Question

A speculator and the original owner of a condominium unit entered into a contract for the sale of the unit. The contract, which contained no reference to the marketability of the title, called for the owner to transfer the unit to the speculator by quitclaim deed, which the owner did on the date called for in the contract. A year later, the speculator entered into a contract to sell the unit to a third party at a price significantly higher than the price paid by the speculator for the unit. The contract specifically required the speculator to provide the third party with title to the unit free from all defects. Upon investigation, the third party discovered that the unit was subject to a restrictive covenant that rendered the title to the unit unmarketable, and that the restrictive covenant had existed at the time that the speculator had purchased the unit. The third party refused to complete the transaction. The speculator subsequently sued the original owner of the condominium unit for breach of contract.

For whom is the court likely to rule?
a. The speculator, because a covenant of marketable title was implied in the contract.
b. The speculator, because of the warranty against encumbrances.
c. The original owner, because the condominium unit was transferred by a quitclaim deed.
d. The original owner, because of the merger doctrine.

Answer 1

The court is likely to rule in favor of the original owner because the title transfer was via a quitclaim deed, which does not guarantee a clear title and there was no mention of marketability of title in the contract with the speculator. Therefore correct option is C

Step-by-step explanation:

The court is likely to rule for c. the original owner, because the condominium unit was transferred by a quitclaim deed. A quitclaim deed does not warrant the quality of the title, meaning it does not guarantee that the title is free from defects. The quitclaim deed merely transfers whatever interest the giver of the deed may have in the property, without any warranty.

Since the contract for the sale of the unit to the speculator contained no reference to the marketability of the title, the original owner did not breach the contract by transferring the unit with a restrictive covenant. Additionally, the restrictive covenant would have been the responsibility of the speculator to discover before reselling the unit, especially since they agreed to provide the third party with title free from defects.