When is a contract not subject to equitable conversion? This is a question that often comes up in business law, and the answer is not always clear. In order to understand when a contract is not subject to equitable conversion, we must first understand what equitable conversion is. Equitable conversion is the doctrine that allows a buyer and seller to treat certain future events as if they have already occurred. This is often used in real estate transactions, but can also be applied to other types of contracts. The doctrine allows for the transfer of risk between the parties and provides certainty in an otherwise uncertain situation. However, there are some situations where the doctrine of equitable conversion does not apply. In this blog post, we will explore some of those situations and try to provide some clarity on the matter.
What is equitable conversion?
In real estate transactions, “equitable conversion” is a legal doctrine that says the buyer and seller are, in equity, equally responsible for any loss or damage to the property from the date of the contract until closing. In other words, if the property is destroyed or damaged before closing, both parties are responsible for repairing or restoring it. If one party doesn’t uphold their end of the bargain, the other party can sue for breach of contract.
When is a contract not subject to equitable conversion?
A contract is not subject to equitable conversion if it is explicitly stated in the contract that there is no transfer of ownership of the property at the time of the sale. This type of provision is typically found in real estate contracts, where the buyer is only acquiring an option to purchase the property at a later date. If the parties do not agree to an equitable conversion, then any change in value of the property during the contract period will be borne by the party who owns the property at that time.
What are the exceptions to the rule?
The general rule is that a contract is subject to equitable conversion, but there are a few exceptions. One exception is when the contract expressly provides that it is not subject to equitable conversion. Another exception is when the contract is for the sale of real property, because real property is not considered personal property under the law. Finally, contracts for the sale of certain types of intangible property, such as patents and copyrights, may also be exempt from equitable conversion.
Texas Case Law
In Texas, a contract is not subject to equitable conversion if the parties have expressly agreed that the property is to be sold “as is.” For example, in a contract for the sale of real property, the parties may agree that the buyer will take title to the property “as is” and that the buyer will not be entitled to any refund or credit if the property is not as represented by the seller.
Equitable conversion does not apply to contracts for the sale of personal property, such as automobiles or furniture. In these types of contracts, each party usually retains ownership of the property until delivery has been made. Once delivery has occurred, however, title passes to the buyer and equitable conversion takes effect.
Parson v. Wolfe
676 S.W.2d 689 (Tex. App. – Amarillo 1984)
Facts & Procedural History
Shawna Wolfe (Decedent) and her sister, Mellane A. Parson (Appellant) entered into a contract in September of 1981 to sell 160 acres of their land to their paternal uncle. Prior to the closure of the sale, Decedent passed away. At the time of her death, she lacked a will and had no children. The money from the land’s sale was placed with the court. Decedent’s husband, Jamie R. Wolfe (Appellee) and Appellant were Decedent’s only heirs at law. Appellant argued that she inherited one-half of Decedent’s interest in the land and was entitled to the proceeds from that interest. Appellee argued that he was entitled to all the proceeds under the doctrine of equitable conversion. After the trial court ruled in favor of Appellee, Appellant appealed to the Court of Appeals, alleging that the contract was invalid.
The Court of Appeals affirmed the judgment of the trial court, stating that the contract here was valid and enforceable. In this contract, the option to perform or pay damages belonged to the sellers (they had the option to perform or accept liquidated damages upon the purchaser’s default). Therefore, the contract was capable of enforcement by specific performance by either party, making it subject to the doctrine of equitable conversion. This meant that Decedent’s interest in the land was to be treated as personal property which passed to her husband upon her death under the laws of descent and distribution.
Main Consideration
Under what circumstances would the contract here not be subject to the doctrine of equitable conversion?
If the liquidated damages provision of the contract was meant to serve as a condition that, if left unfulfilled, would bar specific performance, then the contract likely would have been found enforceable. If this were true, then the doctrine of equitable conversion would not apply.
The Takeaway
Parson v. Wolfe shows that contracts are likely enforceable when they contain provisions that provide the option for the sellers of property to: (1) require performance; or (2) accept liquidated damages upon the default of the purchaser. These provisions allow either party to enforce the contract through specific performance.
Conclusion
In general, a contract is subject to equitable conversion when it is for the purchase of property. However, there are some exceptions to this rule. For example, if the contract is for the sale of a business, it may not be subject to equitable conversion. This is because businesses are intangible assets and can fluctuate in value based on a variety of factors. If you’re not sure whether or not your contract is subject to equitable conversion, it’s best to consult with an experienced attorney who can advise you on your specific situation.
Do you need an Experienced Probate Attorney to help?
If you are going through the probate process, you may be wondering if you need to hire an experienced probate attorney. While the answer to this question depends on a number of factors, there are some general guidelines that can help you make your decision.
First, consider the value of the estate. If the estate is valued at less than $75,000, it is likely that you will not need to hire an attorney. However, if the estate is valued at more than $75,000, it is generally advisable to seek legal assistance.
Next, think about the complexity of the estate. If the estate is relatively simple and straightforward, you may not need an attorney. However, if the estate is complex or if there are disputes among the heirs, it is generally advisable to seek legal assistance.
Finally, consider your own personal circumstances and comfort level with handling the probate process. If you feel comfortable handling the probate process on your own, you may not need to hire an attorney. However, if you feel overwhelmed by the process or if you are not confident in your ability to navigate the legal system, it is generally advisable to seek legal assistance.
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