capacity to contract contracts – prof merges march 7, 2011

Capacity to Contract

Contracts – Prof Merges

March 7, 2011

Statute of Frauds wrapup

• Typical categories

• UCC 2-201

• Common law exceptions

§ 2-201. Formal Requirements; Statute of Frauds

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.

A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

§ 2-201(2)

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.

§ 2-201(3)

(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable

(a) if the goods are to be specially manufactured for the buyer . . .

(b) if the party against whom enforcement is sought admits in court . . . or

(c) with respect to goods for which payment has been made and accepted or which have been received and accepted

Exceptions -- Monarco

• Rest. 2d § 139: “Enforcement By Virtue Of Action In Reliance”

• Modifies traditional S o F

Rest. 2d 139

(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.

(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant . . . .:

(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence . . . .;

(e) the extent to which the action or forbearance was foreseeable by the promisor.

Capacity - themes

• “Status” – type of person; e.g., “minority”

• “Behavior” – actions of the parties; e.g., fraud

• “Substance” of the deal – unfair outcome suggestive of someone’s incapacity

Lucy v. Zehmer

• Standard: “Too drunk to understand the nature and consequences of” his or her actions

Lucy v. Zehmer

• Standard: “Too drunk to understand the nature and consequences of” his or her actions

A question of behavior, and not status; alcoholism vs. mental illness

Lucy v. Zehmer

• Standard: “Too drunk to understand the nature and consequences of” his or her actions

Kiefer v. Fred Howe Motors

Kiefer v. Fred Howe Motors

• Facts

• Procedural History

Facts & history

• Judgment for Kiefer, dealer (Fred Howe motors) appeals

• Basic facts: Kiefer bought car “a few months shy” of his 21st birthday

• Car developed problems, Kiefer tried to return it; sued to recover the price

Kiefer

• Void vs. voidable -- ?

• Jack and the Beanstalk . . .

Kiefer

• Void vs. voidable

–Who does this favor?

–Why should the rule be cast this way?

Evolution of the doctrine

• Should a change in the voting age affect the common law rule?

• What about military service?

– Problems with a “status” rule . . .

“Emancipation”

• Who was arguing that this was a good test for “minor capacity”?

• Relationship to marriage

• P. 314: “Youthful marriage: lack of wisdom and maturity” – agree?

“Necessaries”

•What is the rule?

“Necessaries”

• What is the rule?

K cannot be disaffirmed

“Necessaries”

• What is the rule?

K cannot be disaffirmed

What rationale for this?

Paternalism – and its discontents . . .

• If minors can disaffirm K’s for necessities, they may not be able to get them

• “Please don’t ‘protect’ me, I’m hungry, I need a place to stay . . .”

Necessaries in Kiefer

• Why not argued more strenuosly by Fred Howe Motors?

• What do you think?

• Dissent

Disaffirmance

Ortolere v. Teachers’ Retirement Board

Judge Charles D. Breitel

Ortolere v. Teachers’ Retirement Board

• Facts

• Procedural History

Mental Capacity

• Traditional test

Mental Capacity

• Traditional test

Cognitive vs. behavioral: “impulse control”

“Unable to act in a reasonable manner in relation to the transaction . . .”

(and other party has reason to know)

Substantive fairness

Ortelere’s “evidently unwise and foolhardy selection . . .” – p. 316

Additional factors

• Knowledge by other party

• Reliance by other party

Cundick v. Broadbent

• Facts

• Procedural History

Legal standard for incompetence

• “Sufficient reason to enable him to understand the nature and effect of the act in issue . . .”

“Weak-mindedness” vs. “capacity

What evidence did the court look for in deciding whether Cundick was mentally competent?

What did the dissent say on this issue?

When is “weakmindedness” relevant?

Broadbent’s “overreaching”

How does the legal standard “frame” the issue?

• What facts are “in the frame,” which ones are “left out”?

Legal Standard:

Elements (1), (2), etc.

Legal Standard:

Elements (1), (2), etc.

Broadbent’s reputation?

Mrs. Cundick’s situation?

Community norms?

Cundick’s behavior and motives?

Hill dissent

• Medical evidence unrefuted

• “Res ipsa loquitor” – look at the value of the land and the K amount!