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Risk of Loss
When buildings or resources on land are destroyed after a contract is signed but before the deed is conveyed, the question arises whether the seller or buyer bore the risk of loss. In other words, must the buyer still go ahead and pay for the property? Or does the destruction mean that the seller cannot perform the promise to deliver "the property"?
The older common law rule was that the buyer bore the risk of loss. The rationale was that upon signing a sale contract, the buyer becomes the equitable owner, meaning that the buyer has the right to compel the seller to convey the property via the equitable remedy of specific performance. This idea is called "equitable conversion." Many states have moved away from the old rule, and put the risk of loss on the party in possession of the property at the time of the loss. So if the buyer has not yet taken possession, the seller bears the risk, and must repair the loss or permit the buyer to cancel the sale. The Uniform Vendor and Purchaser RIsk Act, enacted in New York, adopts this rule.
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