MCC An Electronic Contract Does Not Use Paperwork Analysis


Please read the following and then you will address the issue of capacity in that situation.

Peter Pan Insurance Company undertook a new sales program that targets neighborhoods in Neverland where drive-by shootings were a nightly occurrence. In two such shootings, children were killed as they sat in their living rooms.

Peter Pan’s salespeople were instructed to “hit” the houses surrounding those where children were victims. They were also told to contact the parents of those children to sell policies for their other children.

Captain Hook, an experienced Peter Pan salesman, read of a drive-by shooting at Wendy Little’s home, in which Wendy’s five-year-old son was killed. The Neverland Times reported that Wendy was a single parent with four other children.

Hook traveled to Wendy’s home and described the benefits of a Globe policy for her other children. He offered her the $15,000 term life policy for each of the children for a total cost of $45 per month. Wendy was in the process of making funeral arrangements for her son, and Hook noted, “See how much it costs for a funeral.”

Wendy had been given several tranquilizers the night before by a physician at the hospital’s emergency room. The physician had also given her 15 more tranquilizers to help her through the following week. She had taken one additional tranquilizer an hour before Hook arrived, using a Coors Lite beer to take the pill.

Wendy signed the contract for the policy. After her son’s funeral, she received the first month’s bill for it and exclaimed, “I didn’t buy any life insurance! Where did this come from?”

In general, why is capacity a required element for a contract to be valid and what is capacity? What is the issue regarding capacity in the fact situation presented? What mistake did this salesman make? How can this insurance company make sure that it sells only to people who have legal capacity to enter into a contract? What should any business do to ensure that other parties in the contract meet the capacity requirement?