Also known as: minority rules · minority view
Written by attorneys · grounded in primary & secondary sources — see below
An approach to risk of loss in real estate contracts followed by the minority of jurisdictions, under which the seller continues to bear the risk until delivery of the deed.
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Meridian Motors signed a contract to buy a suburban office building from Midwest Airlines with closing scheduled sixty days later. Two weeks after signing, a burst pipe destroyed specialized equipment in the building. Under the minority rule, Midwest Airlines bears the risk of loss and Meridian Motors may rescind or seek a price reduction rather than close at the original price.
Atlas Corp contracted to purchase a warehouse from Summit Properties with closing set for forty-five days. A severe storm caused major roof damage one week later. Under the minority rule, Summit Properties retains the risk of loss and Atlas Corp may rescind the contract or negotiate a reduced price instead of closing.
Vertex LLC agreed to buy a retail center from Horizon Partners with closing sixty days out. A fire gutted the main building three weeks after signing. Under the minority rule, Horizon Partners bears the risk of loss and Vertex LLC need not close at the original price without adjustment.
The minority rule leaves the risk of loss on the seller until deed delivery. The majority rule shifts risk to the buyer at contract formation under equitable conversion, so the buyer must still close even if improvements are destroyed.
Supporting sources
…Steward v. Mercy Hospital (1987) 188 Cal. App.3d 1290, 1295 [233 Cal. Rptr. 881], declared that Newfield represented a minority view, and held that under the majority view enforcement of an oral employment contract was not barred by the statute of frauds if, within one year, the employee could terminate the contract or…