Lucy v. Zehmer, 196 Va. 493; 84 S.E.2d 516 (1954), is a classic case in U.S. Contract Law, and is often taught to first year law students to illustrate a foundational principle:
The mental assent of the parties [to a contract] is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party.
Lucy, 196 Va. 493, 503 (quoting the Restatement of the Law of Contracts then prevailing).
What are the facts of the case?
Mr. Zehmer and his wife were the longtime owners of a piece of land known as the Ferguson Farm. A man named Mr. Lucy knew Mr. Zehmer and mentioned his interest in purchasing the farm more than once. In fact, Mr. Lucy once offered Mr. Zehmer $20,000 for the farm, which he accepted, but the deal fell through when Mr. Zehmer eventually backed out.
Undeterred, one night Mr. Lucy entered a restaurant owned by Mr. Zehmer and attempted again to purchase the Ferguson Farm. The two parties had a few drinks together, and after a verbal exchange that would later be characterized differently by the two sides, signed a contract for the sale and purchase of the farm for $50,000. Both Mr. Zehmer and his wife signed the agreement, the text of which is far more humble than any agreement you will see today. It stated, in its entirety, “We hereby agree to sell to W. O. Lucy the Ferguson Farm complete for $50,000.00, title satisfactory to buyer.”
Mr. Lucy thereafter then engaged his attorney to conduct title research and prepare to close the transaction. When they reached out to Mr. Zehmer, however, he refused to close and claimed that the agreement was meant to be a joke, and that he had never intended for the deal to be taken seriously. Mr. Lucy then sued to enforce the contract.
What was the holding?
The court first found that the parties were not so intoxicated as to invalidate the deal. As for Mr. Zehmer’s contention that he intended the transaction to be made “in jest,” the court essentially held that it was not relevant. What guided the analysis in Lucy was the court’s reliance on prior case law that commanded: “We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. ‘The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts.’” Lucy, 196 Va. at 521. That is, a reasonable interpretation of Mr. Zehmer’s act of signing the agreement is that he actually entered into an agreement, not that he secretly was making a joke. Therefore, the court sided with Mr. Lucy and ordered specific performance.
If you are interested in learning more, the @WashULaw online LL.M. in U.S. Law program offers a course entitled Fundamentals Of U.S. Law I: Contracts that can help expand your understanding of certain issues that may be relevant to cases like these.