Dodson v. Shrader

Supreme Court of Tennessee, at Nashville
824 S.W.2d 545 (1992)

ELI5:

Rule of Law:

When a minor disaffirms a contract that was fair and reasonable, the seller is entitled to a setoff for the decrease in value of the consideration due to the minor's use, depreciation, or willful or negligent damage.

Facts:

In April 1987, Joseph Eugene Dodson, aged 16, purchased a used 1984 pick-up truck from Burns and Mary Shrader for $4,900 cash.
Dodson did not misrepresent his age, though Mr. Shrader believed him to be 18 or 19 years old.
Nine months after the purchase, the truck developed mechanical problems, diagnosed as a probable burnt valve.
Dodson continued to drive the truck for another month without making repairs, at which point the engine 'blew up' and the truck became inoperable.
Dodson then contacted the Shraders to disaffirm the contract and demand a full refund, which the Shraders refused.
While the inoperable truck was parked in Dodson's parents' yard, it was struck and damaged by a hit-and-run driver.
By the time of the trial, the truck's value had diminished to approximately $500.

Procedural Posture:

Joseph Eugene Dodson filed an action in general sessions court against the Shraders to rescind the contract and recover the $4,900 purchase price.
The general sessions court dismissed Dodson's action.
Dodson perfected a de novo appeal to the circuit court.
The circuit court, following existing precedent under stare decisis, granted the rescission and ordered the Shraders to issue a full refund.
The Shraders, as appellants, appealed to the Tennessee Court of Appeals.
The Court of Appeals affirmed the circuit court's judgment.
The Shraders appealed to the Supreme Court of Tennessee.

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Issue:

Does a minor who disaffirms a contract for the purchase of an item have an absolute right to a full refund of the purchase price, or may the seller receive a setoff for the item's decrease in value while in the minor's possession?

Opinions:

Majority - O'Brien, J.

No, a minor is not automatically entitled to a full refund. Where a contract with a minor is fair and the minor was not overreached, the seller is entitled to a setoff for the property's depreciation or damage. The court abandoned the traditional rule that allowed a minor to recover the full purchase price upon disaffirmance, regardless of the property's condition. It reasoned that the common law must evolve to reflect modern conditions where minors frequently transact business. Allowing a full refund in all cases would be unfair to good-faith merchants and could encourage dishonest behavior in minors. The court adopted a new, more equitable rule, balancing the need to protect minors from exploitation with principles of fairness to vendors. This new rule permits a deduction from the minor's refund for the use, depreciation, and any willful or negligent damage to the property, provided the original contract was fair and reasonable.

Analysis:

This decision marks a significant modification of the common law infancy doctrine in Tennessee, moving away from a rigid rule favoring the minor toward a more flexible, equitable approach. By adopting a modified version of the 'Oregon Rule,' the court aligns Tennessee with a modern minority trend that balances the rights of minors and innocent merchants. This precedent requires trial courts to conduct a factual inquiry into the fairness of the contract and the cause of depreciation, thus protecting merchants from bearing the full loss when a minor damages purchased goods. The ruling reflects a judicial recognition of the increased participation of minors in commerce and aims to promote responsibility and integrity.

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