Two guys sit down in a bar in Virginia one evening, just before Christmas 1952. They share a few drinks. Quite a few drinks, or so we are led to believe. One guy (Hardy Zehmer) owns a farm that the other (William Lucy) has tried to buy from him before. Their conversation turns once more to the farm… and the events that subsequently unfolded on that December evening would become part of American legal folklore…
The case that arose from this seemingly mundane social interaction, Lucy v. Zehmer, 84 S.E.2d 516 (1954), is a terrific teaching case: a great story that provides wannabe lawyers with lessons on several levels.
Lucy claimed that Zehmer had agreed to sell him the farm while they were down drinking at the bar. He sought specific performance of the agreement. Lucy could point to a proverbial “smoking gun”. Zehmer had written on a bar check the words, “[w]e hereby agree to sell to W.O. Lucy the Ferguson Farm complete for $50,000, title satisfactory to buyer” and he and his co-defendant wife had both signed the writing. The language could not have been clearer. It left nothing open to negotiation. On its face, it manifested the Zehmers’ unequivocal present commitment to sell the farm.
The Zehmers main line of defence was that the whole thing was a joke gone wrong. Hardy Zehmer had never intended to sell and had said as much to his wife when, out of earshot of Lucy, he had got her to sign the “agreement”. His testimony was colourful. He didn’t believe that Lucy could raise $50,000 and so the “agreement” had been nothing more than an attempt to call Lucy’s bluff. “I was as high as a Georgia Pine”, he said, and the “agreement”… well that was “just a bunch of two doggoned drunks bluffing to see who could talk the biggest and say the most.”
So the issue the court had to decide was whether there was an enforceable agreement even though, as far as one party was concerned, he had never intended to enter into an enforceable agreement.
As my students now know, the Lucy v. Zehmer court ruled that the parties had entered into an enforceable agreement. In so doing, the court adopted what is sometimes referred to as the “objective theory” of contractual intent. If a reasonable observer would conclude from what you say and do that you intend to enter into an agreement, then what’s going on inside your head is irrelevant.
For me, the big learning points from Lucy v. Zehmer are: (i) the critical and pervasive importance of language and context in the law; and (ii) how skillful lawyers can manipulate language and context in practical ways that can affect real world outcomes. If you don’t intend to be bound, use less committing language (in the UK simply writing the phrase “subject to formal contract” at the top of the bar check would have done the trick). If you want to win at trial – though I emphasize repeatedly to students that cases that go to trial and end up in law reports are a drop in the ocean – you need to tell a story that will persuade the court to draw the inferences that are most favourable to your client’s case. This year my students seemed to grasp that the concept of the “reasonable observer” raises some interesting philosophical questions. Who is this reasonable observer? Was he or she in the bar? What characteristics and attributes does he or she possess? Hopefully, they also grasped that, for practical purposes, the “reasonable observer” is the tribunal of fact (the trial court, the jury) and the game is to persuade the fact finder that “our” version of the story – the version that best dictates a legal outcome favourable to our client – is the one that should stick.
There’s little doubt that Zehmer had a pretty good story. His story was that drunks just don’t do major real estate deals in bars. But the court wasn’t convinced. The court bought a different story. And that story was that Lucy and Zehmer weren’t so drunk that they couldn’t get down to serious business…and, that if you sign a piece of paper saying in clear language that you agree to something, you shouldn’t be too surprised if other folk (the folk we refer to as “reasonable observers”) believe that you weren’t joking and meant what you said.
There are other stories that could have been told in Lucy v. Zehmer as a recent article in the Duke Law Journal co-authored by Barak D. Richman and Dennis Schmelzer superbly illustrates. Richman and Schmelzer write about a wider context that is invisible to those of us that have only read the account provided by the Virginia Supreme Court of Appeals. For Richman and Schmelzer, the deal in Lucy v. Zehmer was part of a series of aggressive and predatory land grabs by middlemen seeking to acquire timber reserves for southern Virginia’s thriving pulp and paper industry. Those of my students who worry about whether $50,000 was a fair price for the Ferguson farm may be onto something if Richman and Schmelzer are to be believed. But as I say in class – and I underscore again now – the court was happy that $50,000 was a fair price. And for us as lawyers, what counts is predicting what courts will do, and influencing what courts will do, by the way we tell the story.
Finally, here is yet another retelling of Lucy v. Zehmer. In this version, instead of getting drunk together, Messrs Lucy and Zehmer get high on a brand of marijuana, known as “the Georgia Pine”, with hilarious results…
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The Walters Way 