Risk of Loss & Equitable Conversion: Definition & Importance


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Under the doctrine of equitable conversion, the vendee obtains ____ upon execution of the purchase agreement for real estate but the vendor keeps ____ as security for payment of the purchase price.

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1. Dave signs a purchase agreement to buy Charlie's house. The next day Charlie dies. Does Dave get the house?

2. Henry enters into a purchase agreement to buy a house. The agreement does not feature any assignment of risk of loss in the event of substantial damage to the property prior to closing. Three days later, the house burns down. What will likely be the result?

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About This Quiz & Worksheet

Questions on the quiz are based on the risk of loss and equitable conversion. Use them to explore what you know about concepts like titles and the majority rule.

Quiz & Worksheet Goals

These resources will evaluate if you know how to:

  • Determine the role of the vendee and vendor with regard to the doctrine of equitable conversion
  • Interpret what happens in a given scenario where a purchase agreement is signed and one of the parties dies the next day
  • Understand the role of majority rule in a purchase agreement before a legal title is received
  • Identify how a buyer and seller can address who bears the risk of loss
  • Recognize who receives the proceeds of an insurance payout after a natural disaster under majority rule of a purchase agreement

Skills Practiced

Practice the following skills for studying:

  • Interpreting information - verify that you can read information regarding the risk of loss and interpret it correctly
  • Information recall - access the knowledge you've gained regarding the role of majority rule in a purchase agreement
  • Problem solving - answer practice problems outlining various scenarios involving equitable conversion

Additional Learning

Find out more information on this subject with the lesson named Risk of Loss & Equitable Conversion: Definition & Importance. Once you've completed the lesson, you will have gone over the following study goals:

  • Define equitable conversion and equitable title
  • Analyze who bears the risk of loss in certain scenarios
  • Understand how contracting is assembled around the doctrine of equitable conversion