Dodson v. Shrader

Supreme Court of Tennessee · 1992 · Contracts

ContractsInfancy doctrineDisaffirmance of minor's contractsRestitutionDepreciation setoffminorinfant contractsvoidable contracts

Facts

At age 16, Dodson bought a used 1984 pickup truck from the Shraders' auto sales business for $4,900 cash. There was no inquiry by the sellers and no misrepresentation by Dodson about his age, though Mr. Shrader believed Dodson was 18 or 19. About nine months later the truck developed engine trouble; after being told the problem likely involved the engine, Dodson continued to drive it until the engine blew up and the truck became inoperable. Dodson tendered the truck back and sought rescission and a full refund, but after the sellers refused, the truck was later also struck by a hit-and-run driver while parked at his parents' home.

Issue

When a minor disaffirms a contract for the purchase of nonnecessaries, is he automatically entitled to a full refund of the purchase price upon return of the goods, or may the seller receive a deduction for the minor's use of the goods, depreciation, and damage while the goods were in the minor's possession? More specifically, should Tennessee modify its prior common-law approach to permit such a setoff where the seller acted fairly and in good faith?

Rule

Where a minor has not been overreached, subjected to undue influence, or induced by a fraudulent, unfair, or unreasonable contract, and the minor has paid money, taken possession, and used the purchased article, the minor may not recover the full amount paid upon disaffirmance without allowing the seller reasonable compensation for the use of the article, its depreciation, and any willful or negligent damage to it while in the minor's hands. If there was fraud, imposition, unfairness, or unfair advantage by the seller, the rule does not apply. Questions of overreaching and the fair market value of the property returned are for the trier of fact.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Knoxville, 17-year-old Liam Carter paid $2,400 cash to buy a used bass boat from River Bend Marine, a small dealer. The price matched the local market, the dealer dealt with him politely and honestly, and Liam used the boat every weekend for five months before disaffirming and returning it with normal wear and a lower market value.

If Liam sues to rescind and recover the full purchase price, which result is most consistent with the governing rule?

Explanation. The majority adopted a modified rule for minors' contracts: when the minor was not overreached, there was no undue influence, the contract was fair and reasonable, and the minor paid money and took and used the article, the minor may disaffirm but cannot recover the full amount paid without allowing reasonable compensation for use, depreciation, and willful or negligent damage. The dealer's knowledge of minority is not made a prerequisite to the setoff rule.