Fire Destroys Home After Contract
Luke Latham signed a binding contract to buy a house from Lorenzo Lugo. Before closing a fire destroyed the house. Equity treats Luke as owner at contract formation so he must pay the full price despite the loss.
Also known as: conversion · conversions · tort of conversion
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
An equitable doctrine under which a binding contract for the sale of land causes equity to treat the buyer as owner of the land and the seller as owner of the purchase money. Risk of loss from damage or destruction before closing passes to the buyer at contract formation under the majority rule. The seller holds legal title as trustee for the buyer during the executory period.
An equitable doctrine under which a binding contract for the sale of land causes equity to treat the buyer as owner of the land and the seller as owner of the purchase money. Risk of loss from damage or destruction before closing passes to the buyer at contract formation under the majority rule. The seller holds legal title as trustee for the buyer during the executory period.
Select any source to read its text and confirm it supports the definition.
An intentional tort imposing liability on one who destroys a chattel, materially alters its identity, or uses it in serious violation of another's right to control it. The actor is subject to liability to a person in possession or entitled to immediate possession. Authorization to use the chattel does not excuse exceeding the scope of that authorization.
Select any source to read its text and confirm it supports the definition.
An intentional tort imposing liability on one who destroys a chattel, materially alters its identity, or uses it in serious violation of another's right to control it. The actor is subject to liability to a person in possession or entitled to immediate possession. Authorization to use the chattel does not excuse exceeding the scope of that authorization.
Each sense below has its own examples, sources, and questions.
Luke Latham signed a binding contract to buy a house from Lorenzo Lugo. Before closing a fire destroyed the house. Equity treats Luke as owner at contract formation so he must pay the full price despite the loss.
Luna Lang held an outright remainder interest in a trust. After the settlor's death circumstances arose that a court had not anticipated. The court authorized conversion of the remainder into a special needs trust to preserve assets for the disabled beneficiary.
Lucia Lopez contracted to sell farmland to Lone Peak Energy. Before deed delivery a storm destroyed the barn. Under the majority rule risk of loss passed to the buyer at contract formation so Lone Peak Energy must still pay the full price.
Linden Bank contracted to buy industrial property from Luke Latham. Before closing a fire destroyed the main building. Equity treats the buyer as owner at contract formation placing risk of loss on Linden Bank which must still pay the full purchase price.
Under the majority rule risk passes to the buyer at contract formation. The buyer must still pay the full price even if the property is destroyed before closing. The seller holds legal title only as trustee.
Supporting sources
Lena Lawson left her car with Lucas Lee for repairs. Lucas intentionally destroyed the engine block and replaced it with incompatible parts changing the vehicle's identity. Lena may recover in conversion because the alteration exceeded any repair authorization.
Linden Logistics stored crates for Lakeshore Industries under a limited bailment agreement. Linden used the crates as collateral for its own loan exceeding the authorized storage use. Lakeshore Industries may recover for conversion because the serious violation of control rights occurred.
Intentional destruction that changes the chattel's identity or use that seriously violates the owner's right of control both give rise to liability. Exceeding the scope of authorized use can also trigger conversion.
Supporting sources
No. When conversion clearly appears from the defendant's conduct a demand is unnecessary. A demand and refusal may be needed only when the facts leave doubt whether conversion occurred.
Supporting sources