latent ambiguity

Mutual Assent

Mutual assent (or a 'meeting of the minds') means the parties have agreed to the same essential terms of the contract.

Objective Standard in Mutual Assent

Courts use an objective standard to determine if mutual assent exists, examining the parties' outward expressions rather than their secret subjective intentions.

Latent Ambiguity

Latent ambiguity is a hidden ambiguity that is not apparent on the surface of a contract but is revealed when applied to external facts.

Example of Latent Ambiguity

A contract for the sale of cotton to be shipped on the vessel 'Peerless,' where there are two ships with that name, demonstrates latent ambiguity.

Function of Mutual Assent

Mutual assent is necessary for forming a legally binding contract; without it, the contract may be void or unenforceable.

Function of Latent Ambiguity

Latent ambiguity serves as an exception to the rule of enforcing contracts according to their plain language, allowing courts to admit external evidence.

Key difference between Mutual Assent and Latent Ambiguity

Mutual assent is a foundational element required at contract formation, while latent ambiguity is a potential defect discovered later.

Impact of Latent Ambiguity on Mutual Assent

If a latent ambiguity shows different interpretations by the parties, a court may find that genuine mutual assent was never achieved, making the contract unenforceable.