For today’s post we will take a look at the 4th element which is Capacity to Contract.
Capacity to Contract
For a contract to be valid, all parties must have the legal capacity to enter into the agreement. This means that they must be of legal age, not under duress, and not under the influence of drugs or alcohol. The following case brings to light a few subtleties regarding the “capacity to contract” and is a stark reminder to us all when entering into a contract to clearly state our intentions, verify that the words in the agreement accurately reflect those intentions and then to take the time to reflect on what is written before signing the contract so that we do not regret our actions at a later date.
W. O. LUCY AND J. C. LUCY v. A. H. ZEHMER AND IDA S. ZEHMER: W. O. Lucy (“Lucy”), a lumberman and farmer, testified that he had known Zehmer for fifteen or twenty years and had been familiar with the Ferguson farm for ten years. Seven or eight years prior he had offered Zehmer $20,000 for the farm which Zehmer had accepted, but the agreement was verbal and Zehmer backed out. On the night of December 20, 1952, around eight o’clock, he took an employee to McKenney, where Zehmer lived and operated a restaurant, filling station and motor court. While there he decided to see Zehmer and again try to buy the Ferguson farm. He asked Zehmer if he had sold the Ferguson farm. Zehmer replied that he had not. Lucy said, “I bet you wouldn’t take $50,000.00 for that place.” Zehmer replied, “Yes, I would too; you wouldn’t give fifty.” Lucy said he would and told Zehmer to write up an agreement to that effect. Zehmer took a restaurant check and wrote on the back of it, “I do hereby agree to sell to W. O. Lucy the Ferguson Farm for $50,000 complete.” Lucy told him he had better change it to “We” because Mrs. Zehmer would have to sign it too. Zehmer then tore up what he had written, wrote the agreement quoted above and asked Mrs. Zehmer, who was at the other end of the counter ten or twelve feet away, to sign it. Mrs. Zehmer said she would for $50,000 and signed it. Zehmer brought it back and gave it to Lucy, who offered him $5 which Zehmer refused, saying, “You don’t need to give me any money, you got the agreement there signed by both of us.”
The discussion leading to the signing of the agreement, said Lucy, lasted thirty or forty minutes, during which Zehmer seemed to doubt that Lucy could raise $50,000. Lucy suggested the provision for having the title examined and Zehmer made the suggestion that he would sell it “complete, everything there,” and stated that all he had on the farm was three heifers.
Lucy took a partly filled bottle of whiskey into the restaurant with him for the purpose of giving Zehmer a drink if he wanted it. Zehmer did, and he and Lucy had one or two drinks together. Lucy said that while he felt the drinks he took he was not intoxicated, and from the way Zehmer handled the transaction he did not think he was either.
The next day Lucy telephoned to J. C. Lucy and arranged with the latter to take a half interest in the purchase and pay half of the consideration. On Monday he engaged an attorney to examine the title. The attorney reported favorably on December 31 and on January 2 Lucy wrote Zehmer stating that the title was satisfactory, that he was ready to pay the purchase price in cash and asking when Zehmer would be ready to close the deal. Zehmer replied by letter, asserting that he had never agreed or intended to sell.
Mr. and Mrs. Zehmer were called by the complainants as adverse witnesses. Zehmer testified in substance as follows: He bought this farm more than ten years ago for $11,000. He had had twenty-five offers, more or less, to buy it, including several from Lucy, who had never offered any specific sum of money. He had given them all the same answer, that he was not interested in selling it. On this Saturday night before Christmas it looked like everybody and his brother came by there to have a drink. He took a good many drinks during the afternoon and had a pint of his own. When he entered the restaurant around eight-thirty Lucy was there and he could see that he was “pretty high.”
After they had talked a while Lucy asked whether he still had the Ferguson farm. He replied that he had not sold it and Lucy said, “I bet you wouldn’t take $50,000.00 for it.” Zehmer asked him if he would give $50,000 and Lucy said yes. Zehmer replied, “You haven’t got $50,000 in cash.” Lucy said he did and Zehmer replied that he did not believe it. They argued “pro and con for a long time,” mainly about “whether he had $50,000 in cash that he could put up right then and buy that farm.”
Finally, said Zehmer, Lucy told him if he didn’t believe he had $50,000, “you sign that piece of paper here and say you will take $50,000.00 for the farm.” He, Zehmer, “just grabbed the back off of a guest check there” and wrote on the back of it. At that point in his testimony Zehmer asked to see what he had written to “see if I recognize my own handwriting.” He examined the paper and exclaimed, “Great balls of fire, I got ‘Firgerson’ for Ferguson. I have got satisfactory spelled wrong. I don’t recognize that writing if I would see it, wouldn’t know it was mine.”
After Zehmer had, as he described it, “scribbled this thing off,” Lucy said, “Get your wife to sign it.” Zehmer walked over to where she was and she at first refused to sign but did so after he told her that he “was just needling him [Lucy], and didn’t mean a thing in the world, that I was not selling the farm.” Zehmer then “took it back over there… and I was still looking at the dern thing. I had the drink right there by my hand, and I reached over to get a drink, and he said, ‘Let me see it.’ He reached and picked it up, and when I looked back again he had it in his pocket and he dropped a five dollar bill over there, and he said, ‘Here is five dollars payment on it.’ … I said, ‘Hell no, that is beer and liquor talking. I am not going to sell you the farm. I have told you that too many times before.'”
The court asked Mrs. Zehmer about the note she had signed: “When you read ‘We hereby agree to sell to W. O. Lucy,’ what did you interpret that to mean, that particular phrase?” She said she thought that was a cash sale that night; … and that that was her understanding at the time she signed her name.
She also testified that she could tell definitely that Lucy was drinking and she said to her husband, “You should have taken him home,” but he said, “Well, I am just about as bad off as he is.” The waitress who witnessed the discussion at the restaurant testified that both Lucy and Zehmer appeared to be drinking “right much”.
The Zehmers insisted that the evidence was ample to support their contention that the writing sought to be enforced was prepared as a bluff or dare to force Lucy to admit that he did not have $50,000; that the whole matter was a joke; that the writing was not delivered to Lucy and no binding contract was ever made between the parties. In addition, Zehmer claimed that he was too drunk (therefore had no “capacity to contract”) to comprehend that his note could be construed as a contract. That claim is inconsistent with Zehmer’s attempt to testify in great detail as to what was said and what was done. It is contradicted by other evidence as to the condition of both parties, and rendered of no weight by the testimony of his wife that when Lucy left the restaurant she suggested that Zehmer drive him home.
So Zehmer based his incapacity to contract on being drunk and that the bantering was a joke on his part. However, the judge ruled that Zehmer did have the capacity to contract because of:
- The appearance of the contract,
- the fact that it was under discussion for forty minutes or more before it was signed;
- Lucy’s objection to the first draft because it was written in the singular, and
- he wanted Mrs. Zehmer to sign it also;
- the rewriting to meet that objection and the signing by Mrs. Zehmer;
- the discussion of what was to be included in the sale,
- the provision for the examination of the title,
- the completeness of the instrument that was executed,
- the taking possession of it by Lucy with no request or suggestion by either of the defendants that he give it back,
These are all facts which provided conclusive evidence that the execution of the contract was a serious business transaction rather than a drunken joking matter as the Zehmers claimed.
In the field of contracts, as generally elsewhere, “We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. ‘The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts.'” First Nat. Bank Roanoke Oil Co., 169 Va. 99, 114, 192 S.E. 764, 770.
The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party. Restatement of the Law of Contracts, Vol. I, | 71, p. 74.
An agreement or mutual assent is of course essential to a valid contract but the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind. 17 C.J.S., Contracts, | 32, p. 361; 12 Am. Jur., Contracts, | 19, p. 515.
So a person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement, 17 C.J.S., Contracts, | 47, p. 390; Clark on Contracts, 4 ed., | 27, at p. 54.