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19. Who is likely to prevail on this count?
A seller entered into a written contract to sell a tract of land to an investor. The contract made no mention of the quality of title to be conveyed. The seller and the investor later completed the sale, and the seller delivered a warranty deed to the investor. Soon thereafter, the value of the land increased dramatically. The investor entered into a written contract to sell the land to a buyer. The contract between the investor and the buyer expressly provided that the investor would convey a marketable title. The buyer's attorney discovered that the title to the land was not marketable and had not been marketable when the original seller had conveyed to the investor. The buyer refused to complete the sale. The investor sued the original seller for breach of contract, claiming damages from the seller's failure to convey marketable title, which resulted in the investor's loss of the sale to the subsequent buyer.
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Parties can contract for something less than «marketable title.» Quitclaim deeds transfer whatever title the grantor has to the grantee, even if that title is unmarketable. However, unless the parties specifically contract for this kind of conveyance, there will be an obligation to convey marketable title.
After the closing, the deed typically replaces the real estate contract as the embodiment of the parties' relationship. Under the doctrine of merger, most obligations imposed by the contract of sale are discharged unless they are repeated in the deed. For example, if a purchaser contracted for merchantable title but accepts a quitclaim deed, the purchaser would not be able to sue on the contractual provisions if the title turns out to be defective. The purchaser in this scenario would be limited to the provisions on the deed. Thus, real estate contracts are only relevant during the gap between its signing and the delivery of the deed.
C is correct. Although a marketable title will be implied in a contract for the sale of land, the doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted. The investor's remedy, if there is one, would be based on the deed he received and not on the contract of sale.
A is incorrect. Although a covenant that title will be marketable is implied in a contract for the sale of land, the doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted. In this case, if the investor has a remedy, it would be based on the deed he received, not on the contract of sale. The seller will prevail on the breach of contract claim.
B is incorrect. The doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted. The investor's remedy, if there is one, would be based on the deed he received, not on the contract of sale. The facts do not justify any other claim for damages (e.g., misrepresentation). Accordingly, the seller will prevail on the breach of contract claim.
D is incorrect. This option correctly concludes that the seller will prevail, but misstates the reason why this is so. Even if the contract of sale is silent regarding title matters, the law will imply a requirement of marketable title in a contract for the sale of land. Therefore, the language of the contract of sale, in this case, is not dispositive. Instead, the seller will prevail because the doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted. In this case, if the investor has a remedy, it would be based on the deed he received, not on the contract of sale.