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Bryant v. Willison Real Estate Co.

Supreme Court of Appeals of West Virginia
350 S.E.2d 748 (1986)
ELI5:

Rule of Law:

A provision in a real estate sales contract that explicitly allocates the risk of loss to the seller until the deed is delivered supersedes the common law doctrine of equitable conversion, which would otherwise place the risk of loss on the buyer upon signing the contract.


Facts:

  • On January 4, 1980, James L. Bryant and James E. Bland contracted to purchase the O.J. Morrison Building from the defendants for $175,000, paying a $10,000 down payment.
  • The sales contract included a clause stating, 'the owner is responsible for said property until the Deed has been delivered to said purchaser.'
  • The contract also contained an 'As Is' condition and required the purchasers to carry fire insurance to protect themselves.
  • On February 18, 1980, before the deed was delivered, a water line in the building's sprinkler system broke, causing extensive water damage to the building and two adjacent businesses.
  • The purchasers learned the damage would delay their planned renovations by four to six weeks.
  • The purchasers requested that the vendors either repair the damage or agree to rescind the contract, but the vendors refused.
  • In July 1980, the vendors sold the building in its damaged state to a different buyer for $140,000.

Procedural Posture:

  • James L. Bryant and James E. Bland (purchasers) sued the vendors in the Circuit Court of Harrison County (trial court) seeking rescission of the sales contract and the return of their down payment.
  • The case was heard by a trial court judge without a jury.
  • The trial court denied the purchasers' claim for rescission and ruled they must bear the risk of loss for the damage to the building and for damages paid to adjacent business owners.
  • The trial court entered judgment against the purchasers, permitting the vendors to retain the down payment and awarding damages to the vendors for the third-party property loss.
  • The purchasers (appellants) appealed the judgment to the state's highest court.

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Issue:

Does a clause in a real estate sales contract stating the 'owner is responsible for said property until the Deed has been delivered' shift the risk of loss from the purchaser to the vendor, thereby overriding the doctrine of equitable conversion?


Opinions:

Majority - Chief Justice Miller

Yes. A clause in a real estate sales contract stating the 'owner is responsible for said property until the Deed has been delivered' unambiguously shifts the risk of loss from the purchaser back to the vendor, overriding the default doctrine of equitable conversion. The court reasoned that while equitable conversion normally places the risk on the buyer post-contract, parties are free to allocate risk differently through express contractual language. The provision here was clear and could not be limited by parol evidence to cover only vandalism. The court also held that an 'as is' clause merely negates warranties as to the property's condition at the time of contracting and does not shift the risk of subsequent casualty. Because the vendors bore the risk of loss, their refusal to repair or offer an abatement, followed by their sale of the property to a third party, constituted a breach of contract, entitling the purchasers to the return of their down payment.



Analysis:

This decision reaffirms the principle of freedom of contract, establishing that explicit, unambiguous terms allocating risk will override common law default doctrines like equitable conversion. It clarifies the limited scope of 'as is' clauses, confining their effect to negating warranties of condition at the time of sale rather than shifting the risk of future, unforeseen damage. This precedent underscores the critical importance of precise drafting in real estate contracts, as courts will enforce the plain meaning of risk-allocation provisions. Future litigation over property damage occurring between contract signing and closing will now hinge primarily on the contract's specific language before any consideration of default legal rules.

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