•At lunch, I offer to ―sell you my car for $10,000‖
•You say, ―I accept‖
•Market value of Replicar is $12,000; Market value of Buick is $8,000
•Do we have a contract for the sale of a car, and if so, which one?
•My position: We either have a contract for the sale of the Buick, or no contract (assume
at this point that I‘d rather not sell any car at all than sell the Replicar for $10,000)
•You should have known I meant my Buick, because you know I love my Replicar
•Your position: You know I need the money, because I‘m financially distressed, so I may
well sell below market value because I need the money
•In reality, court probably wouldn‘t find a contract per Restatement §201
•See also Raffles and Oswald
•In cases like those, court will throw up its hands—no reason to know that one meaning
was intended rather than the other, so the court cannot determine the basis of a contract
Raffles v. Wichelhaus (378) (UK 1864)
[Peerless case, shipment to arrive on Peerless, only there are two ships by same name]
•Ambiguity is one the parties did not intend at the time of the agreement
•Buyer: I didn‘t mean the December Peerless, I meant the October Peerless
•Seller: No reason why it should make a difference—Peerless not a material term
•How convenient that Buyer now says he cares which boat it came on, since as of
December, the market price of cotton fell below the contract price
•Buyer: I did care which ship it came on, since I named the ship in the contract
•Seller: We named the ship only to say that if the ship sank, the deal would be off (to do
this, we had to name the ship, otherwise if I changed my mind, I could say the cotton was
on any ship which sank)
•But neither Peerless sank, so the name of the ship was immaterial
•Buyer: That‘s not the only reason I named the ship—I also wanted to name the ship to
have a gauge on when the shipment would arrive—I speculate on cotton (as opposed to
being a textile manufacturer, in which case the time of arrival may not matter so much)—
so time of delivery is very important to me
•Seller: Why, then, did you wait until after the December Peerless came in to bring this
up? Why didn‘t you ask for your cotton after the October Peerless came in?
•Buyer: I realized that the cotton didn‘t arrive (since it was never delivered), and I was
actually happy, since the price of cotton had fallen—I didn‘t say anything, because you
breached, but there were no damages (contract price > market price)
•Seller: Even if you were happy that the cotton didn‘t arrive on the October Peerless, why
didn‘t you at least inquire as to what happened?
•Buyer: I didn‘t care why it didn‘t arrive, I was happy that the contract was the nullity
•Conclusion: Both sides make relatively reasonable arguments. Seller says buyer is
trying to get a free option. Buyer says no—didn‘t know there was a December Peerless
•Maybe there would have been a way to get to the bottom of this, if there was a standard
trade practice regarding the tender of goods for sale (e.g. a meeting place to settle
accounts), but the court didn‘t make this inquiry
•Simpson: Think about what the parties would have agreed to ex ante: They might have
been perfectly happy to suggest that if some unanticipated ambiguity arose, in no case