QUESTION 1 (45 points/40 minutes)

On April 1, 1994, following lengthy negotiations, Thor entered into a ten-year lease with Lars for Brickhaus, a 15,000 square foot, single story, brick building at a monthly rent of $12,000. Under paragraph 26 of that lease, Thor agreed to reimburse Lars for the reasonable costs of any government-ordered repair up to a maximum dollar amount set by the following formula: $150,000 times the number of years remaining on the lease at the time the repair is completed divided by the number of years of the original lease. Thor operated a hardware store in Brickhaus.

On April 1, 1996, Thor subdivided his space and sold his hardware store business to Olaf for $250,000 (payable $100,000 down and $25,000 per year for six years). Olaf thus acquired all of Thor's inventory, all of Thor's good will and a transfer of the balance of Thor's leasehold rights to the west 10,000 square feet of Brickhaus. Thor retained the right to repossess the premises in the event Olaf defaulted in the payment of the purchase price for the hardware business. In the remaining 5,000 square feet of Brickhaus, Thor planned to open an art gallery.

On April 1, 1997, Olaf, on the advice of his physician, transferred his business and all his rights under the Brickhaus lease to Hilde for two years, and retreated to a sanitarium.

This past April 1, 1998, government-ordered seismic repairs were completed. Their reasonable cost, $180,000, was paid by Lars.

Lars has now consulted you and wishes to know from whom he can recover reimbursement for those repairs, and in what amount. Please advise Lars in a clear and concise, but thorough, memorandum.

QUESTION 2 (35 points/30 minutes)

Toward the end of 1995, Don, the owner of Appleacre, a 240 acre apple orchard, decided he would harvest his apples only for the next 5 years. Then, he would sell Appleacre and retire. Although Appleacre abuts a county road on its northern boundary, it is a far shorter route to the apple market if Don can truck his apples across his southern neighbor Sara's land, directly to the state highway.

Accordingly, on January 1, 1996, Don entered into a written agreement with Sara under the terms of which she agreed to allow him to truck his apples across her land. Under this agreement, which would expire December 31, 2000, Don agreed to pay Sara $5,000, payable $1,000 each January Is', and also to have the road regraded, at his expense, every year before the end of April. In the event Don failed to fulfill any of his commitments under this agreement, Sara retained the right to terminate his rights.

Although Don is current on his annual payments, this April came and went without the road being regraded. Don has just received a letter dated May 6, 1998 from Sara in which she informs him that, effective immediately, his right to truck his apples across her land is terminated. This morning, Don learned that yesterday Sara locked the gate between their properties, preventing him access to the road in question.

Don now seeks your counsel. Please prepare a concise memorandum outlining the issues raised by the above scenario and suggest their likely resolution.