SOCIETÀ ITALIANA DI DIRITTO ED ECONOMIA
Randall Johnson (UMKC)
Abstract
This essay, which is part of the University of Kansas Law Review Symposium on the seventy-fifth (75th) anniversary of Shelley v. Kraemer, is the first to explain how a current successor in interest to a racially restrictive covenant may limit more of their own downstream costs. By definition, a downstream cost is any expense that arises after the formation, and in the course of performance, of a valid common law contract. Examples of downstream costs include the time, money and energy that some property owners expend in removing racially restrictive covenants from their deeds.
The essay does its work by encouraging more successors in interest to internalize their own downstream costs, at least on a prospective basis, by making use of self-help options like present and future title covenants. In some cases, the present covenant against encumbrances may be used to limit the costs of removing racially restrictive covenants. Whereas in other situations, wherein present title covenants are not available due to the fact that the closing already took place, a future covenant of further assurances could fully internalize the costs of removing these now-unenforceable terms.
This essay’s innovative use of title covenants has a range of theoretical and practical implications. For example, in keeping with recent legal scholarship, these self-help options underscore the point that valid common law contracts should never include unenforceable terms such as racially restrictive covenants. Second, the essay’s proposed use of various title covenants highlights an inconvenient truth: that too little attention is devoted to the possibility that unenforceable terms may discourage legal compliance. And, third, these self-help options point out a hidden problem with the status quo: any failure to remove unenforceable terms, such as racially restrictive covenants, causes confusion about how the legal system actually works.