Archive for the ‘objective theory’ Category

Lucy v. Zehmer

September 18, 2010 Leave a comment

196 Va. 493, 84 S.E. 2d 516 (p. 1)

Facts: π (Lucy) sued ∆ (Zehmers) on K to sell their farm for $50k. ∆ claim K was written as a bluff. Trial court held in favor of ∆.

Issue: Was the necessary intent to form a contract present, thereby entitling Lucy to specific performance?

Holding: The Zehmers’ outward expressions imputed on them an intent to contract. The contract is therefore binding, and Lucy is entitled to specific performance.

Legal Reasoning: The court relies on the “objective theory” of contracts. Since no one can divine the secret intentions of any other person, a court must rely on what a reasonable person can infer from the outward expression of a party. Therefore, if he outwardly displays that he is intent upon forming a contract– as was the case here– he is assumed to have the intent to be bound by that contract. Lucy was correct to infer, based on the Zehmers’ signing of the contract and verbal insistence that they would sell the farm for $50,000, that the contract would be binding.

Notes: Objective theory of contract– “A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent.” This also sets up a good example of expectation interest. Aside from paying for a lawyer to examine the title to the property, Lucy had not acted in any way to his own detriment based on reliance from this contract. Lucy had very little “reliance interest,” but instead had an “expectation interest,” simply that he could reasonably expect to gain something from the contract. The fact that, at this point, his position in life was exactly the same as before does not prohibit him from enforcing the contract.

Related: §2– Definition of promise (especially Comment (b)), §16– Intoxicated Persons, Hotchkiss v. National City Bank of N.Y., 200 F. 287, 293 (S.D.N.Y. 1911)– classic articulation of objective theory