Essay Question 1 (50 minutes estimated time)
Larry Lesser owned an old warehouse building near downtown Columbia in the State of Mystery. He had inherited the building from his grandfather in 1999 and had very little knowledge about the condition of the building. In January 2001 he was approached by Tom Thompson, who expressed an interest in renting the building for use as an assembly plant for lawnmowers. Thompson had an arrangement for purchasing the components from Chinese manufacturers, assembling the mowers, and selling them wholesale to local garden and hardware stores. On January 15, 2001, Larry and Tom signed the following agreement.
Larry Lesser agrees to lease his warehouse at the corner of 4th and Cherry Streets in Columbia, MY to Tom Thompson for five years at a rent of $1000 per month, commencing today. The premises are to be used for lawnmower assembly. Thompson may not sublet without Lesser's consent. Thompson to be responsible for maintenance.
[signed] Larry Lesser [signed] Tom Thompson [date] 1/15/2001
Tom moved in his equipment and inventory immediately and began running his business, which went well for about a year. Then, in January 2002, Tom's suppliers in China raised their prices sharply. Tom found that he could not assemble mowers and sell them profitably. His friend, Andrea Anderson, said, "I need some space like that for my scrapbook printing business. I would be willing to sublet the property from you." So Tom and Andrea signed the following agreement on January 15, 2002.
Tom Thompson hereby sublets his leased warehouse at the corner of 4th and Cherry Streets in Columbia MY to Andrea Anderson for the remainder of the lease term, which ends on January 15, 2006. Anderson agrees to carry out her duties, and if she does not, Thompson can terminate this sublease and take back the premises.
[signed] Tom Thompson [signed] Andrea Anderson [date] 1/15/2002
They did not mention this agreement to Larry at the time. Later in January, after Andrea took over possession of the property, it began to show serious deficiencies. The roof leaked badly when it rained, and the toilets in the restrooms of the warehouse ceased to function. Andrea complained to Larry, but he refused to take any action, saying "I don't have to do anything for you, since I have no deal with you at all."
Andrea then moved out and refused to pay any rent to Larry. (She had paid no rent at all up to that time.) Larry was incensed, and has threatened to sue both Tom and Andrea for rent for the remaining four years of the lease term, a total of $48,000. He has not made any attempt to find another tenant for the warehouse.
Tom and Andrea, who are still friends despite the incidents at the warehouse, have sought your advice. Andrea has mentioned that she has re-read the lease, and now believes that the "sublet" to her was illegal under the lease. "On that basis, I can't possibly be liable for any rent," she has said. Please evaluate Larry's claims against both Tom and Andrea, discussing all legally relevant issues.
Paul Perry was interested in buying a house. After looking at many houses in the City of Columbia, State of Mystery, a friend named Sam Sellers told Paul that Sam had a house for sale in Boone County, outside the city limits. Paul visited the house, which was located on a 5-acre tract of land. The house was quite modern, having been built in 1998, and the land included an attractive vegetable garden three acres in size. Perry and Sellers agreed on a $100,000 price. Sam wrote, and they both signed, the following paper on April 1, 2002:
Sam Sellers agrees to sell his house and land in Boone County to Paul Perry for $100,000 cash. Title to be subject to all easements of record. Closing to occur on May 15, 2002. Perry has given Sellers $2000 as earnest money, which Sellers can keep as liquidated damages if Perry fails to perform. [signed] Sam Sellers [signed] Paul Perry
Perry advised Sellers that he was a little short of cash, and would have to pay Sellers the $2000 earnest money at a later time. In fact, the money has never been paid and Sellers has not pressed Perry for it.
Perry contacted Boone County Title Company and ordered a preliminary title report. The report, based on the title company's search of the records in the Boone County Recorder's Office, arrived on April 6. It disclosed that Sellers had purchased the land on which the house was located in 1990 as part of a larger, 20-acre tract. Further, in 1995, Sellers had sold the other 15 acres to Cory Colvin. The deed by which Colvin acquired the 15-acre parcel contained the following language:
"Each party agrees that their respective parcels shall be used for agricultural purposes for twenty years from the date of this deed."
Perry also contacted Sally Surveyor and asked her to survey the 5-acre parcel. Her report, also received on April 6, disclosed that underground electrical power lines run across the parcel over a ten-foot strip of land along the edge opposite the highway. These power lines are the source of electrical power to the house, and also serve several other properties in the area. The electric company has apparently never recorded an easement for the electrical lines, since no easement is mentioned in the title report. Sally Surveyor discovered the electric lines because she noticed two small green plastic electrical junction boxes, each about one cubic foot in size, on the surface of the ground at the boundaries of the tract. She then obtained the additional details above from the electric utility company.
Paul Perry has consulted you. He is worried about the matters mentioned in the title and survey reports, and would like to get out of the contract if he can avoid any liability for doing so. Please prepare a memo to Perry, advising him whether he can do this and, if so, how he should go about it, discussing all relevant legal issues. (Bear in mind that it is now May 6, 2002.)