Marketable Title

The marketable title doctrine implies a requirement in every land sale contract that the seller will deliver title that is free from reasonable doubt and would not expose the buyer to the hazard of litigation. Unless the contract provides otherwise, the buyer is entitled to receive a title that a reasonable, prudent person would accept — one that is free from encumbrances, liens, and defects that could undermine the buyer's ownership or use of the property.

A title is unmarketable if it contains defects such as an outstanding mortgage, tax lien, or judgment lien; an encroachment by or onto the property; a restrictive covenant that limits use; an easement that burdens the property; a gap in the chain of title; or an adverse possession claim that creates uncertainty about ownership. The standard is not absolute perfection but reasonable certainty — the buyer need not accept a title that involves a genuine risk of future litigation, even if the seller would likely prevail in such litigation.

The timing of the marketable title requirement is important. The seller must deliver marketable title at closing, not at the time of contract formation. This means the seller has the period between contract and closing to cure defects. If the seller cannot deliver marketable title by the closing date, the buyer may rescind the contract, refuse to close, and recover their deposit. The buyer may also seek damages if the seller's failure constitutes a breach.

The merger doctrine provides that contract obligations merge into the deed at closing. Once the buyer accepts the deed, the contract obligations — including the implied warranty of marketable title — are extinguished, and the buyer's rights are determined solely by the deed and any warranties it contains. This makes it critical for buyers to examine title before accepting the deed, because post-closing claims based on the contract's marketable title warranty are generally barred.