Lucy v. Zehmer (Case Brief And Objective Theory of Contracts)

What is the case Lucy v. Zehmer about?

Where can you find a Lucy v. Zehmer case brief?

How important is mental assent and what’s the objective theory of contracts?

In this article, we will go over the Lucy v. Zehmer case in detail, assess the facts, go over the court’s decision and discuss the legal issue and rule of law.

Are you ready?

Let’s get started!

Lucy v. Zehmer case brief 

Lucy v. Zehmer is a U.S. case regarding contract formation and enforceability of a contract in the common law.

The facts of the case are quite simple.

The story unfolded in the early 1950s. 

Zehmer owned a tract of land in Virginia.

Lucy knew Zehmer for many years and was particularly interested in buying the land from Zehmer.

At one point in time, Zehmer had even orally agreed to sell his farm but had eventually backed out of the deal.

On December 20, 1952, Lucy and Zehmer went to a restaurant owned by Zehmer and had quite a bit to drink while discussing the possibility of selling Zehmer’s farm.

That evening, Zehmer writes on the back of the restaurant’s receipt:

“We hereby agree to sell to W. O. Lucy the Ferguson Farm complete for $50,000.00, title satisfactory to buyer“.

Here is the image of this famous contract:

(Source: Cooley Law School, Western Michigan University)

This note was signed by Zehmer and his wife.

Shortly thereafter, Lucy hires an attorney to validate the title of the farm and conclude the transaction.

Lucy’s attorney writes to Zehmer asking for when he had the intention to close the deal.

However, Zehmer responds stating that he never had the intention to sell his farm.

He stated further that the note on the receipt was written in jest and did not represent a binding commitment on his part as they were in a jovial atmosphere and he was the influence of alcohol.

The case ultimately goes to court.

Court’s decision in the case

Archibald C. Buchanan of the Supreme Court of Virginia rendered the court’s judgment in this case.

The court’s decision was unanimous to the effect that Zehmer was not intoxicated to a point where he was unable to understand what he was doing.

Zehmer was able to comprehend the consequences of his actions when he wrote and signed the note on the back of the restaurant receipt.

Furthermore, Lucy had an objective and justifiable belief that Zehmer was serious about the sale of his farm and did not consider that the note and the signature was just a jest.

The court concluded that a person’s mental assent was not a requisite for the formation of a contract.

A person’s actions and words convey are clear, a person’s intention is not relevant.

Ultimately, the court concluded that in this case, specific performance was the proper remedy to compensate Lucy for her damages.

Extracts of the case

Here is an extract of the Lucy v Zehmer case depicting the circumstances on how Zehmer and his wife signed a contract for the sale of their farm:

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 entered the restaurant and talked to Mrs. Zehmer until Zehmer came in. 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, *496 saying, “You don’t need to give me any money, you got the agreement there signed by both of us.”

(Source: Justia US Law)

Rule of law

Contracts are generally formed when there is a meeting of the minds.

In other words, both parties to a contract should have consented to or agreed to obligate themselves in a binding contract.

This is what’s we refer to as the mutual assent.

However, in the United States, under the objective theory of contract, the law can impute the intention to a person when the person’s words, actions and behaviour leads the other contracting parties to believe that there is a clear manifestation of agreement.

When a person’s actions clearly manifest acceptance or an intention to be bound in a contract, the courts will give less significance to the person’s actual intention to enter into a contract or not.

Legal issue 

The question raised by the Zehmer case is whether or not a contract is enforceable when one party believes the other party intended to enter into a contract regardless of the actual intention of the other party.

For example, Party A enters into a contract with Party B.

Party B believes that Party A demonstrated a clear intention to enter into a contract through actions, words and conduct.

However, Party A claims that his actions and behaviour are not relevant as he or she did not subjectively formulate the intention to enter into a contract. 

The legal issue is: should a court enforce the contract or not?

Under Amerian common law, the courts will enforce the contract.

A “meeting of the minds” cannot be interpreted too restrictively.

If a party did not clearly reject a contract or demonstrate that he or she did not have the intention to enter into a contract and his or her intentions manifested a clear intention or acceptance, the courts will conclude that a contract was formed. 

The objective theory of contracts

In U.S. law, the objective theory of contracts is a notion that states that the existence of a contract is determined by a person’s actions rather than by the person’s actual intention.

Under the objective theory of contracts, Lucy had a reasonable belief that Zehmer sold her his farm.

As a result, Zehmer’s underlying intention of not wanting to sell was not significant when:

  1. Zehmer’s words led Lucy to believe that he was selling his farm
  2. The statement he wrote lead Lucy believe he was looking to sell his farm
  3. The fact that he and his wife signed the receipt demonstrated a serious intention to be bound

Previously, the law required that both parties subjectively agree to be bound to the contract (animus contrahendi).

With the objective theory of contracts, the person’s subjective intention is superseded by the person’s outward manifestations.

As such, the person’s outward actions will trump their inward intentions.

In the Restatement (Second) of Contracts, the objective theory of contracts is defined as follows:

“Formation of a contract requires…a manifestation of mutual assent.” (Sec. 17(1))

It goes further to state:

“The conduct of a party may manifest assent even though he does not in fact assent.” (Sec. 19(3))

A person’s conduct can manifest assent sufficient enough to lock the person in a legally binding contract.

Criticism of the court’s decision 

This case was criticized by academic legal commentators for many reasons.

For example, Barak D. Richman and Dennis Schmelzer consider that the court misrepresented the contractual surrounding of that December evening in 1952.

According to Richman and Schmelzer’s research titled “When Money Grew on Trees: Lucy vs. Zehmer and Contracting in a Boom Market”, they have found that:

  1. Luch was acting as a middleman for southern Virginia’s pulp-and-paper industry looking for Zehmer’s farm for its rich timber reserves 
  2. Lucy was involved in past shady transactions and court disputes 
  3. Within eight years from winning her case, Lucy sold the farm for $142,000

The question is, was a sale for $50,000 a fair price?

Was it reasonable to believe that Zehmer had a real intention to sell his farm for that price?