Memorandum of Contract

When a buyer in a real estate sales contract starts to think that the seller is getting cold feet, the buyer may want to file a “Memorandum of Contract” or “Memorandum of Agreement” in the county deed records to cloud title, put subsequent purchasers on constructive notice of the buyer’s equitable title, and ensure that the seller does not try to sell to another buyer. Tex. Prop. Code § 13.002; 12.001. The buyer can claim equitable title through the contract. See Johnson v. Wood, 138 Tex. 106, 157 S.W.2d 146 (1941). A good memorandum should “contain all of the essential elements of the agreement.” Crowder v. Tri-C Res., 821 S.W.2d 393, 396 (Tex. App.—Houston[1st Dist.] 1991). At a minimum, the memorandum should contain the names of the parties to the contract, a description of the property, the date of the contract, and a clause referring to the contract. Because the goal is to put subsequent buyers on constructive notice, the memorandum should contain as much information as possible, however, most people do not want to record the contract itself due to privacy considerations.

The buyer should file the memorandum of contract at his or her own risk. If the buyer and seller become embroiled in a dispute related to the sales contract and the buyer loses the dispute in Court, then the contract may provide that the seller could recover its attorney’s fees against the buyer and the buyer could be looking at an Action on Fraudulent Lien or Claim under Chapter 12 of the Texas Civil Practices and Remedies Code and criminal liability if the memorandum is not filed in good faith or is not released in a timely manner when release becomes appropriate. Bowles v. State, 2006 Tex. App. LEXIS 7341, *2-3 (Tex. App.—Houston 1st Dist. Aug. 17, 2006).

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.