Final Examination Essay Questions - Winter 2001

Essay Question 1 . (60 minutes estimated time) Vic Vendor was an experienced real estate speculator who owned numerous parcels of land in Boone County in the State of Arkansouri. One day he was having lunch with a long-time friend, Pam Purchaser. Pam mentioned that she was looking for a lot on which to build a new home for herself and her family. Vic commented that he had for sale a beautiful 5-acre tract overlooking the Arkansouri River in the town of Easley. Pam said that she was familiar with the land and would like to buy it. Vic stated that he would be willing to sell it for $40,000. "Heck," said Pam, "We don't need no realtors. Let's just do the deal right here."

Pam then wrote out the following on the back of an old envelope she found in her purse:

    April 1, 2001. Vic Vendor agrees to sell his land in Easley, Boone County, Arkansouri to Pam Purchaser for $40,000.

Both Vic and Pam wrote their names on the paper, and Pam put it back in her purse. She told Vic she would be ready to close on the sale in a couple of months, and Vic said "O.K by me."

Pam immediately had a mobile home that she owned moved onto the land, and she hired a well-drilling company, which drilled a water well on the land. However, as she investigated the land further, she discovered the following information:

1. The property taxes on the land have not been paid for the past three years, and have a total unpaid balance owing of $1,500. However, the County has not yet taken any steps to conduct a tax sale of the land.

2. There is an easement over the land in favor of the Boone County Rural Electric Cooperative for electric power lines and poles. There is an actual power line in place on the easement, which serves several nearby homes, and would provide power to Pam's house if she built on the lot.

3. The town of Easley had never previously been incorporated as a legal municipality. (Indeed, the term "Easley" was merely a description of an area of Boone County with no specific boundaries.) However, on April 15, 2001, the town became legally incorporated and on that same date adopted a zoning ordinance. This ordinance superseded the previous County ordinance, which had zoned Vic's land residential. The new town ordinance zoned the land "Exclusive Agricultural," making it illegal to build a house there. This was consistent with the town's announced policy of preserving Easley's "rural character and ambiance." Vic was aware of the proposed incorporation of Easley and the proposed adoption of the zoning ordinance when he agreed to sell the land to Pam, but made no mention of it to her. Of course, these legal steps by Easley were not completed until 14 days after Vic and Pam made their agreement.

Pam has now consulted you. She has asked whether she can (1) get out of her obligation to buy Vic's land, and (2) recover damages from him. She notes that land prices have been rising rapidly in Boone County, and that Vic's land, if a house could be built on it, would be worth about $50,000 today. Please write a memo to Pam, considering the facts above and advising her of her rights, discussing all relevant issues.

Essay Question 2 (50 minutes estimated time). Patty Perry had always wanted to own her own restaurant. After saving her money for many years, she accumulated enough to purchase a coveted "Burger Time" franchise. In addition to purchasing the franchise, she also leased an existing building from Burger Time, Inc. in which to operate the restaurant. The lease, which was for a five-year term, contained the following clauses (among others):   

    A. Tenant may not sublet the premises without prior consent of Landlord.

    B. Tenant shall at all times during the term of this lease sell hamburgers only on buns manufactured and supplied by Landlord.

    C. If Tenant shall breach any covenant of this lease, Landlord may immediately terminate the lease by notice to Tenant.

For three years, Patty operated the restaurant, using only buns supplied by Burger Time, Inc. Then she tired of the business and decided to sell it to Bob Bunn. Without informing Burger Time, Inc., she executed and delivered to Bunn a document reading as follows:

    Patty Perry hereby assigns to Bob Bunn her leasehold estate in her Burger Time restaurant premises located at [a legal description was inserted here]. This assignment shall last until one week before the end of the term of her lease with Burger Time, Inc., at which time this assignment shall terminate and Patty Perry shall have the right of possession of the premises.

[signed] Patty Perry

Bob Bunn took possession of the restaurant and began paying the rent as due to Burger Time. However, he quit ordering Burger Time buns and began buying his buns from a local bakery instead.

You have been consulted by the general counsel of Burger Time, Inc., who has asked your opinion as to whether Burger Time has any claims or remedies against Patty or Bob arising from the facts stated above. Please answer, discussing all relevant issues.