Land Sales Contracts Case Study

Contract Law

The author of this report is asked to look at the case study of Rami and his impatience related to selling his property in New York City. The questions that will be answered include whether a contract was formed, whether the buyer (Fahd) can get his deposit returned, whether Fahd can sue for damages based on common law tort, whether Fahd can due for the common laws of contract, the implications from the Conveyancing Act of 1919 and some counterpoints to all of the above based on the totality of the facts and circumstances. While there are some factors that may end up cooking Fahd's proverbial goose, Rami was grossly negligent and fraudulent in the way the house was listed and sold and this was despite being told straight away that he should not act in such a way.

Analysis

For a couple of reasons, there would seem to not be a valid contract. First of all, Rami was told that the house could not be listed due to the proper permits and other paperwork not being in place. Second of all, Rami had Shalom post a valuation that was simply not true. While Shalom did not know that, Shalom should have done his due diligence if it was attached to a listing that he posted and he should have had a valuation done just to be sure it was accurate and ethical to post the value. The value was not cross-checked or verified, so Shalom is not entirely blameless. The above assumes that a contract did not exist. Further, due to Rami disregarding the advice of Dominic, the house should not have been on the market in the first place. There is a high likelihood that Fahd would not have seen the property for sale and/or that someone else would have beat him to the property if it had been listed when it was actually legal to do so. However, there is one major reason why the contract is not valid, it would seem, and that is because the contract in question was verbal. When it comes to sales of land, doing otherwise is simply not allowed. Also, the above proves that the property was not "marketable" and thus any sale for a property that could not be sold, regardless of why, cannot occur (Australia, 2015).

The author will not cover the counterpoint and presume the contract is upheld and/or that there was some sort of written follow-up to the initial verbal contract to buy the house. If it turns out that there is a contract, Fahd has an issue given that he was not to be financing the property. As such, the common pattern of having the property valued as a means to make sure that a loan could even be extended by a finance company was not necessary. Fahd could probably not sue for damages under a tort. This is because Rami was obviously negligent but ostensibly not perpetuating a fraud. The one caveat to that would be the fact that Dominic told Rami straight that the house could not be listed until the proper paperwork was in order. Rami actively and intentionally ignored this and had the home listed in the first place. However, that is a matter of non-compliance with regulations rather than simply lying about the property, its worth and so forth. Even so, saying a property is for sale when Rami was told prior that the house could not be sold in the first place is going to be frowned upon in a court of law. The latter part of this paragraph could lead to there being damages under contract law given that Rami had unclean hands as far as entering a sales contract and he knew it full well based on the advice of Dominic. That being said, Fahd may not know that but Rami would have to concede that this occurred during any civil action unless he chooses to further lie and deceive about what did happen, what did not happen and so forth. Regardless, it will not be hard to verify that the proper paperwork was not in place. Rami will have to explain that and there is not really a way for the outcome to be good for Rami whether he tells the truth or not (Australia, 2015).

When it comes to the Conveyancing Act, the actual statute says:

"No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorized by the party to be charged (Australia, 2015).

Obviously, the sale in question in this case study does not pass the test above unless there was a contract brought up and both signed it. Of course, the case reflects being in New York City and the specific statute in question is in Australia. However, even if that were not an issue, the contract would still be void as it was never fully created and formed. Further the Conveyance act says that:

In every case where specific performance of a contract would not be enforced against the purchaser by the Court by reason of a defect in the vendor's title, but the purchaser is not entitled to rescind the contract, the purchaser shall nevertheless be entitled to recover his or her deposit and any instalments of purchase money he or she has paid, and to be relieved from all liability under the contract whether at law or in equity, unless the contract discloses such defect and contains a stipulation precluding the purchaser from objecting thereto (Australia, 2015).

The above would indicated, as worded when it says "where specific performance of a contract would not be enforced….the purchaser shall nevertheless be entitled to recover his or her deposit. As such, the contract is void and Fahd should be able to get all of his money back. This would be true in Australia under the Conveyance Act and it would be true in any other country (e.g. The United States) where contract law follows the traditional European method dating back to the 1600's. When it comes to a cooling off period, that time has passed. Per the Conveyance Act, the cooling off period is 5 pm on the fifth day after the supposed execution of the contract, which would seem (notwithstanding the above) to have taken place when he extended the whole deposit. Since ten days passed before the valuation came through, Fahd would be out of luck if a contract exists…but it did not exist for the reasons mentioned above (Australia, 2015).

As it relates to Property, Stock and Business Agents Act of 2002, Shalom is in a bit of a pickle. Indeed, Shalom has a duty under that law to act in the interests of both the buyer and the seller. There is also talk about conflicts of interest. Both of those provisions are tested when it comes to Shalom selling the NYC property on the behalf of this brother while not urging and recommending that one or both of them know what the true value of the property is before it is sold (in the case of Rami) or in the case that it is bought (in the case of Fahd). Indeed, there are sometimes little to no protections for people and situations where someone intentionally or unintentionally pays a premium for property. However, when it comes to third parties that are supposed to be neutral and/or be following a certain code of ethics, there are other factors and details involved. Another clause within that law that is troublesome is section 51. Every clause in that contract is troublesome for Shalom (and probably Rami, to be honest) based on the actual wording involved. The clause in question says that "a licensee must not publish or cause to be published in the course of carrying on business as a licensee any statate that a) Is intended or apparently intended by the licensee to promote the sale or lease of any property and b) is materially false, misleading or deceptive (whether to the licensee's knowledge or not). Further, such a statement is considered published if I tis "inserted in any newspaper, periodical publication or other publication" or "publicly exhibited in, on, over or under any building." In short, of Shalom is a licensee as defined in the statute, he is in a bit of trouble. The act defines a licensee as a person that is a "holder of a license under this act." An "agent" is a person that is a real estate agent, a stock/station agent, a business agent and so on. In short, Shalom should have stated that he could not post the advert and that Rami should not have done it either (or have anyone else do it)…