Facts
- Konic International Corporation sold electrical equipment, including a surge protector, and Spokane Computer Services, Inc. sought equipment for its operations.
- Spokane employee David Young was tasked with investigating purchase of a surge protector and contacted Konic about a suitable unit.
- Konic’s salesperson quoted the price orally as “fifty-six twenty,” intending $5,620.00; Young understood the quote as $56.20.
- Young told Konic he needed supervisory approval, prepared a purchase order for $56.20, obtained approval, and then placed the order using the purchase order number without restating a dollar amount to Konic.
- Konic shipped the surge protector; Spokane installed it and began using it.
- Due to internal processing errors at both companies, the mismatch between Spokane’s purchase order and Konic’s invoice was not immediately discovered.
- After Spokane’s president learned of the invoiced $5,620 price, he told Konic Young lacked authority at that price, Spokane did not want the unit, and Konic should remove it.
- Konic refused to retake the unit, asserted Spokane owned it, and demanded payment; Spokane refused to pay $5,620.
- Konic sued to recover the price; the magistrate entered judgment for Spokane on an agency/authority rationale, the district court affirmed, and the Idaho Court of Appeals affirmed on contract-formation grounds.
Issues
- Whether a valid sales contract was formed when each party attached a materially different meaning to the quoted price “fifty-six twenty.”
- If no contract was formed, whether Konic could recover on restitutionary or other noncontract theories based on Spokane’s receipt and use of the equipment.
Decision
- The Idaho Court of Appeals affirmed judgment for Spokane on different reasoning than the trial court.
- The court held no contract was formed because there was a fundamental failure of communication and no mutual assent on price, an essential term.
- The court declined to impose liability on alternative theories such as unjust enrichment due to insufficient supporting evidence.
Legal Principles
- A contract is not formed when the parties attach materially different meanings to a term essential to the exchange and there is no objective basis to prefer one meaning over the other.
- Price is an essential contract term; a large, material disparity in the parties’ understandings can demonstrate lack of mutual assent.
- When the formation defect is absence of assent on an essential term, agency authority analysis may be unnecessary to resolve liability.
- Restitution/unjust enrichment requires proof supporting a benefit unjustly retained; attempted disaffirmance and a seller’s refusal to retake goods may weigh against imposing restitution absent adequate evidence.
Conclusion
Because Konic and Spokane never mutually assented to the price term due to an ambiguous oral quotation understood in materially different ways, no enforceable contract arose, and Konic also failed to prove a basis for restitutionary recovery; the judgment for Spokane was affirmed.