Opinion ID: 1144948
Heading Depth: 1
Heading Rank: 9

Heading: Executory vs. Executed Contract

Text: Had the parties relied upon their rights under the contract before delivery of the instruments called for by the agreement, we would have been able to agree with the trial court's conclusion that the purchasers had the right to rescind the executory agreement and recover their down payment because of the breach committed by the sellers. Encyclopedia authority for this proposition is expressed in 92 C.J.S. Vendor & Purchaser § 552(2)(a), pp. 556-560, where the text says: Where the purchaser under an executory contract for the sale and purchase of land rightfully rescinds the contract for defects in the vendor's title, or a want of good title in the vendor, as discussed supra § 161, he may maintain an action for the recovery of payments made by him on the purchase price, and it has been held that he may recover such payments, regardless of whether or not he knew of the defect before entering into the contract. Thus, the purchaser may maintain such an action where the title is subject to a reservation or restrictions, such as building restrictions against the property, or restrictions as to the use to which the premises may be put; or where the vendor is unable to convey a title such as will be guaranteed or insured by a title company, as required by the contract, . . In general, if at the time fixed for performance the vendor is unable to furnish a good title, the purchaser may maintain an action to recover amounts paid on the purchase price... . (Emphasis supplied.) In the same vein, we have said in Mader v. James, Wyo., 546 P.2d 190, 193 (1976): ... A written contract for the sale [of real property], while still executory, may be rescinded by... acts and conduct constituting abandonment of the written bargain... . In the case at hand, the parties, indeed, undertook to act and conduct themselves in a way which was inconsistent with the terms of the buy-and-sell agreement. They clearly did not continue to rely upon their rights under the contract. After the sellers had failed to discharge their duty to furnish a title insurance policy showing merchantable title in them, and when the sellers were unable to bring about the issuing of a title insurance policy showing title in the buyers, once the deed had been recorded, the buyers, instead of relying upon the breach and urging rescission, accepted the delivery of the warranty deed, and, in exchange, delivered their note and mortgage to the sellers. What is the effect of the making and delivery of the deed upon the purchasers' right to rescind? Once the deed was executed and delivered, the executory contract became executed. In 8A Thompson on Real Property, 1963 Replacement, § 4441, at p. 250, the following language appears: An executory contract of sale becomes executed when the deed is itself completely executed and title passes... In the same paragraph, the writer says: ... A contract to sell is an executory contract until a conveyance is made. (Citing Bauer v. Monroe, 117 Mont. 306, 158 P.2d 485 (1945). [4] Since a contract is no longer executory but is executed upon making and delivering the deed, it is the further appropriate rule of law that, thereafter, the provisions of the contract are merged into the deed and it is the deed that controls the rights and obligations of the parties. In 8A Thompson on Real Property, supra, § 4458, p. 331, this language appears: In accordance with contract law generally, all provisions in the contract are merged into the deed when executed and delivered except those covenants which are deemed to be collateral to the sale. Thus, the deed regulates the rights and liabilities of the parties... . (Footnotes omitted.)