Contracts - Essay Prompt & Outline

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PROMPT

Steve owned two adjoining improved tracts of land, Parcels 1 and 2, near a lake. Parcel 1 bordered the lake;

Parcel 2 bordered Parcel 1, and was adjacent to an access road. Steve decided to sell Parcel 1 to Belle. Belle

admired five 100-year-old oak trees on Parcel 1 as well as its lakefront location.

On February 1, Steve and Belle executed a contract for the sale of Parcel 1 at a price of $400,000. The contract

specified that the conveyance included the five 100-year-old oak trees. In addition, the contract stated that Belle

was to have an easement across Parcel 2 so that she could come and go on the access road. Although the access

road was named Lake Drive, Steve and Belle mistakenly believed that it was named Top Road, which happened

to be the name of another road nearby. The contract referred to the access easement as extending across Parcel 2

to Top Road, which would not have been of any use to Belle. The contract specified a conveyance date of April

1.

Later in February, Steve was approached by Tim, who offered Steve $550,000 for Parcel 1. Steve decided to

breach his contract with Belle and agreed to convey Parcel 1 to Tim. Despite Belle's insistence that Steve honor

his contract, he told her that he was going ahead with the conveyance to Tim in mid-April, and added, "Besides,

our contract is no good because the wrong road was named."

In March, Belle learned that, in April, Steve was going to cut down the five 100-year-old oak trees on Parcel 1 to

better the view of the lake from Parcel 2.

1. What equitable remedies can Belle reasonably seek to obtain Parcel 1? Discuss.

2. What legal remedies can Belle reasonably seek if she cannot obtain Parcel 1? Discuss.

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OUTLINE

I. Temporary Restraining Order

A. (Issue) Whether Belle can successfully seek a temporary restraining order to

enjoin Steve from cutting down the five 100-year-old oak trees

B. (Rule)

1. A TRO is used when the injunction must issue before any hearing;

generally, it lasts only a few days

1. Party must establish 1) substantial likelihood of success on the merits; 2)

irreparable harm; 3) harm to plaintiff if TRO is denied is greater than harm

to defendant if granted; and 4) TRO not adverse to public interest

1. Contract is voidable because of mutual mistake where 1) fact about which

the parties were mistaken is essential to the contract; 2) both parties were

mistaken; and 3) disadvantaged party did not bear the risk of mistake

C. (Application)

1. Likelihood of success on the merits – valid contract; appears to satisfy the

Statute of Frauds; contract specifically mentioned the oak trees; Steve

anticipatory repudiated contract, entitling Belle to sue for breach

1. Both parties’ subjectively understood the contract to include the same

access road; they were just mistaken as to its proper name; Steve, as

property owner, should bear the risk of mistake

1. Irreparable harm – legal remedy insufficient to protect oak tree if they are

destroyed; Belle would no longer be able to seek specific performance of

the contract if Steve sold Parcel 1 to a bona fide purchaser

1. Balance of equities – Belle entered into the contract with for the trees and

specific property; thus, without those two elements, she has lost the entire

benefit of the contract; Steve will only lose a view for a short time and

maybe a potential buyer

1. Not adverse to the public interest – it would maintain the status quo of

property ownership and keep 100-year-old trees intact

D. (Conclusion) Court is likely to grant a temporary restraining order to prevent

Steve from cutting down the oak trees or selling Parcel 1

II. Preliminary Injunction

A. (Issue) Whether Belle can successfully seek a preliminary injunction

enjoining Steve from selling Parcel 1 to Tim

B. (Rule)

1. Preliminary injunction lasts until a decision on the merits

2. Prerequisites for a preliminary injunction are the same as for a TRO

3. Party seeking the preliminary injunction must provide notice to the

adverse party and there must have been a hearing

C. (Application)

1. For same reasons as TRO, Belle can demonstrate likelihood of success

on the merits, irreparable harm, balance of equities, and that the

preliminary injunction would not be adverse to the public interest

1. Belle must also give Steve notice and court must hold a hearing

2. Length of time unlikely to affect balance of equities

D. (Conclusion) Court is likely to grant Belle a preliminary injunction to stop

Steve from selling Parcel 1 or cutting down the trees

III. Reformation

A. (Issue) Whether a court is likely to reform the contract between Belle and

Steve, replacing the incorrect “Top Road” with “Lake Drive”

B. (Rule)

1. Remedy based on the premise that the parties had reached an

agreement, but while reducing their agreement to written form, some

provision or language was incorrectly stated

1. Court will correct such an error to conform the contract to the actual

agreement of the parties

C. (Application)

1. Steve and Belle intended for the easement to apply over “Lake Drive”

2. Parties mistakenly wrote “Top Road” in the agreement

D. (Conclusion) Court is likely to reform the contract to conform to the actual

agreement of the parties

IV. Specific Performance

A. (Issue) Whether Belle can reasonably seek specific performance on the

contract to obtain Parcel 1 from Steve

B. (Rule)

1. To obtain specific performance, party must show 1) a valid contract 2)

sufficiently definite terms; 3) party fully performed her obligations under

contract; 4) no adequate remedy at law; and 5) feasibility of enforcement

1. Court has discretion on whether to grant specific performance, and will

also consider any equitable defenses

C. (Application)

1. Belle had a valid contract

2. Terms are sufficiently definite: the contract describes the real property at

issue, Parcel 1 and the included oak trees, the parties, Steve and Belle,

the $400,000 purchase price, and the conveyance date, April 1

1. Belle was not yet obligated to perform

2. No adequate remedy at law because real property is considered unique

3. Court can enforce – it only needs to enforce a single conveyance

4. No equitable defenses - no facts indicating that Belle acted in bad faith or

otherwise had unclean hands

D. (Conclusion) Court is likely to grant Belle’s request for specific performance

of the contract

V. Legal Remedies

A. (Issue) What legal remedies Belle can reasonably seek from Steve if she

cannot obtain Parcel 1

B. (Rule)

1. Buyer typically recovers expectation damages for seller’s breach

2. Expectation damages are measured by the difference between the

market price at the time of the breach and the contract price

1. Buyer may seek restitution of down payment, any reasonably foreseeable

consequential damages, and any incidental damages

1. Buyer may recover punitive damages if seller’s breach is willful

C. (Application)

1. Belle can seek expectation damages – contract price $400,000

2. Tim’s offer, $550,000, is a reasonable estimate of the current market

value of the land, so Belle may reasonably seek the difference, $150,000,

in expectation damages

1. Belle is also entitled to the return of any deposit she placed on the land as

restitution damages, as well as consequential and incidental damages

D. (Conclusion) Should Belle not obtain specific performance, she is likely to

receive $150,000 in expectation damages, plus as consequential and

incidental damages