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Contract case study Essay

TO:    Professor, senior attorney

Mr. Bibe (plaintiff) is a thirty-two year old marketing executive, who signed a contract for the purchase of a coffee shop from Mr. Lott (defendant) Mr. Bibe seeks to void the contract he signed for the purchase of the coffee shop.  

The circumstances of the signing of the contract for purchase suggest that the plaintiff was not of sound mind when he signed the contract. The circumstances further suggest that the defendant intentionally induced the plaintiff to sign the contract when he knew the plaintiff to be impaired by the consumption of alcohol.

The defendant’s behavior during the luncheon after which the contract was signed suggests that he both knew about, and encouraged the diminished capacity of the plaintiff Specifically, even though four people attended the luncheon, the defendant was the only one who did not consume wine, drinking only water. This, in itself, isn’t particularly probative, however, the fact that two of the four bottles of wine consumed by the plaintiff and his colleagues during the luncheon were purchased by the defendant.

When first approached during the luncheon about the purchase of the property in question, the plaintiff laughed and declined the offer of sale. He did indicate

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that he found the offer interesting. It was at that time the defendant began buying wine for the plaintiff and his colleagues. After ordering the third bottle of wine, the defendant obtained the records of  the business he wished to sell, and began describing the business in detail to the plaintiff as he continued to consume alcohol. After assuring the plaintiff that the purchase was a “good deal”, the Plaintiff requested the purchase proposal in writing. After ordering a fourth bottle of wine for the group, and pouring the plaintiff another glass, the defendant procured paper and drew the contract in question.

The contract reads, “I, Owen Lotts, agree to sell, and I.M. Bibe agrees to purchase “The Coffee Shop” at 12 N. Main Street for the sum of $300,000.”.  Still consuming wine,  the plaintiff signed the contract.. Throughout the luncheon, the plaintiff drank continuously for two and one-half hours and ate only a salad. Upon leaving the restaurant, the defendant paid the entire bill, including the bar tab.

After the luncheon, the plaintiff went home and slept for several hours. When he awoke, he recalled the contract he had signed and is considering attempting to renege on the terms of the contract.

Relevant Statute:

“A person entirely without understanding has no power to make a contract of

any kind, but the person is liable for the reasonable value of things furnished

to the person necessary for the support of the person or the person’s family.”

Questions of Law:

Can the plaintiff can show that at the time he signed the contract he “entirely without understanding” due to intoxication?

Is the property named in the contract “necessary for the support of the person or the person’s family”?


In Marron v. Marron 19 Cal. App .326 Cal. App 1 Dist.1912, the court determined that the burden of proof in an alleged instance of diminished capacity due to intoxication.

The plaintiff must show that he was intoxicated when he signed the contract. According to  Phelan v. Gardner, District Court of the Fourth Judicial District, City and County of San Francisco (43 Cal.306) “a party may show, in order to defeat a settlement made by him at the time, he was incapable of contracting intelligently, by reason of intoxication”.  In this case the court instructed that “… if you believe from the evidence that the defendant found the plaintiff in an intoxicated condition … if you believe he did … ply[ed] him with liquor until he got him in a stupefied state, and in such state that he did not know what he was doing..” that a settlement made in these circumstances would be “void, and not binding upon the plaintiff”. However, In Guidici v. Guidici 2 Cal.2d 497 Cal., 1935,  The court established that in order to support an action to cancel a deed to real property, the evidence that plaintiff at the time of signing the deed was in ”such a state of mind , due to long and excessive drinking of intoxicating liquor , that he did not know what he was doing and that he had no recollection of signing the deed, was sufficient  to support  the finding that he was mentally incapable , at that time , of understanding  the nature of his act in signing” The court further opined that “ One deprived of reason and understanding by reason of drunkenness is , for the time , as unable to consent to the terms of a contract as are persons who lack mental capacity by reason of insanity or idiocy and  a completely intoxicated person is generally placed on the same footing as persons of unsound mind; and a person who at the time of making  a contract is completely intoxicated may avoid this contract notwithstanding the fact that  his intoxicated condition may have been caused by his voluntary act and not by the contrivance of the other party to the contract.”

            The level of intoxication, according to the Phelan ruling must be “a stupefied state”. The Guidici case sets the standard at “sufficiently intoxicated so as to not remember what he did…” This is problematic in the case before us. The plaintiff, while he did consume a portion of four bottles of wine, faces probative issues in relation to both how much he consumed, and the consequent level of intoxication he obtained. The plaintiff may call his co-workers as witnesses to the portion of the four bottles of wine consumed, which will end in being around 1 and 1/3 bottles. According to the plaintiff, this amount was consumed over a 2 and ½ hour period. It can be established in this manner that a significant level of intoxication resulted from the consumption. It can be further established that the defendant intentionally provided alcohol to increase the plaintiff’s inebriation.

            The difficulty here arises in the standard of “stupification”. The plaintiff woke with a headache only four and ½ hours later, and was sober enough to remember and regret the signing of the contract. Further, he drove himself home without incident after the luncheon, during a period of time likely to be the height of his intoxicated state. His post-incident memory and ability to drive 20 miles call into serious question whether his level of intoxication met the standards set by the case above. Additionally, the plaintiff never alleges a lack of memory of any portion of the luncheon. It would appear that this element of the case would be difficult to establish to the level of proof required for a legal action.

According to  Donnelly v. Rees 141 Cal. 56 Cal. 1903, in order to nullify a binding document which has been alleged to have been contracted while one party was not in a condition to do so, three elements must be established First,  the defendant gained the contract by “fraud”; second, that the defendant utilized “undue influence” and finally that the defendant committed a violation of a trust.

             The set of facts presented by the plaintiff does not appear to support the notion that the contract was obtained by fraud, or that the defendant exercised undue influence. The plaintiff acknowledges that he knew and understood the content of the contract, and had effectively “changed his mind” about his purchase.

Conclusion:  The plaintiff in this case faces two difficulties in seeking redress on the grounds of intoxication. The first of these is that the level of intoxication assumed by both statute and court ruling are far beyond that which is alleged by the plaintiff, and supported by a factual examination of the evidence. The second difficulty is that there has been no allegation that the plaintiff did not receive fair value in the contract, nor that the plaintiff was bound to terms that would imperil his livelihood or that of his dependents. If the plaintiff chooses to challenge the contract, he would be better served to challenge its validity on other procedural grounds.


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