Mike agreed to buy Stephen's house for $1,000,000. As part of this contract, Stephen agreed to paint the exterior of the house and have the house inspected for termites before the closing. A final inspection (i.e., a "walkthrough") was scheduled for February 25th, and the closing was scheduled for March 1st. In addition, Mike agreed to take possession of the house on May 1st.

During the walkthrough, Mike was satisfied with the new coat of paint on the house's exterior. Mike then asked Stephen if the house had been inspected for termites. Stephen responded by saying, "yes, the house was inspected."

At the closing, Stephen transferred title of the house to Mike by using a general warranty deed.

Mike took possession of the house, as scheduled, on May 1st. Within a few days, Mike noticed damage on the interior walls. It soon became obvious that the damage was caused by termites.

When Mike contacted an exterminator to deal with the termites, the exterminator told Mike that Stephen had called him a few months earlier to inspect the house. The exterminator then said, "I told Stephen that the house needed to be sprayed, but he didn't want to pay for it."

Enraged by this discovery, Mike files a lawsuit against Stephen on the basis of fraud. In his defense, Stephen responded to this lawsuit by stating that he had never lied to Mike about anything.

One year later, Mike is diagnosed with dementia. The doctors told Mike that he had this condition for at least five years. Nobody in Mike's family ever suspected that Mike had dementia.

(a) What is required for this contract to comply with the Statute of Frauds?

(b) If it is discovered that the house is burdened by a 200-year-old lien that Stephen did not know

about, what covenant (if any) did Stephen violate?

(c) Would your answer to part (b) be different if a special warranty deed were used (instead of a general warranty deed) to transfer title of the house?

(d) Can Stephen successfully defend himself against the allegation of fraud?

(e) Regardless of your answer to part (d), assume that Stephen is found liable for fraud. Why

would it be possible for Mike to be awarded punitive damages?

(f) What type of property interest does Stephen have in the house on March 2nd?

(g) Is it likely that Mike's dementia can be used as the basis to void the contract?