What Happens If You Sign a Contract to Purchase a Condo, and Then Die? That's Easy - Your Estate Buys the Condo, or Loses the Deposit!
Even the dead must honor their contracts. In an unusual case, the Buyer signed an agreement to purchase a NYC Condo for $2,300,000. The agreement is approved. The Buyer dies before the closing, and the estate does not want the condo. But, the estate wants the $230,000 deposit returned.
The Contracts Professor noted the courts reasoning as thus:
The crux of this matter lies in contract paragraph 15.2, which expressly makes the contract binding on the parties' "heirs, personal and legal representatives and successors in interest." The inclusion of this provision indicates that the parties explicitly contemplated, and provided for, the possibility of either party's death before closing, by specifying that the death would not terminate the contract, but that the contract would survive, to be performed by the successors or heirs of the deceased party. This provision makes the contract binding on [the buyer's] estate.
While this is basic contract interpretation and reasoning, the estate would have been responsible in any case. Just because a party to a contract dies does not mean that their estate is not responsible for the contract entered into by the deceased. (Unless it was a personal services contract, which has separate rules for obvious reasons.) The general rule in New York and I will guess all other states, is:
"[w]here the proposed purchaser dies before the closing of title, his executor or administrator may pay the balance of the purchase price and take the deed in his own name holding it in trust for the heirs at law or devisees. It is the duty of the fiduciary for a deceased vendee to complete payments under a contract entered into by such vendee for the purchase of real property" (4-35 Warren's Weed New York Real Property §35.24 [2009] [footnote omitted]; see Di Scipio v. Sullivan, 30 AD3d 660 [2006])."
The court also rejected the arguments of impossibility and frustration of contract purpose. So the Seller gets to keep the deposit, and apparently was able to sell the property for $2,125,000. That is a nice extra profit for the seller. How to avoid this problem: add a contract clause that the death of a party voids the contract. It isn't hard to do.
Thanks to the Contract Prof Blog for this story.
