Drennan v. Star Paving Co. – (Reliance)

Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (1958)

BY: James F. Polk – AISOL YEAR ONE STUDENT

History:

Defendant gave a bid as a subcontractor to the Contractor Plaintiff.
The bid was used by the Plaintiff in giving their bid to a client.
The Defendant then would not perform the work for which they bid for the bid upon amount.
Contractor sues.
Action was to recover damages caused by the Defendant’s refusal to perform the work according to the submitted bid.
Bid was submitted by Defendant to the Plaintiff prior to the Plaintiff giving their bid to their client.
Plaintiff is awarded judgment.
Defendant appeals from the judgment.

Facts:

On July 28, 1955, bids for the “Monte Vista School Job” had to be submitted to the Lancaster School District before 8pm.
In that area it was a common practice for Contractors to receive bids by phone from Subcontractors the day of a bid and to use them in coming up with the bid numbers submitted for jobs.
The Plaintiff was a Contractor.
The Plaintiff was putting a bid together on July 28, 1955 for the “Monte Vista School Job”.
On July 28, 1955, the Plaintiff’s Secretary received 50 to 75 bids from Subcontractors for different parts of the job.
The Plaintiff’s Secretary wrote the bids on a form as they came in and brought the form into the Plaintiff’s office.
The Plaintiff put the name’s and bids of the subcontractor’s who submitted bids onto a master cost sheet.
The bid submitted to the Client School District had to include the names of subcontractors who were going to be doing 0.5% or more of the work.
The Plaintiff had to provide a bidder’s bond of 10% of his bid of $317.385 as a guarantee that he the Plaintiff would in fact enter a contract with the Client School District if he the Plaintiff was awarded the job.
————- the specific incident ————–
- Late in the afternoon on July 28, 1955, the Plaintiff’s Secretary spoke over the phone with the Defendant’s Estimator.
- The Defendant’s Estimator gave their name and phone number and stated that they were bidding for the paving portion of the “Monte Vista School Job”.
- The Defendant’s Estimator gave a bid of $7,131.60.
- The Plaintiff’s Secretary asked the Defendant’s Estimator to repeat the bid and the Defendant’s Estimator did.
- The Plaintiff himself listened to the bid over the second phone in his office and then posted the bid on his master cost sheet after the Plaintiff’s Secretary then brought the bid form into the Plaintiff’s office.
- Defendant’s paving subcontractor’s bid was the lowest and so the Plaintiff included it in his bid for the Monte Vista School Job and included the Defendant’s name as the paving subcontractor.
- Plaintiff won the because his bid to the Client, Lancaster School District, for the Monte Vista School Job was the lowest.
- Plaintiff was awarded the Monte Vista School Job Contract by the Client Lancaster School District.
- ————— the next day —————–
  - Defendant went to Plaintiff’s Office the next day after winning the bid.
  - Mr. Oppenheimer, the Defendant’s Construction Engineer told the Plaintiff that the Defendant’s Estimator had made a mistake in the bid and that the Defendant could not do the job for the price they had bid.
  - The Plaintiff stated that he expected the Defendant to honor the Defendant’s bid to the Plaintiff because the Plaintiff was bound to honor the Plaintiff’s bid to the Client.
  - Defendant refused to do the paving for less than $15,000.
  - Plaintiff got figures from other Subcontractors, the best of which was the bid from L & H Paving Company out of Lancaster, who bid the Plaintiff $10,948.60 for the same paving that the Defendant had bid $7,131.60.
Trial Court entered a judgment for the Plaintiff in the amount of $3,817 (the difference between their bid and the higher amount the Plaintiff had to pay the new Subcontractor, which was the de facto cost to the Plaintiff) plus costs.
- This award was because the Court found the Defendant to have made a definite offer to do the paving for $7,131.60.
- The definite offer bid was relied upon by the Plaintiff in calculating Plaintiff’s own bid to the Client.
- The Defendant was specifically named as the Paving Subcontractor in the Plaintiff’s bid to the Client.
Defendant’s Arguments on Appeal:
- Defendant argues that there was not an enforceable contract between the Parties.
- (note, U.C.C. was first published in 1952. not yet a fact of the case. just a note.)
- Defendant argues that the bid was a revocable offer and that Defendant revoked the offer before the Plaintiff communicated an acceptance of the revocable offer to the Defendant.
- No evidence that Defendant’s offer was to make the bid irrevocable in exchange for inclusion of Defendant’s bid numbers in Plaintiff’s bid to the Client.
- There is also not any evidence showing that the Plaintiff’s use of the Defendant’s bid in the bid that the Plaintiff made to the Client acts as an acceptance of the Defendant’s bid thus obligating the Plaintiff to award the subcontract to the Defendant.
- There was not an option supported by consideration.
- There was not a bilateral contract binding both parties.
Plaintiff’s Arguments against Defendant on Appeal:
- Plaintiff argues that Plaintiff relied on the Defendant’s offer.
- Plaintiff argues that Defendant is therefore liable for damages for Defendant’s refusal to perform.
Issue: Did plaintiff’s reliance make defendant’s offer irrevocable?
Reasoning:
- 1. – Section 90 of the Restatement of Contracts: “A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” – Applies in CA and 5 cases are cited.
- 2. – 1 Williston, Contracts [3d ed.], ss24A,p.56. ss61,p.196:
  - The key is whether the offer of the promisor induces action of a definite and substantial character on the part of the promisee.
  - Defendant had reason to expect that if it’s bid ended up being the lowest among the other bids for the same portion of the overall job that it would be used by the Plaintiff.
  - The Defendant’s offer induced what can be described as, “action of a definite and substantial character on the part of the promisee.” just as described in Williston.
  - There was no express statement nor was there a clear implication that the offer made by the promisor was revocable at any time before acceptance.
  - Offer made by Defendant was silent on revocation.
    - Must determine there are conditions to the right of revocation imposed by law or reasonably inferred in fact (51 Cal.2d 414):
      - It is obsolete that an offer is revocable at any time before complete performance of a unilateral contract.
      - If there is an offer for a unilateral contract and part of the consideration is tendered by the offeree then the offerror is bound by contract. The duty of immediate performance is conditioned on receipt of full consideration within a reasonable time. Restatement of Contracts ss 45.
      - Merely acting in justifiable reliance on any offer may in some cases serve as sufficient reason for making the promise binding. Restatement of Contracts ss 90.
- 3. – In Lieu of a detriment model of consideration on the side of the offeree, the fact that the reasonable reliance on the offer by the offeree will result in a negative change in the offeree’s position which is foreseeable, and this is taken as consideration in a bilateral contract.
- 4. – Therefore the fact that Drennan did not provide consideration in the form of benefit to bind Star in the agreement, it stands to reason and is therefor foreseeable that Drennan would rely on the bid if it was the lowest.
- 5. – It was beneficial to Star for Drennan to rely on it’s bid, because this would mean Drennan would win the contract and Star the subcontract.
- 6. – Star had a duty to exercise caution in preparing it’s bid and it therefore did not make a difference that Star made a mistake in the bid.
- 7. – The duty of care is made weightier because the negative consequences for Drennan stemming from an erroneous subcontractor bid were reasonably foreseeable to Star.
- 8. – Drennan could not reasonably know that Star made an mistake in the bid because there are regularly a large difference between subcontractor bids. Star should have reasonably expected Drennan to rely on its bid when making his own bid. Drennan did rely on the bid. Therefore enforcement of the terms of Star’s bid is necessary to prevent injustice to Drennan.
- 9. – Drennan had a duty to mitigate damages, and did so by searching for several months for the next lowest bidder. The trial court’s award of $3,817.00 was the difference between Star’s bid and Drennan’s final cost of paving and is affirmed.
Judgment of the Lower Court Affirmed.