The said party of the second part agrees to purchase said property under and subject to an existing first mortgage of $4,000.00 now against the property and pay therefor the sum of $2,500.00 as follows: $200.00 at the time of the execution of this agreement and the balance at the time of settlement.

Again, the property may be clear of encumbrance and the vendor agree to take a first mortgage as part consideration, in which event the clause may read as follows:

The said party of the second part agrees to pay and the party of the first part agrees to accept therefor the sum of $6,500 in the following manner: $200 at the time of the signing of this agreement and the remainder as follows, by executing to the vendor a first mortgage to the amount of $4,000 on said property and the balance of $2,300 to be paid in cash at the time of settlement. (d.) Fire Insurance Policies.

All perpetual policies of fire insurance to be paid for at the withdrawal value, and term policies at proportionate value for the unexpired term.

Fire insurance policies are generally of two kinds, perpetual and term. A perpetual policy is one which remains in force forever without payment of additional premium. It is issued on the payment of one premium based on a charge of 2 per cent. of the amount insured for. Thus the premium on $1,500.00 policy would be $30.00. This policy may be surrendered and cancelled at any time and the holder thereof receive a rebate or return of the whole premium paid less 10 per cent. This is what is known as the cancellation or withdrawal value.

A term policy is a policy which, as the name signifies, issued for a limited term such as one, three or five years. The premium varies according to the risk and the length of the term. The cancellation value of this kind of a policy is the proportion of the unexpired term less the brokers' commission assumed to be 15 per cent. of the premium. Very often, however, the vendor will throw the policy in without charge, especially if it be a term policy, in which event this clause should read:

All fire insurance policies now on said property in-
Icluded in the sale.

(e.) Encumbrance Clause.

"The premises are to be conveyed free and clear of all encumbrance."

This clause, unless qualified by exceptions, means that the vendor undertakes to pass an absolutely clear title. Any encumbrance, such as mortgage, judgment, building restrictions, would, unless paid off, be a noncompliance with this term. However, if the title is to be taken subject to the incumbrance, the clause will read as follows:

"The premises are to be conveyed clear of all encumbrance except a first mortgage of $4,000 as above mentioned."

(f.) Fixture Clause.

"The gas fixtures, heaters, ranges, etc., annexed to said building are included in sale."

In

Fixtures are such articles as are annexed to freehold. Pennsylvania the question whether a given article is a fixture or not depends not on the way it is fastened, but upon the intention of the person who attached it (National Bank of Catasauqua v. North, 160 Pa. 303; McKay v. Meyer Co., 44 Pa. Superior Ct. 293). Thus gas fixtures, heaters, ranges, may or may not be fixtures according to the intention and it has already been held under certain circumstances that they are not (Heysham v. Dettre, 89 Pa. 506). Consequently it is good practice to always insert a clause to the effect that gas fixtures, heaters, ranges, etc., are included in sale. Indeed, it is best to specify all articles about which there may be a controversy as suggested hereafter (See par. 50, suggestion 5).

(g.) Possession Clause.

"Possession is to be given at the date of settlement."

The clause as herein set forth means that at the date of settlement the house will be vacant and possession given to the vendee. If there should be a tenant whose lease does not expire before the settlement a mere assignment of the lease would not satisfy this clause unless the vendee agrees to waive it. If it is desired to take the property subject to an existing lease, it is usually specified as follows:

"Possession to be given by lease." (h.) Apportionment of Taxes, Etc.

Taxes, water rent, rent and interest on encumbrance (if any) to be apportioned for the current term at the date of settlement.

Unless this clause be inserted, taxes levied before settlement are an encumbrance and as such must be paid by the vendor (Densmore v. Haggerty, 59 Pa. 189; King v. Association, 106 Pa. 165).

This is the rule throughout the State, but is perhaps different in Philadelphia, where by local custom taxes, etc., are usually apportioned without special stipulation (Moore v. Taylor, 29 W. N. C. 495). Good practice, however, requires the insertion of the clause even in Philadelphia, and certainly outside of that city.

As the mode of apportioning taxes, water rent, rent, etc., will be discussed and explained fully hereinafter when we treat with the subject of settlements (See Chapter XIV, Part V, Settlements, par. 205), it will suffice now to say that under this clause, taxes and water rent and interest on mortgages, if any as well as rent (if the property is occupied by tenant) are apportioned to the date of settlement. That is, if the settlement takes place in June and the vendor has already paid his taxes for the whole year, it is, of course, plain that he is entitled to a rebate or a return of six months' taxes from the vendee. In Philadelphia it has become customary to apportion the rent also to the date of settlement (Singer v. Solomon, 56 Leg. Int. 315, 8 Pa. D. R. 402), although strictly speaking rent does not accrue day by day, but comes into existence the day on which it is due and belongs to holder of the legal title on the day it is due. It may be necessary outside of Philadelphia and it is good practice even in Philadelphia that it be provided in the agreement that the rent is to be apportioned, as above set forth.

(i.) Kind of Title Agreed On, Etc.

"The title is to be good and marketable and such as will be insured by any title and trust company of Philadelphia. And the said parties hereby bind themselves, their heirs, executors and administrators, for the faithful performance of the above agreement within thirty days. from the date hereof, said time to be the essence of this agreement, unless extended by mutual consent in writing endorsed hereon."

As has been said heretofore (Section on Marketable Title, par. 9), in order to clear up any question that may arise respecting the title without maintaining an action of law, it is well to insert above clause, for by it a safe easy test is specified. Of course in sections of the State where there are no title companies the clause need only read, "The title is to be good and marketable, etc.," and the test then is as set forth hereinbefore in the paragraph on Marketable Title (Par. 9) that any title which exposes the holder thereof to the hazard of a law suit is not marketable.

As an agreement of sale is a contract, like any other contract

it would end on the death of a party, hence the necessity for that part of the clause which specifies that the parties bind themselves, their heirs, executors and administrators to the faithful performance of the agreement. This prevents death of either party from effecting the rights of the other.

46. Execution of Agreement of Sale:

Signature by Agent.

An agreement of sale should be executed, that is, signed by both parties or agents. But when executed by an agent, the agent must be authorized in writing to do so, otherwise the agreement is not binding on his principal (Parish v. Koons, I Pars. 78), unless the principal subsequently in writing ratifies this act of the agent (Darlington v. Darlington, 160 Pa. 65). The delivery of the deed signed by the principal would be a ratification. This point is important and should be kept in mind by all real estate agents and brokers, that they cannot execute a binding agreement of sale nor a lease over three years unless they have authority in writing.

If the vendor is married, care should be taken to have the wife or husband sign, else she cannot be compelled to join in the deed. An agent acting for a married vendor must have his authority to execute an agreement of sale signed by both husband and wife. 47. Acknowledgment of Agreements of Sale: Recording.

It is not necessary for an agreement of sale to be acknowledged by the parties before a notary public and is rarely done, although it has this very important advantage which is overlooked by many real estate agents and brokers, to wit, when acknowledged it may be recorded. An agreement of sale may, under the recording acts, if properly acknowledged, be recorded. By recording an agreement constructive notice is given to the world of the agreement to sell and should the vendor thereafter refuse to carry out his agreement and deliver a deed, the vendee's agreement becomes a cloud on the title which prevents the vendor from selling to any one else; thus practically enabling the vendee to compel the vendor to keep his agreement, without commencing action at law. However an agreement executed by agent must be accompanied by a power of attorney showing the agent's authority to sign, otherwise it will not be accepted by the recorder of deeds for record.

48. Legal Effect of Agreement of Sale.

The moment an agreement of sale is signed it has the effect of

vesting in the vendee what is known as an equitable title to the land. That is the vendee has a right to go to a court of equity to enforce the terms if violated by the vendor. The vendor has in like manner an equitable title to the money. The vendee, however, may at his election enforce the transfer of the legal title to him or waive this right and sue for damages in a court of law.

49. Extinction of Agreement.

(a.) Merger.-An agreement of sale may be extinguished first by deed being made and delivered by the vendor to the vendee in which event it is said to be merged into the deed. That is the deed supersedes or takes the place of the agreement of sale. The general rule is that the deed executed, delivered and accepted is taken to be the ultimate intent of the parties and prevails over inconsistent provision of a prior agreement. This rule has of course exceptions, but consideration of these are unnecessary for our consideration here.

(b.) Cancellation or Recision by Parties.-If the parties to the agreement mutually agree that it be cancelled, abrogated or avoided this of course extinguishes the agreement of sale. The agreement to rescind the agreement of sale need not be in writing but for sake of safety and convenience of proof it is much better to have it done in writing (McClure v. Jones, 121 Pa. 550).

50. Suggestions in Drawing Agreements of Sale.

The condition of the property purchased will of course suggest additional clauses which may be inserted for the better protection of either of the parties. The following are some suggestions as to points to observe in drawing agreements of sale:

1. If the property about to be purchased is not vacant, specify when and how possession is to be given.

2. If the vendee is to have possession before settlement have him sign a lease containing the usual ejectment clause (see form par. 248), for the period to the time of settlement. This will protect the vendor in case the settlement is not completed and the vendee refuses to move out. The ejectment clause in a lease provides a speedy method of ejecting a recalcitrant tenant and saves delay and expense of the ordinary proceeding at law.

3. See that the agreement provides that taxes, water rent and house rent are to be apportioned at the settlement. By local custom (Moore v. Taylor, 29 W. N. C. 495), in Philadelphia, this