Law Contracts Module 4 Discussion Post

Module 4: Discussion – Contracts Group 6Module 4

Discussion

Main Post – 10 points

Fact Pattern:

• Timber, Inc. (“Timber”) is in the lumber business. It owns thousands of acres of land in Texas which they use to harvest timber–mostly Texas pine. While removing cut timber from Timber’s holdings in East Texas, Lynn, Timber’s logging foreman discovered a pool of oil, the size of a small pond.
• Lynn reported it to Timber’s Chief Environmental Officer, who ordered an immediate cleanup operation.
• The cleanup crew concluded that Timber had struck an oil reserve. It turned out that, Timber was sitting on one of the largest untapped oil reserves in the U.S.
• Timber decided to try to purchase the land surrounding its current holdings, to assure that it would be able to control the all of the untapped oil in the region. In particular, Timber was intent in purchasing two parcels of land.
• The first parcel was a mostly treeless cattle ranch, owned by Cattle, Inc.
• The second parcel was a densely populated coniferous forest full of mature pine ready for harvesting, owned by Pulp and Paper, Inc.
• Timber asked Lynn to approach both companies and offer to purchase their land.
• Cattle, Inc.’s CEO asked Lynn: “Why would Timber, Inc. be interested in purchasing our treeless grazing land?”
• Lynn said that “Timber is considering diversifying into cattle ranching, as a way to hedge against fluctuations in the pine lumber market.”
• This was a boldface lie. Timber’s CEO had told Lynn to do whatever it takes to get ahold of the two parcels of land.
• Cattle, Inc. agreed to sell of its land to Timber at a price twice the current market value.
• Pulp and Paper’s CEO, was a bit more skeptical. She requested that she be given a tour of Timber’s land, as a way to assure herself that Timber was not up to something shady.
• Timber agreed to the visit–however, before the visit Timber covered up the pool of gurgling Texas crude with thousands of timber logs, completely obscuring any sign of Timber’s oil strike.
• Pulp and Paper’s CEO passed by the crude oil pool but all that she saw were thousands of pine logs.
• Pulp and Paper agreed to sell all of its land to Timber for twice its current market value.
• In both cases, Timber was able to acquire thousands of acres of land that were in fact worth 50 times their current market value.

Questions:

• Please review the following excerpt of the textbook on
• and discuss the following:
• Any potential fraud associated with each of these transactions and the consequences of such fraud
• Whether it was reasonable for Cattle, Inc.’s CEO to believe Lynn’s statement regarding Timber’s interest in diversifying into cattle ranching.

References – 2 points

Please base your response on course materials (lectures, slides, readings, or other assigned materials). In your response, make clear when you are relying on a source and provide full citations at the end with slide numbers, page numbers, or time stamps. Your post must include two or more citations, with at least one drawn from the course materials. If you use an external source, you must include a workable URL and a one-sentence justification of why it adds value beyond the course materials.