Konic International Corp. v. Spokane Computer Services, Inc.

Idaho Court of Appeals · Contracts

Contractsmutual assentmeeting of the mindsambiguitymisunderstandingmaterial termprice termRestatement (Second) of Contracts § 20

Facts

Spokane Computer employee David Young was told to investigate surge protectors and, after speaking with Konic, selected a unit and asked the price. Konic's salesman said "fifty-six twenty," intending $5,620, while Young understood the phrase to mean $56.20; Young then obtained approval for a purchase order in the amount of $56.20 and phoned in the order. Konic shipped the equipment, Spokane Computer received and installed it, and after the company president returned and realized the equipment was worth far more than $56, he ordered it shut off and later, when the invoice discrepancy was discovered, told Konic that Spokane Computer did not want the equipment and that Konic should remove it. Konic insisted Spokane Computer owned the equipment and sued for the price.

Issue

Whether a contract for sale was formed when the parties used the phrase "fifty-six twenty" for the price but each attached a materially different meaning to that phrase. Also, whether Konic could recover under alternate contract-based or restitutionary theories despite that misunderstanding.

Rule

There is no manifestation of mutual assent, and therefore no contract, when the parties attach materially different meanings to their manifestations regarding a material term and neither knows or has reason to know the meaning attached by the other. When an ambiguous expression concerning a material term is reasonably understood in two different ways, any apparent agreement is illusory rather than binding.

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

In Portland, Oregon, Mira Chen called Alder Peak Audio Supply to buy a mixing console for her small recording studio. The salesperson quoted the price as "eighteen forty," intending $1,840, while Mira reasonably understood it as $18.40 and immediately emailed a purchase authorization in that amount.

If both interpretations of "eighteen forty" were reasonable and neither party had reason to know of the other's meaning, is the best view that a contract was formed?

Explanation. The majority rule is that no contract is formed when the parties attach materially different meanings to their manifestations concerning a material term, and neither knows or has reason to know the other's meaning. Price is plainly material, and an ambiguous expression reasonably capable of two meanings defeats mutual assent. (Derived from Konic International Corp. v. Spokane Computer Services, Inc. (n.d.).)