Opinion ID: 203914
Heading Depth: 2
Heading Rank: 1

Heading: Validity of the Contract

Text: Under Puerto Rico law, a contract has three elements: consent, a definitive (and legal) object, and consideration. See P.R. Laws Ann. tit. 31, § 3391; Quiñones López v. Manzano Pozas, 141 D.P.R. 139, 1996 P.R.-Eng. 499244 (1996) (stating that three essential conditions of contract validity are consent, a definite object that may be the subject matter of a contract, and consideration). [7] Fernandez believed that the settlement agreement did not include all of Smith Barney's commission overcharges, in excess of contractually promised rates, and he argues that this mistaken belief is the sort of error that would void his consent. See P.R. Laws Ann. tit. 31, § 3404 (erroneous consent is void). Under Puerto Rico law, however, not all errors entitle one party to invalidate his consent (i.e. make a contract voidable); in order to invalidate consent, an error must refer to the substance or the object of the contract. P.R. Laws Ann. tit. 31, § 3405. Moreover, the Puerto Rico Supreme Court has noted the important social interest in holding parties to their contracts, and therefore the validity of [a] contract and of the consent is presumed, and in order for an error to annul consent, such error must be excusable. Capo Caballero v. Ramos, 83 D.P.R. 650, 1961 WL 13778 (1961) (emphasis in original). An error is not excusable when the ignorance of the true state of things is due to negligence or fault of the one who invokes it. Id. at 649. In Capo Caballero, the Puerto Rico Supreme Court applied the excusable requirement to find that the defendant Ramos could not invalidate his consent to a contract to purchase land from Cap Caballero. Id. at 653. Ramos intended to construct a T.V. antenna on a plateau at the top of a hill, which Ramos believed was owned by Cap Caballero. Ramos sent an attorney and an engineer to confirm that the desired location, which had already been identified, was indeed owned by Cap Caballero. Id. at 639. Because it was raining, the engineer did not complete the arduous climb to the top of the hill, but nevertheless informed Ramos that the desired location for the antenna was within Cap Caballero's fenced land. Id. at 639-40. On further review, it became clear that although Cap Caballero's land was high enough to permit construction of an antenna, the steep slope involved would make construction economically prohibitive and that the desired land was actually owned by another. Id. at 651-52. Nevertheless, the Puerto Rico Supreme Court held that any error on the part of Ramos did not refer to [] facts unknown to the defendant or which he could have found out by exercising some care; it was due to [Ramos's] negligence or fault and was not an excusable error. Id. at 652 ( citing Miro v. Comision Industrial De Puerto Rico, 57 D.P.R. 28, 33, 1940 WL 7948 (1940)). [8] From this authority Smith Barney argues that if there was any error in Fernandez's consent, it was not excusable and therefore cannot be used to invalidate Fernandez's consent and rescind the settlement, nor can the error support reformation of the settlement to exclude claims based on the contractual ten and three cent per share commission rates. The essence of Smith Barney's argument is that, as Fernandez concedes, he was in possession of the calculations used to derive the settlement amount before he assented to the settlement, and consequently, Fernandez was capable of determining precisely what commission rates were used to calculate the settlement. Thus, Fernandez's failure to discover that the contractual rates of three and ten cents per share were not used to calculate the settlement was not an excusable error that would serve to invalidate Fernandez's consent. Fernandez does not directly grapple with this authority, and instead relies on another case, Producciones Tommy Muniz, Inc. v. C.O.P.A.N., 113 D.P.R. 517, 13 P.R. Offic. Trans. 664 (1982), to suggest that no contract was formed between himself and Smith Barney. In C.O.P.A.N., the Puerto Rico Supreme Court held that the acceptance of a winning bid did not constitute a valid offer and acceptance (i.e. a contract) because a significant termthe size and complexity of the television center to be furnished in exchange for the exclusive right to broadcast the Pan-American Gameswas indefinite, and course of dealing evidence revealed that the parties subsequently traded seven drafts of a proposed contract. Fernandez argues that the inclusion of contractual commission overcharges in the settlement agreement amounted to essentially a latent ambiguity in a key term, as in C.O.P.A.N., and therefore his acceptance of the settlement agreement should not have created a legally binding contract. We disagree. Unlike the construction of a television center, which can involve many permutations of equipment quality and quantity, the settlement agreement did not fail for indefiniteness or contain the same level of ambiguity in a key term. The total amount of the settlement was precisely delineated, as were the calculations supporting the settlement. As the court made clear in C.O.P.A.N., it is not necessary for an offer to specify every detail, if such details can be ascertained from other sources, and the parties were clear about them. In the present case, the calculations, whose accuracy is not challenged, were supplied before the settlement was agreed upon, and they served the purpose of ensuring that the offer was definite. Moreover, in view of the Puerto Rico Supreme Court's insistence that errors vitiating consent must be excusable, it would be unfair and inappropriate to permit Fernandez to withdraw his consent from this contract, because all of the information necessary to ferret out any erroneous conception or misimpression under which he was operating with respect to the scope of the settlement was already in his possession.