A buyer and seller enter into a valid contract for the sale of a commercial property. Before the closing date, a severe storm damages the property. At the time of the storm, legal title remained with the seller, but equitable title had passed to the buyer under the doctrine of equitable conversion. The jurisdiction adheres to the majority rule regarding risk of loss. Who bears the risk of damage to the property resulting from the storm?
The seller bears the risk of loss because legal title had not transferred to the buyer at the time of the storm.
The buyer bears the risk of loss because possession of the property had been transferred to the buyer prior to closing.
The buyer bears the risk of loss because equitable title transferred to the buyer at contract signing.
Both the buyer and seller share the risk of loss equally since the damage occurred before legal title passed.
The correct answer is based on the majority rule under equitable conversion, which states that the buyer bears the risk of loss once equitable title transfers to the buyer, typically at contract signing. The seller retains legal title but holds it in trust for the buyer until closing. The correct answer reflects this principle of risk allocation. Incorrect answers fail to consider the division of legal and equitable ownership or misstate minority approaches that are inconsistent with the majority rule.
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