Please review the “fact pattern” notes attached and discuss the following:
- Discuss whether Mike and Danny have any legally binding contract. If there is a legally binding contract, is Mike’s oral promise to fix the leaking roof part of the contract. Why or why not?
- Discuss whether Mike and Barbara have any legally binding contract. Is Mike liable for damage to Barbara’s stereo under contract theory? (Do not discuss negligence, warranty or any theory in tort.)
- Discuss whether Mike and Emily have any legally binding contract. Does Mike have to pay Emily for her work on the deck? Who is liable to Mike for the rent due during the time that Emily lived in the house? Explain.
- Discuss whether Mike and Cecelia have a legally binding contract for the purchase of the house.
Five years after purchasing the house from Mike, Danny realized that he could not meet his obligation to We Like to Lend Money, Inc., because he would not be able to pay the balloon payment. Though he had paid every interest-only payment on time, he did not have any money for this final obligation.
Danny was discouraged, so he asked his mother for a loan so that he could travel around the world to think. His mother agreed to loan him $20,000. She prepared a mortgage instrument and Danny consented to all of its terms. They both signed the mortgage, and Danny’s mother properly recorded it. This mortgage was to be amortized over 30 years at 5% interest.
Shortly thereafter, Danny decided that he was moving to Tahiti, and he packed his bags and left. He refused to make any additional payments to any of his creditors.
Assume that We Like to Lend Money, Inc. commenced foreclosure proceedings after Danny failed to pay the balloon payment.
- Describe the process for foreclosure.
- Specify the payout to each party and your reasoning.