Balaban-Gordon Co., Inc. v. Brighton Sewer Dist. No. 2

• Decision Date: 13 April 1973
• Docket Number: BALABAN-GORDON
• Citation: 41 A.D.2d 246,342 N.Y.S.2d 435
• Court: New York Supreme Court — Appellate Division
• Parties: COMPANY, INC., Respondent, v. BRIGHTON SEWER DISTRICT NO. 2, et al., Appellants.

Page 435

342 N.Y.S.2d 435

41 A.D.2d 246

BALABAN-GORDON COMPANY, INC., Respondent, v. BRIGHTON SEWER DISTRICT NO. 2, et al., Appellants.

Supreme Court, Appellate Division, Fourth Department.

April 13, 1973.

Branch, Van Voorhis & Wise, Rochester, for appellants (Charles S. Turner, Rochester, of counsel).

Leslie Hynes, New York City, for respondent (William D. Powers, New York City, of counsel).

Before DEL VECCHIO, J.P., and WITMER, MOULE, CARDAMONE and SIMONS, JJ.

OPINION

SIMONS, Justice:

This appeal questions the right of a contractor to withdraw its bid on a public construction contract because of a unilateral mistake in interpreting the engineers' specifications concerning equipment to be included in the bid price.

A bid is a binding offer to make a contract. It may be withdrawn in the case of unilateral mistake by the bidder where the mistake is known to the other party to the transaction and (1) the bid is of such consequence that enforcement would be unconscionable, (2) the mistake is material, (3) the mistake occurred despite the exercise of ordinary care by the bidder and (4) it is possible to place the other party in status quo. (13 Williston on Contracts, 3d ed. § 1573; Ann. 52 ALR 2d 793--794.)

In 1967 the appellant Brighton Sewer District No. 2 advertised for bids to construct two sewage treatment plants. Bids were received for the general construction, plumbing, heating and electrical work for each facility and bidders could bid each contract separately or in combination. Respondent Balaban-Gordon Company, Inc. was the lowest bidder on the general construction contract for both plants. Its total bid for the work was $2,249,700, $530,300 below the second bidder. It also bid on the plumbing contract. It was the high bidder for that job, its bid being $376,230 higher than the low bid of $687,770. The respondent's representatives, upon learning of the difference in the bids, checked with the appellant's engineers and re-examined their worksheets. They determined that they had incorrectly interpreted the specifications and had included the cost of several pieces of mechanical equipment in the bid for the plumbing contract which should have been in the bid for the general construction. ¹ The trial court has found this mistake was due to the bidder's negligence. The respondent explained the error in detail at a conference with appellant's representatives and asked that its bid be withdrawn. The appellant insisted that the bid could not be withdrawn under General Municipal Law (§ 105) and demanded that respondent execute the contracts for general construction. When the respondent refused to do so, the appellant readvertised for bids and declared the respondent's bid bond forfeited. This action to rescind the bid and to cancel the bond followed. The trial court, 67 Misc.2d 76, 323 N.Y.S.2d 724, granted judgment for respondent, holding that it was entitled to rescind its mistaken bid notwithstanding its negligence.

If the bid may be rescinded, then the bid bond must be cancelled because the municipality may not retain the proceeds either as a penalty or liquidated damages. If there is no legal obligation on the part of the contractor to fulfill its bid, it may not be held on the bid bond for its failure to do so. (Harper, Inc. v. City of Newburgh, 159 App.Div. 695, 145 N.Y.S. 59; cf. Brandese v. City of Schenectady, 194 Misc. 150, 85 N.Y.S.2d 856, affd. 273 App.Div. 831, 75 N.Y.S.2d 884, affd. 297 N.Y. 965, 80 N.E.2d 355.)

It is apparent from the facts that there was a material mistake of serious consequence to the bidder from which it should be relieved if the appellant can be placed in status quo and if respondent's mistake is excusable. The mistake in computing the bid was 'palpable', i.e., known to the other party because of the disparity in the bids and because of the prompt actual notice to appellant once the bids were opened and before the contract was awarded. Furthermore, the appellant's position has not been damaged. It could have awarded the contract to the second bidder. The election to rebid the job was its own and not required by any act of respondent. Appellant lost the bargain but that is not a compensable loss if the bid may be rescinded, because it was a bargain to which the appellant was never entitled. (W. F. Martens & Co., Inc. v. City of Syracuse, 183 App.Div. 622, 171 N.Y.S. 87.)

The case turns on whether this is the type of a mistake which justifies relief by rescission. Mistakes by definition reflect oversight or some lack of care and so the requirement that the mistake occur in the exercise of ordinary care may not be interpreted narrowly. The question is whether the mistake is of the variety considered excusable, and each case must be considered on its own facts. (3 Pomeroy Equity Jurisprudence 5th ed. § 856(d); Ann. 59 ALR 811, 827.)

The parties are in agreement that relief is available where the mistake is clerical or arithmetical. (Moffett, Hodgkins and Clarke Company v. Rochester, 178 U.S. 373, 20 S.Ct. 957, 44 L.Ed. 1108; City of New York v. Seely-Taylor Co., 149 App.Div. 98, 133 N.Y.S. 808, affd. 208 N.Y. 548, 101 N.E. 1098; Levine v. Parsons, 258 App.Div. 1003, 16 N.Y.S.2d 722, mot. for lv. to app. den. 282 N.Y. 808, 26 N.E.2d 836; W. F. Martens & Co., Inc. v. City of Syracuse, supra; City of New York v. Dowd Lumber Co., 140 App.Div. 358, 125 N.Y.S. 394; 10 McQuillin, Municipal Corporations, 3d ed. § 29.82.) In such a case, the mistaken bid does not express the true intention of the bidder. If he were to recompute the bid or if another person were to do so, the obvious error would be discovered and corrected. Its existence may be objectively determined. In those circumstances, there is said to be no meeting of the minds because the bid was one which the bidder never intended to make.

On the other hand, it is commonly recognized that a bidder will not be relieved from an error in a value judgment in estimating the requirements or costs necessary to fulfill a contract (3 Corbin on Contracts § 605). Mistakes of this type are inherent business risks assumed by contractors in all bidding situations. If the specifics of the job were recalculated by the bidder, his bid would be the same, for these estimates do not involve oversights. They represent subjective judgments deliberately made with respect to the requirements of the job. Another person calculating the bid might or might not make the same 'mistake', depending upon his mental evaluation of the work to be performed, but in any event, the minds of the bidder and the offeree meet because the bid is precisely what the bidder intends even though his judgment later proves faulty.

The appellant claims that the error must be considered one of these two types, either clerical and arithmetical, or an error of judgment, relief by rescission being available in the former case but not in the latter. Since the incorrect interpretation of the specifications was not clerical or arithmetical appellant claims that respondent should be held to the bid and liable for liquidated damages under its bid bond. Unfortunately, not all mistakes made by contractors are categorized so easily. Applying the reasoning of the two types of mistakes to the facts of this case illustrates the difficulty. If respondent's representatives were to recompute its bid, they doubtless would interpret the specifications the same way. In that sense, the bid accurately represented the contract respondent was willing to make and there...