughly 10% of the price, which sounds like reasonable forecast, not a penalty. The fact that Seller later resold for $475,000 and suffered only $25,000 in apparent loss does not make the clause unenforceable; liquidated damages are judged at contract formation, not by comparing them to actual damages after the fact.
The choice arguing "No, because the $50,000 amount exceeds Seller's actual damages" reflects the classic trap: using hindsight instead of the reasonable-forecast standard. The choice claiming "liquidated damages clauses are unenforceablein contracts for the sale of real property" is wrong; they are enforceable if they satisfy the standard. And the choice saying "a defaulting buyer may never recover any portion of a deposit once forfeiture has been agreed" overstates; ifthe clause were an unenforceable penalty, a buyer could recover the excess. Here, because the forecast was reasonable and damages were uncertain, Seller may keep the deposit, and Buyer's suit fails. Remember: on this topic, avoid hindsight — focus on what the parties reasonably anticipated when they signed the contract.
- In most jurisdictions, who is likely correct?
Answer: Seller, because a financing contingency imposes an implied duty on Buyer to make reasonable, good-faith efforts to obtain financing, and Buyer failed to do so.
Whenever you see a financing contingency, remember that it protects the buyer, but it also carries a duty: the buyer must make reasonable, good-faith efforts to obtain financing. That implied duty is the key to this question. Buyer applied to only one lender, received an 8% commitment, and then stopped—even though several other local lenders regularly made comparable commercial loans. Because the contract did not specify an interest rate, the question is whether 8% was commercially reasonable, and nothing suggests it was not. In most jurisdictions, Buyer's failure to shop around or pursue other lenders means Buyer did not act in good faith, so Seller is likely correct.
The answer stating "Seller, because a financing contingency imposes an implied duty on Buyer to make reasonable, good-faith efforts" captures that rule precisely. The answer claiming "Buyer, because the loan commitment condition did not occur" is wrong because Buyer cannot benefit from a condition that failed due to Buyer's own lack of good-faith effort. The answer claiming Buyer could reject 8% because no maximum interest rate was specified is also wrong: when the contract is silent, a market-rate commitment is generally acceptable, and Buyer offered no evidence that 8% was unreasonable. Finally, the answer about waiver obligating Buyer to pay cash misses the point—waiver is not what happened here, and Seller's claim is about bad-faith failure to satisfy the condition, not waiver.
Study tip: whenever a condition depends on one party's actions, ask whether that party made reasonable efforts. A party cannot manufacture a failed condition and then hide behind it.
- In Seller's action for specific performance, who prevails?
Answer: Seller, because the contract allowed Seller until March 15 to cure title defects and Seller did so before Buyer could terminate.
Whenever you see a title dispute in a real estate contract, first check the contract's own deadlines. Here the contract made time of the essence but also gave Seller until March 15 to cure any title defect. On March 1, the unsatisfied Bank mortgage indeed made title unmarketable—a recorded lien clouds title regardless of the property's equity—so Buyer could refuse to close that day. But the contract did not end on March 1. The cure period expressly kept the contract alive. Seller cured by recording the mortgage satisfaction on March 10 and then tendered a deed and closing statement. That was within the allowed cure window and before Buyer could terminate. Therefore Seller is entitled to specific performance.
Why the wrong choices fail: the choice saying Buyer wins because time was of the essence ignores the express March 15 cure provision; the choice saying Buyer could terminate once the closing date passed without a cure misreads the contract—termination was available only if the defect remained uncured by March 15; and the choice saying the mortgage did not make title unmarketable because the property had enough equity confuses value with marketability, while "substantial performance" does not cure a title defect.
Study tip: on bar-exam questions, always honor express contract deadlines over default rules. A time-is-of-the-essence clause does not erase a separately negotiated cure period.
- Who is entitled to the sale proceeds?
Answer: The daughter, because equitable conversion treats Seller's interest under the contract as personal property from the time the contract was signed.
Whenever a decedent dies after signing an enforceable contract but before closing, ask: what was the decedent's interest at the moment of death? Under equitable conversion, an enforceable contract for sale transfers the seller's interest in land into a right to receive the purchase price. Thus the seller's property is treated as personal property from contract signing, even though legal title remains with the seller until closing. Here, Seller died after the contract was signed, so at death his interest in Blackacre had already become personalty—the right to the $200,000 proceeds. The executor's later sale simply completed the transaction and realized that personal right. Therefore the proceeds pass under the gift of personal property to the daughter.
The son, who argues legal title at death means proceeds pass as real property, is confusing bare legal title with equitable ownership; seller held title only as security, and equitable conversion controls. The statement that equitable conversion does not affect devisees when the seller dies before closing is backwards: it is precisely the situation where it matters. And the daughter does not win because the executor's post-death sale converted the property; the conversion occurred at contract signing, not after death.
Strategy: on property/wills questions, mark the date of the enforceable contract relative to death. If contract precedes death, real property should be treated as personalty; if not, the original character controls.
- In most jurisdictions, what is Buyer's measure of recovery?
Answer: $22,000, representing the return of the deposit, the title-examination costs, and the excess of market value over the contract price.
When a seller breaches a land-sale contract, most jurisdictions try to put the buyer in the same financial position as if the sale had closed. So the buyer should get back the deposit paid, recover reasonable reliance expenses like a title examination, and receive the benefit of the bargain — the difference between the contract price and the market value at the time of breach.
Here, the contract price was $200,000 and the house was worth $210,000, so the benefit-of-the-bargain loss is $10,000. The buyer also paid a $10,000 deposit, which the breaching seller must return, and spent $2,000 on a title examination, a foreseeable incidental cost. Total recovery:
10,000+10,000+2,000=22,000
The choice of "$10,000, representing the excess of market value over the contract price” only covers the lost bargain and ignores the deposit and title costs. The “$12,000" choice adds title costs but still forgets to return the deposit. The "$20,000" choice returns the deposit and pays the lost bargain but leaves out the title-examination costs. Only the $22,000 total combines all three components.
On a question like this, remember the seller-breach formula for a buyer: return of deposit + reliance costs + benefit of bargain. Don't treat the deposit refund as optional — the buyer paid it and the breaching seller cannot keep it. The comparable-house purchase for $210,000 simply confirms the market value and the $10,000 lost bargain. - Who is entitled to prevail?
Answer: Buyer, because the Act places the risk of loss on the seller until either title or possession has passed to the buyer.
Whenever you see risk of loss in a real estate sale and the jurisdiction has adopted the Uniform Vendor and Purchaser Risk Act, do not default to equitable conversion. The Act replaces that common-law rule with a simple timing question: has title or possession passed to the buyer? If neither has passed, the seller bears the risk.
Here, the contract was silent on risk, closing had not occurred, and Buyer had not taken possession. So both title and possession remained with Seller when the fire destroyed the house. Under the Act, Seller bears the loss. Buyer is therefore entitled to return of her deposit, and Seller cannot force her to complete the purchase.
The equitable conversion choice is the classic trap: that doctrine would put risk on Buyer at contract signing, but the Act was designed to override that harsh result. The abatement choice is also wrong because when the seller bears the loss, the Act says the seller cannot enforce the contract at all — there is no price to abate, since Buyer's duty to pay is discharged. Finally, the void-contract choice misstates the effect: destruction does not make the contract void from the start; it simply gives Buyer the right to recover her deposit and excuses both parties' performance.
Remember the Act's two checkpoints: title or possession. If neither has passed to the buyer, the seller bears the loss. Equitable conversion is a distractor whenever the Act is named.
- Will Buyer recover?
Answer: Yes, because the roof-replacement promise was collateral to the conveyance and therefore survives the deed.
Whenever a sale of real estate goes to closing, remember the doctrine of merger: the deed is the final word on title and the transfer of the property itself, but it does not automatically wipe out every promise in the contract. The key question is whether the promise is part of the conveyance or merely collateral to it.
Here, the seller's promise to replace the roof is a separate, collateral undertaking. It relates to the physical condition of the building, not to the title or the deed's terms. Because the deed was silent on the roof, the contract promise survives closing, so Buyer can sue for breach. That is why the correct answer is that Buyer recovers because the roof-replacement promise was collateral to the conveyance.
The first wrong answer—that the contract merged into the deed and extinguished all pre-closing promises—overstates merger. Merger extinguishes only terms that the deed is meant to embody, like title covenants, not collateral promises like roof repair. The second wrong answer—that Buyer accepted the property as is by not inspecting—misstates the law; acceptance of a deed does not waive a separate contractual right, especially when the promise was to replace the roof before closing. The final wrong answer—that a warranty deed warrants the improvements are in good condition—confuses warranties of title with warranties of physical condition. A warranty deed generally warrants title, not that the roof is sound.
Study tip: on bar-exam property questions, separate "title" promises from "collateral" promises—collateral promises survive the deed.
- In most jurisdictions, may Buyer enforce the option?
Answer: Yes, because an option contract is irrevocable during the stated period and remains enforceable against the optionor's estate.
Whenever you see an option supported by consideration, separate ordinary offer law from option-contract law. A gratuitous offer generally dies with the offeror, but an option is a binding contract: the seller has already been paid to keep the offer open. Here, Buyer paid $1,000 for the right to buy Blackacre within 60 days. That payment made the power of acceptance irrevocable during that period. Seller's death did not cancel the option; the estate steps into Seller's position and must convey if Buyer timely exercises. Buyer mailed written notice within 60 days, so Buyer may enforce the option.
The first wrong answer applies the ordinary rule that death of the offeror terminates the power of acceptance even if the offer is supported by consideration. That ignores the key point: consideration converted the bare offer into an option contract. The second wrong answer, calling the option a personal right that dies with the optionor, similarly misses that options are contract rights enforceable against the estate in most jurisdictions. The final wrong answer suggests Buyer must record the option and give notice to the estate before the period expires. Recordation may protect priority against later purchasers, but it is not required for enforceability here, and the mailed notice was timely.
For the exam: when you see "option" plus "consideration," think irrevocable. Death of the optionor does not revoke it—the estate is bound.
- In a jurisdiction that applies the traditional part-performance doctrine, will Buyer prevail?
Answer: Yes, because Buyer's possession and substantial improvements, made with Seller's consent, are unequivocally referable to a contract for the sale of land.
When you see a land sale contract and the Statute of Frauds, the part-performance doctrine is the equitable escape hatch. The key is whether the buyer's acts are "unequivocally referable" to a contract for the sale of land—meaning the conduct makes sense only if a sale occurred, not a mere lease or license. Here, Buyer took possession, paid $10,000, and built a $25,000 barn with Seller's knowledge and consent. These acts, especially the substantial improvements, clearly point to an ownership interest. Thus, the traditional doctrine removes the Statute of Frauds barrier, and Buyer can compel specific performance—the actual conveyance of the land, not just a refund.
Choice "No, because part performance permits only restitution" is wrong because the doctrine, when satisfied, permits specific performance; restitution is a fallback only when part performance fails. Choice "No, because part performance can remove the Statute of Frauds only when the buyer has paid the full purchase price" misstates the rule—full payment is not required; possession plus improvements are the classic triggers. Choice "Yes, because Buyer's $10,000 payment is sufficient part performance without regard to possession or improvements" is wrong because a partial payment alone is not unequivocally referable to a land sale—it could be a lease or a loan. The payment is supportive evidence, but it's the possession and the barn that clinch the case.
Strategy: Always ask, "Are the buyer's acts unequivocally referable to a land contract?" Look for possession plus substantial improvements, or other conduct that only makes sense if ownership was intended. And remember, successful part performance yields specific performance, not just restitution.
- At closing, which statement is correct?
Answer: Seller owes Buyer a credit of $2,400, because Seller is responsible for the January through August portion of the tax year.
Whenever you see a real estate tax proration question, the first thing to identify is the time period each party is responsible for relative to the closing date. Here, closing is September 1, so the seller is responsible for January through August (8 months), and the buyer for September through December (4 months). Using a 360-day year, the $3,600 annual tax equals $300 per month. The seller's share is 8 × $300 = $2,400. Since the tax is payable in arrears on December 31 and the seller has not paid, the buyer will eventually pay the full bill. To ensure the seller bears their share, the seller must credit the buyer $2,400 at closing.
Now consider the wrong choices. The one stating "Buyer owes Seller a credit of $1,200" gets the amount right for the buyer's share but reverses the direction – because the seller hasn't paid, the seller owes the buyer, not the other way around. The choice claiming "No proration is made until the tax bill is paid" ignores the contract's explicit provision requiring proration at closing, and it wrongly leaves the buyer without reimbursement. Finally, the choice "Seller owes Buyer a credit of $1,200" has the correct direction but the wrong amount – it assigns the seller only the buyer's 4-month share, when the seller is responsible for the 8-month share of $2,400.
Your takeaway: always ask who pays the bill later and who is responsible for the earlier time period. The party who pays later gets a credit from the other for their share. Watch the direction and the month count.
- Who prevails?
Answer: Buyer, because time is not of the essence unless the contract expressly so states, and Buyer tendered within a reasonable time after June 1.
When you see a real-property sales contract with a closing date but no "time is of the essence" language, your default should be that the closing date is not a strict, essential condition. The mere fact that a date is stated does not make it essential; in real estate contracts, time is generally not of the essence unless the contract expressly says so.
Here, Buyer missed June 1 because of lender delays, then tendered the full cash price and demanded a deed on June 5. Because time was not made essential, Buyer's failure to close on June 1 was not a material breach. Buyer still performed within a reasonable time, so Seller was required to close. That is why the Buyer prevails.
The wrong answers expose common traps. The answer saying "Seller prevails because the specific closing date created a material breach" overstates the effect of a date absent an essence clause. The answer saying "time is always of the essence in real property contracts" is simply the opposite of the general rule. And the answer claiming Seller breached the implied covenant of good faith by refusing an extension mischaracterizes the issue: Seller had no duty to grant an extension, but Buyer did not need one because the June 5 tender was already within a reasonable time after June 1.
Study tip: for a real estate closing date, ask first whether the contract expressly states "time is of the essence." If it does, enforce the date strictly. If it does not, a short delay followed by tender will usually not kill the deal.
