Contract Scenario
Calvin had been an avid coin collector for many years, and the most valuable coin in his collection was an uncirculated, mint condition, 1943 Lincoln penny made of copper (most pennies made during World War II were made of zinc because copper was needed in the war effort). That penny had a value of between $60,000 and $95,000.
In August of 2017, Calvin had a serious stroke that left him unable to speak or walk, but his doctor assured his family that Calvin would recover over time with intensive therapy.
Calvin was a widower and did not have any children, but he had several nephews who visited him from time to time as he recovered. None of the nephews had any real interest in Calvin’s coin collection. One of Calvin’s nephews, Billy, who visited Calvin more often than the other nephews, sometimes listened to Calvin talk (talking was a part of Calvin’s therapy) about his mounting medical bills and his coin collection, but Billy never showed much interest in the medical bills or the coin collection.
In October, as Calvin’s recovery progressed slowly, Billy visited Calvin and told Calvin that he had been reading about coin collecting, and he realized that Calvin’s collection, especially the 1943 Lincoln copper penny, was valuable, and Billy suggested that Calvin should consider selling the 1943 Lincoln copper penny and use the proceeds to pay his medical bills. Calvin resisted the idea at first, but Billy continued to urge Calvin to sell the penny so that he would not have to worry about the medical bills. Finally, when Billy told Calvin that he would arrange the sale of the penny for a commission of just 5% of the sale price of the penny, Calvin began to think that selling the coin might be a good idea. He was still a little confused about how the sale would work and what Billy would do to make sure that the penny would be sold for the best price. Calvin told Billy that he thought that the penny was worth almost $100,000, but Billy assured Calvin that the market had changed recently, and that the penny was now worth $40,000 to $45,000. Eventually, Calvin allowed Billy to sell the penny for the best price he could get and to take a 5% commission for arranging the sale of the penny. Billy then sold the penny to a friend for $40,000, took his 5% commission, and paid the remainder of the sale price to Calvin.
A few months later, as Calvin continued to recover, he read a story in a coin collecting magazine about how an uncirculated, mint condition, 1943 Lincoln penny made of copper had just sold at auction for more than $100,000, and Calvin began to wonder if Billy had taken advantage of him. Calvin consulted a lawyer and asked the two questions below.
- Exhibit 11-1 (on page 239 of the textbook) explains the relevant considerations for mental incapacity. Based on the facts presented, did Calvin have the mental capacity to enter into the contract when he agreed to let Billy sell the penny?
- Page 264 of the textbook poses four questions to analyze when determining undue influence. Based on the facts presented, did Billy exert undue influence over Calvin to cause Calvin to enter into the contract that allowed Billy to sell the penny?
Analysis of Calvin’s Contract Scenario
Mental Capacity of Calvin to Enter into the Contract:
To determine whether Calvin had the mental capacity to enter into the contract when he agreed to let Billy sell the penny, we need to consider the relevant considerations for mental incapacity outlined in Exhibit 11-1 of the textbook.
According to the facts presented, Calvin suffered a serious stroke that left him unable to speak or walk. However, his doctor assured his family that he would recover over time with intensive therapy. It is crucial to note that being unable to speak or walk does not automatically indicate a lack of mental capacity.
Mental capacity refers to a person’s ability to understand the nature and consequences of their actions, including entering into a contract. Although Calvin’s physical condition was impaired, it is not explicitly stated that his cognitive abilities were affected. The fact that he engaged in therapy and participated in discussions about his medical bills and coin collection suggests that his cognitive functions were intact.
However, it is important to consider whether Calvin was susceptible to undue influence, which may have impacted his decision-making process. This leads us to the next question.
Undue Influence exerted by Billy over Calvin:
To determine whether Billy exerted undue influence over Calvin, we can refer to the four questions posed on page 264 of the textbook.
a) Was there a relationship of trust and confidence between Calvin and Billy? Based on the facts presented, Billy was one of Calvin’s nephews who visited him more often than the other nephews. Although none of the nephews showed much interest in Calvin’s coin collection, Billy had been visiting Calvin frequently and listening to him talk about his medical bills and coin collection. This suggests a close relationship between Calvin and Billy, which could be considered a relationship of trust and confidence.
b) Did Billy have a motive to exert undue influence? Billy had a financial motive to convince Calvin to sell the penny since he proposed selling it and offered to take a 5% commission. By emphasizing the need to pay off medical bills and assuring Calvin that the penny was worth less than what Calvin believed, Billy had a clear motive to exert influence over Calvin’s decision.
c) Did Calvin appear to be susceptible to influence? Considering Calvin’s vulnerable state after suffering a stroke and his concerns about mounting medical bills, it is reasonable to assume that he may have been susceptible to influence, particularly from someone he trusted like Billy.
d) Was there unfair persuasion or manipulation by Billy? Billy continued to urge Calvin to sell the penny despite Calvin’s initial resistance. He also provided information about the market value of the penny, emphasizing a lower value than what Calvin believed. Billy’s persistent persuasion could be seen as unfair manipulation, exploiting Calvin’s vulnerability and limited understanding of the situation.
Based on the analysis above, it is plausible to argue that Billy exerted undue influence over Calvin, leading him to enter into the contract that allowed Billy to sell the penny. This raises concerns about the validity of the contract and whether it was entered into freely and voluntarily.
In conclusion,
while it is possible that Calvin had the mental capacity to enter into the contract, there are strong indications that Billy exerted undue influence over him. Consulting with a lawyer is an appropriate course of action for Calvin to explore potential remedies for the situation.