Ray v. Eurice Bros.

Court of Appeals of Maryland · Contracts

ContractsMutual assentObjective theory of contractsUnilateral mistakeIncorporation by referenceParol evidenceDamages for breachobjective assent

Facts

The Rays negotiated with Eurice Bros. for construction of a house and, after discussing plans and detailed specifications, executed a written contract under which the builder agreed to construct the house for $16,300 strictly in accordance with identified plans dated January 9, 1951 and identified memorandum specifications dated February 14, 1951. After signing, the Eurice corporation also signed the contract, plans, and specifications at the building association in connection with the Rays' construction loan. Later, the builder refused to perform, claiming it thought the contract referred instead to its own earlier three-page proposal specifications rather than the Rays' five-page February 14 specifications. The Rays treated the refusal as a breach and sued for the additional cost of obtaining equivalent performance plus loan expenses.

Issue

Whether a builder who signed a clear written construction contract was bound by the plans and specifications identified in that contract, even if the builder subjectively believed the contract referred to different specifications. A related question was whether the identified specifications were part of the contract although not physically fastened to the signed document.

Rule

Absent fraud, duress, or mutual mistake, a person with capacity who reads and signs a written contract, or signs it without reading, is bound by its clear and unambiguous terms. Contract assent and interpretation are determined objectively, not by a party's undisclosed subjective intent, and an integrated agreement cannot be varied by parol evidence. When a writing specifically refers to another document, the referenced document becomes part of the contract by incorporation even if not physically attached.

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

In Columbus, Ohio, Dana Keller hired Stonebridge Homeworks, a small builder, to construct a garage apartment. The written contract signed by both parties stated that the work would be done "strictly in accordance with Specifications dated March 3, 12 pages," but the builder later refused to start, saying its manager thought the contract referred to the company's earlier two-page estimate.

If Dana sues for breach, which is the best result?

Explanation. The majority rule is objective: assent is judged by the words and acts manifested, not undisclosed intent. Absent fraud, duress, or mutual mistake, a party who reads and signs a clear writing—or signs without reading—is bound by it. Here the builder's claimed misunderstanding is unilateral only, so it does not defeat contract formation or excuse performance. (Derived from Ray v. Eurice Bros. (n.d.).)