Shortly following the death of her husband George, Sarah Sterling, a resident of Santa Clara County, decided to sell her house and move to a location closer to her children. She listed her house for sale with a real estate broker who told her that she would be lucky to get $300,000 for the house.
The broker’s prediction seemed to be correct. Sarah received only two offers for the house, both for $275,000, during the first two months that it was listed for sale. Sarah rejected both offers. Thereafter the broker received a telephone call from a man who introduced himself as Will Peterson. In the phone call, Peterson offered $325,000 cash for Sarah’s house "if my move to the area is approved, if the seller notifies me within 24 hours, escrow to close in two months." The broker asked Peterson what approval he was waiting for and also asked when Peterson would know about the approval. Peterson replied only that he would know within a week, and he gave the broker the telephone and FAX number of a hotel at which he was staying. The broker did not press Peterson for further information.
Flushed with her seeming good fortune, Sarah decided to sell the house to Peterson, but neither she nor her broker contacted Peterson within 24 hours of his telephone call. Instead, 36 hours after Peterson’s call, Sarah signed and FAXED to Peterson a note saying: "Will take the $325,000 for the house, to close in two months. If your move is approved we can sign a contract."
A few days after sending the FAX, Pat Sterling, Sarah’s sister-in-law and next door neighbor, discovered and then told Sarah that Peterson was the infamous Billy Peterson, a former resident of San Francisco County who had just been paroled and released from prison after serving two years for torturing and maiming pets of his former neighbors. William Peterson was his given name, but he often went by the name "Billy" and that is how the media had reported his name when he was arrested, convicted, imprisoned, and paroled. Pat also told Sarah that a few days after Peterson had first called Sarah’s broker, the parole board had approved Peterson’s request to move to Santa Clara County. That, it turns out, was the approval for which Peterson was waiting.
Pat, concerned about the safety of her own pets, begged Sarah to get out of the deal. Sarah replied with great sympathy, but also told Pat that calling off the deal might cost as much as $50,000, because the best offer that Sarah had received before Peterson's call was $275,000. Pat replied: "If that happens, I would want to help you out with some of the money that George left me in his will because that is what George would want."
At Sarah’s request, the broker telephoned Peterson. The broker spoke first. He said: "This is difficult for me, but Sarah asked me to call you about the deal." Peterson replied: "What timing! I was just about to call you to tell you that my approval came through and we can go ahead with the deal." The broker replied: "Well, Sarah doesn’t want to go through with the deal because she found out about your conviction." Peterson objected, threatened a lawsuit, and hung up.
Sarah sold the house to another buyer for $275,000. Peterson then sued Sarah for breach of contract. When Pat learned of the lawsuit, and before Sarah had hired a lawyer, Pat wrote Sarah:
"Sarah - - I’m terribly sorry about the lawsuit. You have been a wonderful friend, sister-in-law, and neighbor. Your latest act of kindness is only one of many throughout the years that we have known each other. That’s one of the reasons why George loved you so much. In appreciation, I will pay your legal expenses, up to $25,000, in the Peterson lawsuit. Love, Pat"
Part A
Shortly thereafter, having learned that Sarah had been unfaithful to George before George’s death, Pat refused to pay any money to Sarah either to help out Sarah with the money lost on the sale of the house or to help defray Sarah’s legal expenses. Identify and evaluate Sarah’s legal theories for recovering money from Pat.
Part B
Identify and evaluate Sarah’s legal theories for avoiding liability to Peterson. Do not discuss the Statute of Frauds that is applicable to the sale of an interest in real estate.