Daily Development for
Monday, June 29, 1998
By: Ira Meislik
Daily Developments normally are edited and prepared by Prof. Patrick A. Randolph, who is in China until late July. Ira Meislik will file periodic developments reports in Professor Randolph's absence.
VENDOR AND PURCHASER; RESTRAINTS ON ALIENATION: A provision in a land contract providing that the vendor and vendee will share any profit resulting from the vendee's resale of the property, that any offer to purchase must be approved by the vendor before acceptance, and that any dispute about the value of the property is to be settled by an appraiser constitutes an unreasonable restraint on alienation and is unenforceable.
LaFond v. Rumler, 574 N.W.2d 40 (Mich. App. 1997).
The vendee purchased the property on a land contract providing that if the property were resold by the vendee within fifteen years, the parties would split that portion of the purchase price that exceeded the $60,000 paid by the vendee plus specified taxes. The vendee later sought to have the profit-sharing provision invalidated.
The court held that the provision was unenforceable because it went unreasonably beyond protecting the vendor's legitimate interest in ensuring repayment of the contract. The court acknowledged that the provision did not restrict the vendee's right to sell the property, but based its decision largely on the fact that the contract restricted the vendee's right to sell the property at a price of her choosing. The court reasoned that the vendor's right to reject offers that the vendee might otherwise accept and the fact that an appraiser, who is a stranger to both the property and the contract, could ultimately control the marketability of the property, impermissibly restricted the vendee's freedom to resell the property. In support of its decision, the court also noted that the disputed provision could prevent the vendee from recovering the value of improvements made at her own expense because she had to share the profit with the vendor.
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