A Michigan purchase agreement includes a clause stating that the seller must provide a clear title at closing. The title search reveals an old unpaid mechanic's lien on the property. The seller refuses to pay off the lien, claiming it is the buyer's problem after closing. The buyer refuses to close. Under Michigan law, which outcome is most likely?
Correct Answer
B) The buyer may cancel the contract and receive a full refund of earnest money because the seller failed to deliver marketable title as required by the agreement
A standard Michigan purchase agreement requires the seller to convey marketable title — title free from undisclosed liens and encumbrances. An unpaid mechanic's lien is a cloud on title that prevents the seller from fulfilling this contractual obligation. If the seller refuses to clear the lien, the buyer is entitled to cancel the contract and receive a full refund of earnest money, as the seller is in breach.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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