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.
Community
norms?
Cundick’s
behavior and
motives?
Legal Standard:
Elements (1), (2),
etc.
Broadbent’s
reputation?
Mrs.
Cundick’s
situation?
Hill dissent
• Medical evidence unrefuted
• “Res ipsa loquitor” – look at the value
of the land and the K amount!