Blackacre is a 500-acre farm. Most of Blackacre’s property is used to grow crops and to provide pasture for cattle. There is also a house on Blackacre, as well as a stable for horses. O, the owner of Blackacre, agrees to sell Blackacre to B. The sales contract is executed on Day 1. The contract provides that the purchase price is $900,000, identifies O as the seller and B as the buyer, and properly describes Blackacre as the property being sold. The closing is set for Day 60. There are no contingencies in the contract. Further, there are no mortgages, liens, or other encumbrances on Blackacre. B has adequate financing to close the sale, and there are no defects in O’s title or on the property that would interfere with closing.
The sales contract is governed by the common law of property. The contract contains no provisions about risk of loss or insurance. Nevertheless, O maintains casualty insurance on the house and the stable in the amount of $100,000.
B intends to live in the house on Blackacre and to keep horses in Blackacre’s stable upon closing on Blackacre. On Day 30, lightning strikes the stable, which burns to the ground. The cost to rebuild the stable is $200,000, and the stable cannot be rebuilt before the Day 60 closing date. B immediately seeks to rescind the sales contract. B tells O that the lease on B’s current residence is about to expire, and without the stable on Blackacre, B will have nowhere to put his horses. B therefore wants to rescind the sale in order to buy a different property. O refuses to agree to rescission, and seeks to hold B to the original closing date and sales price. At the same time, O tells B that the insurance company has paid O $100,000 toward the cost of rebuilding the stable.
On Day 45, O dies. O’s will leaves all of O’s real property to X, and all of O’s personal property to Y. On the original closing date, both X and Y tender the Blackacre deed to B, in exchange for $900,000, minus the $100,000 insurance payout, for a total of $800,000. B refuses the tender, and asserts that the contract is now completely void due to the loss of the stable and the death of O.
- Upon O’s death, what legal interests do B, X and Y each hold in Blackacre? Explain.
- Can either X or Y force B to complete the purchase of Blackacre? Explain.
- Assuming that B must purchase Blackacre before the stable is rebuilt, what would be the correct purchase price? Explain.