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Case: Konic International Servs. V Spokane Computer Servs.

Inc (1985) 396-400

[Idaho Court of Appeals]

Parties: Plaintiff - Konic (seller)

Defendant - Spokane (buyer)

Procedural History: Suit brought before a magistrate sitting without a jury.

Magistrate entered judgment for Spokane (defendant), due to lack of authority of
Spokane employee to enter into the contract. Konic appealed, and district court
affirmed for defendant. Now before the Court of Appeals.

Facts: An employee of Spokane, Young, was asked to research into the purchase of
a power surge. His search turned up power surges priced from $50-$200, but they
were not what the company needed. Young then spoke to Konic, and found a power
surge suitable for Spokane's needs, and Konic told Young the price was "fifty-six
twenty." Konic meant $5,620, but Young understood $56.20. Young did not have
authority to make the purchase, but prepared a purchase order for $56.20 and had
it approved by the appropriate authority. He then telephoned in the order. The
power surge was delivered and installed. The price discrepancy was not discovered
until later, when the President of the company realized that the cost of the power
surge had to be more than $56.20, and when the discrepancy was discovered, he
immediately notified Konic that Young did not have authority to make that purchase
and that Konic needed to take back the equipment. Konic would not do this, and
Spokane would not pay, so Konic brought this suit for the price of the power
surge. The judgment was entered for the defendant, due to lack of authority of
Young to make that purchase. Konic appealed the decision.

Issue: Whether a contract existed when their was a mutual mistake as to the
price of the equipment.

Holding: Court affirmed the lower court's decision, but on a different theory.

Reasoning: Court says its not necessary to say Young did not have authority to
enter into the contract, because there is a more basic contract principle in
question here. Basically, there was no meeting of the minds, so no contract was
ever formed (so we don’t even have to worry about Young's authority). Because of
mistake's on sides of both parties, there was a discrepancy as to the price which
was not discovered until after the surge was delivered and installed. Because
there was such a huge discrepancy, court says the price became a material issue so
since there was no meeting of the minds on that material issue, there is no
contract. Court cites Peerless as a source (same principle). Also, the lower
court of appeals had said that Konic was entitled to possession of the power

RULE: From Peerless, and also;

Restatement (2nd) § 20
(1) There is no manifestation of mutual assent to an exchange if the
parties attach materially different meanings to their manifestations and
a. Neither knows or has reason to know the meaning attached by
the other
Comment C: "even though the parties manifest mutual assent to the same words
of the agreement, there may be no contract because of a material difference of
understanding as to the terms of the exchange."