Bar Exam (US) Contracts: Question below is based on the following fact situation. Hoedown was th...

Question

Question below is based on the following fact situation.

Hoedown was the undisputed record owner of Cornish Acres, a 200-acre farmland in northern Kansas. In 2003, Hoedown entered into a three-year lease with Overalls, who planned to use Cornish Acres for the raising of cattle and hogs. The lease provided that Overalls would pay Hoedown a monthly rental of $1,500, payable on the first day of each month.

Overalls took possession of Cornish Acres on June 1, 2003. Shortly thereafter, he built thereon, at his own expense, a corn crib made of lumber which was fifteen feet wide and twenty feet long and set on loose bricks. At each corner of the corn crib, he set a wood post in the ground fifteen inches deep and nailed the corn crib to the four corner posts. In 2005, Overalls also built a hog house of brick and mortar on the premises. The hog house was constructed on a cement foundation which extended into the ground twenty-four inches. This structure was thirty feet wide by seventy feet long, and was used to keep the brood sows warm during the winter months.

These permanent improvements increased the appraised market value of Cornish Acres from $250,000 to $275,000. In May 2006, Hoedown informed Overalls that he was going to put the farm up for sale. The next month, when the Hoedown-Overalls lease expired, the parties settled a dispute over Overalls's right, if any, to compensation for the improvements by the following written agreement:

"On the sale of Cornish Acres, Hoedown hereby agrees to pay Overalls twothirds of any sale proceeds in excess of $250,000, provided that Overalls may remain on the farm until November, 2006, rent-free while Hoedown tries to sell it. After that time, however, Overalls may remain on the farm until closing, but at a $1,000 monthly rental."

Hoedown initially set the asking price at $300,000. After receiving scant interest, Hoedown decided to reduce the price to $260,000. This price reduction so infuriated Overalls that he thereafter made negative comments about the farm to all of the prospective buyers except Husker, who inspected Cornish Acres while Overalls was away on vacation.

On February 1, 2007, after rejecting offers for $240,000 and $250,000, Hoedown finally sold Cornish Acres to Husker for $256,000. Thereupon, Overalls, who had paid no rent since June, 2006, moved out. After closing, Hoedown refused to pay Overalls any of the sale proceeds, and Overalls brought suit to recover damages for breach of contract.

Which of the following statements, if true, most persuasively supports Overalls's contention that he is entitled to recover at least $2,000 from Hoedown (or the equivalent of two-thirds of the sale proceeds in excess of $250,000, minus two months unpaid rent at $1,000 per month)?

AnswerChoose the correct answer.Choose all that apply. Correct Partially correct Incorrect Don't Know

  1. A
    Correct Answer
    Hoedown breached an implied promise by failing to attempt to sell the property at $275,000, which was the appraised market value of Cornish Acres.
  2. B
    Correct Answer
    Since Overalls made no negative comments about the farm to Husker, there is no showing that Overalls' remarks to the other prospective buyers necessarily caused any loss to Hoedown (i.e., prevented him from selling the farm for more than $256,000).
  3. C
    Correct Answer
    The Hoedown-Overalls agreement contained only one express condition (i.e., Overalls was permitted to remain on the farm during Hoedown's efforts to sell it), and since that condition has occurred, Overalls is entitled to his share of the proceeds from the sale.
  4. D
    Correct Answer
    Even if Overalls's failure to pay any rent for the last two months of his holdover was a material breach of contract, Hoedown's promise to pay Overalls a share of the proceeds of the sale was an independent covenant.
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