A purchase and sale agreement for an Oregon farm property includes a clause transferring all appurtenant water rights with the property. After closing, the buyer discovers that the seller had previously severed and sold the irrigation water rights to a neighboring farmer, and those rights are registered with the Oregon Water Resources Department under the neighbor's name. The deed did not specifically reference the water rights. Which of the following best describes the legal situation?
Correct Answer
A) The buyer has a claim against the seller for breach of contract because the seller conveyed rights they did not own
Under Oregon water law (ORS Chapters 537 and 539), water rights follow the prior appropriation doctrine and are a separate property interest that can be severed from land ownership and conveyed independently. When the seller previously sold the irrigation water rights to the neighbor and those rights were registered with the Oregon Water Resources Department under the neighbor's name, the seller no longer owned those rights at the time of sale to the buyer. By including a clause in the purchase and sale agreement purporting to transfer water rights the seller did not own, the seller breached the contract's warranty of title and the implied covenant that the seller has the right to convey what is promised. The buyer has a valid breach of contract claim against the seller.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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.
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