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the next defense to contract formation we want to go over is the misunderstanding where the parties are simply assigning different meanings to the same term in the contract if this happens if the agreement includes a term that has multiple possible meanings the result depends on the partys knowledge or awareness of the misunderstanding right we have three possible results here three possible combinations either neither party knows or should know of the misunderstanding both parties know or should know of the misunderstanding or one party knows or should know of the misunderstanding if neither party knows or should know of the misunderstanding we say theres no contract unless both parties intended the same meaning if both parties know or should know of the misunderstanding same result no contract unless both parties intended the same meaning and finally if one party knows or should know of the misunderstanding we actually say we have a binding enforceable contract based on the ignora