## Facts

- Calvin T. and Katherine Ray owned a lot in Baltimore County, Maryland, and sought to hire William G. Eurice & Bros., Inc. to build a house.
- During negotiations, an architect prepared detailed written plans and “memorandum specifications,” which the Rays and a Eurice representative reviewed item-by-item and marked with agreed changes.
- Eurice later submitted an unsigned draft proposal with terms that differed from the previously discussed specifications.
- The Rays had counsel prepare a written construction contract stating the house would be built for $16,300 in accordance with specified plans and “memorandum specifications,” incorporating them by reference.
- At signing, the parties reviewed the documents and signed (initialed) each page of the contract, the specifications, and the plans.
- Before construction began, Eurice stated the house could not be built to the referenced specifications for the contract price and refused to perform.
- Eurice claimed he believed different specifications (consistent with his earlier draft) governed and argued the referenced specifications were not the agreed ones.
- The Rays hired others to build the house and sought damages for the additional cost.

## Issues

1. Whether an enforceable construction contract was formed when the builder signed a written agreement incorporating specified plans and specifications, but later claimed he subjectively believed different specifications applied.
2. Whether the builder’s alleged misunderstanding about the specifications was a unilateral mistake that negated assent or excused performance.
3. Whether the referenced specifications were part of the contract through incorporation by reference despite disputes about physical attachment at signing.

## Decision

- The Maryland Court of Appeals reversed the trial court and held the parties formed an enforceable written contract.
- The court held the contract incorporated the plans and specifications by reference and treated the signed documents as a single agreement.
- The court ruled the builder’s alleged error about which specifications applied was, at most, a unilateral mistake and did not defeat contract formation.
- The court held Eurice breached by refusing to perform and that the Rays were entitled to expectation damages measured by the added cost to obtain the promised performance.

## Legal Principles

- Contract formation and interpretation generally turn on objective manifestations of assent shown by the parties’ words and actions, not undisclosed intentions.
- A party capable of understanding a written contract is bound by its signed terms absent fraud, duress, or mutual mistake; failure to read or a unilateral misunderstanding ordinarily does not avoid the contract.
- Documents expressly referenced in a signed agreement may become part of the contract by incorporation by reference when the reference is clear and the documents are identified.
- For breach of contract, expectation damages aim to place the injured party in the position it would have occupied had the contract been performed, commonly measured by the reasonable cost difference to obtain substitute performance.

## Conclusion

The court enforced the signed construction agreement based on objective assent, rejecting the builder’s claim that his unilateral misunderstanding about the specifications prevented a contract; the builder’s refusal to build constituted breach, entitling the owners to expectation damages.


Ray v. William G. Eurice & Bros., Inc., 93 A.2d 272 (Md. 1952)