Please read the following and then you will address the issue of capacity in tha

Question

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

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

Globe 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.

Tom Raskin, an experienced Globe salesman, read of a drive-by shooting at Nancy Leonard’s home, in which Leonard’s five-year-old son was killed. The Los Angeles Times reported that Leonard was a single parent with four other children.

Raskin traveled to Leonard’s home and described the benefits of a Globe policy for her other children. He offered her the $10,000 term life policy for each of the children for a total cost of $21 per month. Leonard was in the process of making funeral arrangements for her son, and Raskin noted, “See how much it costs for a funeral.”

Leonard 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 Raskin arrive, using a Coors Lite beer to take the pill.

Leonard 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? 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?

Explanation / Answer

Capacity determines the state of a person to legally enter into a contract. It means his/her legal competence to get into the contract offered by someone or some company. If the person entering the contract donot have proper capacity, then the contract ill not be valid. People from certain classes are not capable of entering into a contract. These classes are infants or minors, insane persons, people under drug influence, bankrupt people. So it is necessary for a company to learn about the capacity of a person before entering into a legal contract with him. Hence capacity is arequired element. In the fact situation presented, Leonard has just lost his son to a tragic incident. In fact Leonard was given tranquilizers by the doctor on the day before and also took a tranquilizer before Raskin arrived. So Leonard had taken a drug with alcohol, which shows that he does not certainly have the capacity to sign a contract. Also his financial situation is unknown, he could be bankrupt. If he is bankrupt, then he has no capacity to sign the new contract. The salesman made the mistake of not inquiring about the physical and economical state of the person. The person was taking tranquilizers prescribed by the doctor to help him through the bad situation. This altered his mindset and he was not fit to sign the contract. Hence the contract could be deemed illegal. The insurance company should inquire research about the state of the person who is given the contract. The person should have the legal capacity to sign the contract. Inquiring about the physical and economical state of the person will help in this case. Also the salesman can give the person to recover from tragic incident to help him think more and give him ease for chosing the contact. The business should check the past records of the party, his medical health , mental state and his bank details. The firm should make sure the person can compete with the terms set by the firm. And should not force him into the contract. The business should give him better options to opt so he can easily do the business.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.