Struck Pyrite Sample Answer

The first issue is consideration. Consideration law is [as on the attached sheet].

Is there a benefit to the promisor here? Well, Mel received nothing in exchange for his option promise. He was supposed to receive $10, but Alice never paid it, apparently. The facts do not mention that. I'd have to ask Mel specifically, but the facts don't say.

Is there a detriment to the promisee? Alice didn't pay the $10. That was the only detriment that was bargained for. Alice has done lots of non-bargained-for detriment: spent $2,000 for the presentation, two days showing the property, formed a contract with Pedro's. But Mel bargained for none of this.

Is there a mutual promise? no. Alice made no promises until she exercised the option.

Bargain? Well, there is no form of consideration that Mel bargained-for. He was induced to give the option by the mere chance that Alice would accept, it seems. A mere chance at a benefit has not traditionally been consideration.

Some courts have held that recitation of a consideration in an option contract is effective, even though nominal. Here we did have a recitation of consideration: "$10 in hand paid." So some courts would hold this effective. This is an issue of first impression in this state, so our courts might adopt this rule. Which rule is better? The policy choice is actually between three options: We can distrust the parties and require a real bargain, that the $10 actually be paid; or we can trust the parties completely and say that their mere assent is effective. Or, it seems to me we have a third option: we can say that a bargained-for chance at a benefit is sufficient consideration. On the last option, I think the parties here are quite sophisticated. Mel is older and has farmed for many years. Farming is a complicated business now, and requires some sophistication, particularly if one grows cotton and rice profitably. We don't know that Mel was profitable, but that he wants to sell in order to retire indicates that he has been living off the farm, perhaps, so there must have been some profit. He likely knows, because Smallville is growing, that other farms have been selling. So he knows there is a market for farms nearby. Alice, on the other hand, has proved her sophistication: She is a licensed, active realtor, and can manage to obtain presentations before large companies interested in commercial real estate, taking up two days worth of executive time. She also completed a sale with one of them, which sale was advantageous to that business and showed Alice's shrewdness: a peanut producer will want to locate next to Skippy's, so she has chosen her buyer well. So perhaps consideration was not necessary here. T he policies of consideration: evidentiary, cautionary, to produce understanding in a jury, and so on, are largely met with the agreement is in writing and the parties are sophisticated. The theory of the

On the other hand, that has been tried before, in Pillans, which was rejected in Rann. The consideration requirement has a long history. Perhaps an easier move, more acceptable to the judiciary, would be the third option: to get the court to accept a chance at a benefit as a consideration. Mel in fact bargained for the chance to get Alice to seriously consider buying his property. She in fact did seriously consider it. She marketed the property by preparing presentations, at great expense, and giving them. IN fact, she did give Mel a chance-she elected to exercise her option. So she has in fact given Mel the benefit that he bargained for. It's almost as if Mel has purchased junk bonds from Alice. The stock represents a chance at a benefit: the stock might in fact be worthless, but it might be profitable. Purchasing junk bonds and optioning your property are economically the same thing from Mel's point of view-a bet on whether a deal will be profitable. Only it if is does one get any benefit. I can argue this to the court.

I'm not sure I like the first option, but it has the most precedent for it around the country. Should we let Mel off merely because he didn't collect his $10? That's a pretty sad result, it seems to me. I'm sure Alice would pay the $10 if she thought it was legally required. Perhaps we can imply a promise that she pay it. Nonetheless, I it is possible that the court adopt this requirement, of an actual, traditional bargain. So there is a chance Mel might lose.

Promissory estoppel? Rule is on the sheet.

Was there a promise? Yes, Mel optioned his property-promised to hold his offer open.

Should the promisor reasonably expect his promise to induce action of forbearance? yes, because if Alice wants the property, she will have to obtain financing to purchase it. It is possible to see Alice's lining up another purchaser as obtaining financing. She has in fact spent less in obtaining that financing than she might in obtaining a large loan to cover the purchase. If Mel knew that Alice was a licensed realtor, then he might also think that she was going to try to resell in the next 30 days. She did, after all, have an option already written out in her car, and she was the one who called Mel and wanted to talk. That is something a realtor would do. Even so, it seems Alice's actions were also consistent with her wanting to buy for herself, because her property bordered Mel's. So Mel could have taken Alice's proposals as a neighbor's, not as a realtor's. On the other hand, Alice was no farmer, and the only land we know she owns is only 10 acres, not enough to farm profitably, probably. Moreover, the 10 acres is near the highway and is long that thin. I think we might go to a jury as to what Mel's expectations are.

Did the promise induce action? Yes, as noted above in the discussion of non-bargained-for detriment. She did line up another buyer and bind herself to sell to it, apparently.

Would injustice result if the promise were not enforced? Yes, because Alice is now on the hook for the property to Pedro's. This would be injustice, clearly, I think. Alice has reasonably relied on Mel's word, and it would not seem fair at all to let him back out now. PE should make his option enforceable.

Did she misrepresent? Law is on the sheet.

False statement? No, she stated nothing falsely.

omission? She didn't tell him that she was planning to market the property to commercial interests.

Did she have a duty to speak? No duty when parties are at arm's length and underlying facts are reasonably within the knowledge of both parties. Here, the parties are at arm's length. Mel may indeed think that Alice is a neighbor. If he thinks she is a realtor, then perhaps she is his realtor and has a duty to protect his interests, but she perhaps has not presented herself as a realtor. If not, then Mel may well think she is buying for herself, and the parties are at arm's length.

Was knowledge of the facts reasonably within the knowledge of both? Alice knew commercial parties might be interested. Did Mel? Well, he must have known that Smallville was growing and that business was moving out his direction-south, away from the city. Skippy had just purchased the property across the highway weeks before the option deal, though we are not sure whether Alice or Mel know of that. Both could have found out, however, especially if the property had been listed for sale. At any rate, this is a typical sale of commercial property. This sort of thing happens all the time. Who knows the market better gets the better deal, and Mel must have known that. Mel might have been suspicious when Alice was all ready to buy the property and is not a farmer. Reasonably, I think Mel should have protected his own interests here.

Was the omission material? Well, yes. Had Mel known what Alice's prospects were he would have charged her more or perhaps hired her as his realtor.

Did she have an intent to mislead? Probably not, given that there was no way that she could know that Pedro's or the other company would buy. She was speculating on the market. There was not much to tell Mel when he optioned his property.

Did Mel rely on this omission when he entered the contract? Well, that's tough to say. It appears he never thought about it. If he did not rely, then there is no need to talk about whether his reliance was reasonable.

I would bet that a court would hold that Mel's option was enforceable and no misrepresentation occurred.

43 minutes (some typos corrected afterwards)