A general contractor, Drennan, was preparing a bid for a school construction project and received a subcontractor bid from Star Paving to perform the paving work for $7,131.60. Drennan relied on Star’s figure in computing and submitting his own successful general bid. After the general bid was accepted, Star notified Drennan that its bid was mistaken and refused to perform at the quoted price. Drennan obtained another paving subcontract at a higher price and sued Star for the difference.
Whether a subcontractor whose bid is relied on by a general contractor in submitting the general bid may revoke the bid after the general contractor has relied on it, even though the general contractor did not formally accept before revocation.
A subcontractor’s bid is irrevocable for a reasonable time when the subcontractor should reasonably expect the general contractor to rely on it in submitting the prime bid and the contractor does so rely. Under promissory estoppel principles, such reliance makes the offer binding to the extent necessary to avoid injustice.
Yes. Star’s bid became binding and could not be revoked after Drennan reasonably relied on it in submitting his successful general bid, and Drennan could recover the added cost of substitute performance.
The court rejected the view that traditional offer-and-acceptance rules alone controlled, because the subcontractor had reason to expect reliance before formal acceptance. Drennan’s use of the paving figure in his prime bid was foreseeable and reasonable, and Star’s bid induced that action. The court also found no unfairness in holding Star to its bid because the subcontractor bore the risk of its own mistake in the bidding process. To avoid injustice, the law enforced the promise through reliance rather than requiring a completed bilateral contract before the bid became temporarily irrevocable.
Drennan is the leading case applying promissory estoppel to construction bidding and establishing that a subcontractor’s bid may become temporarily irrevocable once a general contractor reasonably relies on it in submitting the prime bid. It is commonly contrasted with James Baird Co. v. Gimbel Bros., Inc., 64 F.2d 344 (2d Cir. 1933), which refused to bind the subcontractor on similar facts. Drennan strongly influenced Restatement (Second) of Contracts § 87(2) and remains foundational in reliance-based offer irrevocability doctrine in public construction bidding.
James Baird Co. v. Gimbel Bros., 64 F.2d 344 (2d Cir. 1933) |
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