25. For whom will the court find?

Real estate contracts require the seller to convey a marketable (also known as merchantable) title. If the contract is silent on the issue of what kind of title that is to be conveyed, the obligation to convey a marketable title will be implied in the contract. Marketable title is title free from reasonable doubt as to both matters of the law and fact, and a reasonable purchaser would be willing to accept it readily. The title must be free from any questions that could present an unreasonable risk of litigation ensuing.

Unless the parties specifically contract for this kind of conveyance, there will be an obligation to convey marketable title. Defects that may make a title unmarketable include defects in the chain of title itself that indicate the conveyor lacks full interest that he purports to convey, or encumbrances, such as: (i) mortgages; (ii) liens; (iii) easements; (iv) use restrictions; (v) encroachments; or (vi) land-use and zoning violations.

The document that passes the actual title from the grantor to the grantee is the «deed.» A deed does not transfer title until it is accepted by the grantee. Once the grantee accepts the deed, it replaces the contract and becomes the new embodiment of the parties' relationship. Under the doctrine of merger, most of the obligations that were imposed under the contract of sale are then discharged unless they are repeated in the deed. There are two main types of deeds, quitclaim and warranty deeds.

A «warranty deed» contains certain covenants from the grantor assuring there are no title defects by either himself or any prior titleholder. The typical covenants that make up a general warranty deed are called «usual covenants for title» and they include three «present» covenants and three «future» covenants.

A present covenant is a type of covenant that, if it is ever breached, will happen as it is made. The idea is that these promises must be presently true when the grantor makes them because they are about the current state of the property (i.e., the grantor has current title and the current ability to convey, or there are currently no encumbrances). These present covenants include: (i) the covenant of seisin, that the grantor owns the estate or interest in land, in both title and possession; (ii) the covenant of the right to convey, meaning the grantor holds the power to convey it; and (iii) the covenant against encumbrances, which promises that there are no impediments to the property, visible (e.g., an easement) or invisible (e.g., a mortgage).

A future covenant is a type of covenant that, if it is breached, can only be breached after the conveyance is made because they involve interference with the grantee's future use of the property. These include the covenants of: (i) quiet enjoyment, meaning the grantee's possession or enjoyment of his property will not be disturbed by any third party with a lawful assertion of superior title; (ii) warranty, meaning if there are any lawful claims of superior title that exist at the time of conveyance, the grantor will defend on the grantee's behalf and compensate if loss results from that claim of title; and (iii) future assurances, meaning that if the grantee/purchaser's title turns out to be imperfect in some way, the grantor will take any reasonably necessary action to perfect it.

The Statute of Frauds requires land sale contracts to be reduced to writing. However, if the parties have both fully performed under an oral agreement, their relationship is the same as they had fully complied with the Statute initially. This is known as the «doctrine of part performance.»

C is correct. Although the colleague eventually discovered an access issue with the land, which could have been a basis to render the title unmarketable under the original contract of sale, the colleague would have had to raise this issue PRIOR to accepting the deed. At the time of this discovery, the parties had already executed the deal and properly recorded the deed. Because the discovery of the lack of access was after the conveyance was completed, the window for any previously-existing challenge to the marketability of title was closed. The doctrine of merger ensures that most contractual obligations of sale are discharged at that point unless repeated in the deed. Thus, once the deed was accepted by the colleague, the only enforceable covenants going forward were future covenants, which involve a third party's interference with the colleague's possession and enjoyment of the land or a claim of superior title. Because none of these covenants were breached, the niece should prevail.

A is incorrect. Although it is true that lack of access to the land would have allowed the colleague to challenge the marketability of title, this claim had to have been raised prior to the transfer of the deed. Once the colleague accepted the deed, under the doctrine of merger, the previous contractual obligations, including marketability of title, were discharged and replaced by future covenants of the warranty deed. Lack of access does not violate any of those future covenants, as explained above.

B is incorrect. Again, after executing the deal, the contractual obligations prior to the conveyance were discharged under the doctrine of merger and replaced by the deed itself, which became the embodiment of the land sale contract. Under the newly-recorded deed, the remaining covenants available as remedies for the colleague were quiet enjoyment, warranty, and future assurances. This answer thus correctly identifies that the covenants of warranty and quiet enjoyment were in place, however, they do not protect against this type of land access issue. They involve claims of interference by a third party with future possession or use or a claim of superior title. The colleague received title as the niece said she had, and no other third party interfered. Therefore, because lack of access does not violate any of these covenants, the colleague will not prevail against the niece.

D is incorrect. This answer reaches the correct answer with the wrong reasoning. The niece will prevail, but not because the agreement to sell the land was oral. This is an implication of the Statute of Frauds, which does require agreements to sell land to be in writing. However, where the parties fully performed a land sale contract under an oral agreement, their relationship is considered the same as if they had properly reduced it to writing originally.