Montana Contract for Deed Law


Contract for Deed – General – Montana

Montana Statutes

TITLE 28. CONTRACTS AND OTHER OBLIGATIONS
CHAPTER 1. OBLIGATIONS IN GENERAL
Part 1. General Provisions

28-1-104. Relief from forfeiture.

Whenever by the terms of an obligation a party thereto incurs a forfeiture or a loss in the nature of a forfeiture by reason of his failure to comply with its provisions, he may be relieved therefrom upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty.

TITLE 28. CONTRACTS AND OTHER OBLIGATIONS
CHAPTER 2. CONTRACTS
Part 17. Extinction of Contracts – Rescission

28-2-1711. When party may rescind.

A party to a contract may rescind the same in the following cases only:

(1) if the consent of the party rescinding or of any party jointly contracting with him was given by mistake or obtained through duress, menace, fraud, or undue influence exercised by or with the connivance of the party as to whom he rescinds or of any other party to the contract jointly interested with such party;

(2) if, through the fault of the party as to whom he rescinds, the consideration for his obligation fails in whole or in part;

(3) if such consideration becomes entirely void from any cause;

(4) if such consideration, before it is rendered to him, fails in a material respect from any cause; or

(5) if all the other parties consent.

TITLE 28. CONTRACTS AND OTHER OBLIGATIONS
CHAPTER 2. CONTRACTS
Part 17. Extinction of Contracts – Rescission

28-2-1713. How rescission accomplished.

Rescission, when not effected by consent, can be accomplished only by the use on the part of the party rescinding of reasonable diligence to comply with the following rules:

(1) He must rescind promptly upon discovering the facts which entitle him to rescind if he is free from duress, menace, undue influence, or disability and is aware of his right to rescind.

(2) He must restore to the other party everything of value which he has received from him under the contract or must offer to restore the same, upon condition that such party shall do likewise, unless the latter is unable or positively refuses to do so.

TITLE 70. PROPERTY
CHAPTER 20. TRANSFER OF REAL PROPERTY
Part 1. Method of Transfer

70-20-115. Notice to purchaser of property under contract for deed.

(1) As used in this section, “purchaser under contract for deed” means:

(a) any person who:

(i) has entered into a contract with the record owner of real property in which it was agreed that the record owner will deliver the deed to the property to the purchaser when certain conditions have been met, such as completion of payments by the purchaser; and

(ii) has recorded the contract or an abstract of the contract in accordance with Title 70, chapter 21;

(b) any assignee or successor of a person included under subsection (1)(a), if such assignee or successor has also recorded the contract or an abstract of the contract in accordance with Title 70, chapter 21.

(2) When it is required by statute that legal notice be given to the owner of real property, the same notice must be given to a purchaser of that property under a contract for deed.

TITLE 70. PROPERTY
CHAPTER 21. RECORDING TRANSFERS AND OTHER TRANSACTIONS RELATING TO REAL PROPERTY
Part 1. General Provisions

70-21-102. Unrecorded instruments valid between parties.

An unrecorded instrument is valid as between the parties and those who have notice thereof.

Montana Case Law

A contract for deed is, by definition, an executory contract. See Dobitz v. Oakland (1977), 172 Mont. 126, 561 P.2d 441. It is an agreement by a seller to deliver the deed to property when certain conditions have been met, usually when the buyer has completed making payments to the seller. Tungsten Holdings, Inc. v. Olsen, 50 P.3d 1086 (2002).

Equity abhors forfeitures. Montana’s anti-forfeiture statute, Mont. Code Ann. § 28-1-104, reflects this policy and authorizes a district court to relieve a party from forfeiture in any case where he sets forth facts which appeal to the conscience of a court of equity. Specifically, § 28-1-104 provides that whenever by the terms of an obligation a party thereto incurs a forfeiture or a loss in the nature of a forfeiture by reason of his failure to comply with its provisions, he may be relieved there from upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty. Quigley v. Acker, 955 P.2d 1377 (1997).

A party qualifies for relief from forfeiture under Mont. Code Ann. § 28-1-104, if he has tendered full compensation for his obligation, his default under the contract was not the result of a grossly negligent, willful, or fraudulent breach of duty, and he asserts facts which appeal to the conscience of the court of equity. Id.

Section 28-1-104, MCA, applies only when the party exposed to forfeiture has offered the entire outstanding balance as full compensation on the contract. Burgess v. Shiplet, 230 Mont. 387 (1988); Daugherty Cattle Co. v. General Construction Co., 254 Mont. 479 (1992).

A contract for deed is a different legal concept than a purchase money mortgage. Although certain similarities do exist between the two, it is clear that the legislature intended to distinguish between a mortgage and a purchaser under a contract for deed. Aveco Properties Inc., v. Olsen, 229 Mont. 417 (1987).

A purchaser under a contract for deed is described in Mont. Code Ann. § 70-20-115 as (a) any person who: (i) has entered into a contract with the record owner of real property in which it was agreed that the record owner will deliver the deed to the property to the purchaser when certain conditions have been met, such as completion of payments by the purchaser; and (ii) has recorded the contract or an abstract of the contract in accordance with Title 70, chapter 21; (b) any assignee or successor of a person included under subsection (a), if such assignee or successor has also recorded the contract or an abstract of the contract in accordance with Title 70, chapter. Id.

Unless the contract provides otherwise, a seller need not provide marketable title to real property sold under a contract for deed until the date set for final payment and tender of the deed. Liddle v. Petty, 816 P2d 1066 (1991).

When the purchase price of property under a contract for deed is paid in installments, default in the payment of any installment is a distinct breach and gives the vendor the right to declare a forfeiture. Id.

A contract for deed between appellants and a life estate contracted for therein are effective and enforceable as against the parties and also against subsequent purchasers who have notice of the contract under 70-21-102. Notice to a subsequent purchaser can be constructive notice through a duly authorized, trained real estate agent who acts for the purchaser throughout the purchase transactions. A misapprehension on the part of the purchaser as to the contract provisions is not to be confused with lack of knowledge or notice. Harbeck v. Orr, 627 P2d 1217, (1981).