M. A. Stephen Const. Co., Inc. v. Borough of Rumson

• Decision Date: 30 July 1973
• Parties: M. A. STEPHEN CONSTRUCTION CO., INC., a corporation of the State of New Jersey, Plaintiff-Appellant, Cross-Respondent, and Sark Kavookjian, Plaintiff, v. BOROUGH OF RUMSON, a municipal corporation of the County of Monmouth, State of New Jersey, Defendant-Respondent, Cross-Appellant. CARDELL, INC., a corporation of the State of New Jersey, Plaintiff-Respondent, v. The TOWNSHIP OF MADISON, a municipal corporation in the County of Middlesex, State of New Jersey, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 67

125 N.J.Super. 67

308 A.2d 380

M. A. STEPHEN CONSTRUCTION CO., INC., a corporation of the

State of New Jersey, Plaintiff-Appellant, Cross-Respondent, and Sark Kavookjian, Plaintiff, v. BOROUGH OF RUMSON, a municipal corporation of the County of

Monmouth, State of New Jersey,

Defendant-Respondent, Cross-Appellant.

CARDELL, INC., a corporation of the State of New Jersey, Plaintiff-Respondent, v. The TOWNSHIP OF MADISON, a municipal corporation in the

County of Middlesex, State of New Jersey,

Defendant-Appellant.

Superior Court of New Jersey Appellate Division.

Argued April 23, 1973.

Decided July 30, 1973.

Stewart M. Hutt, Woodbridge, for appellant H. A. Stephen Construction Co., Inc. (Hutt & Berkow, Woodbridge, attorneys, Jay M. Hollander, Woodbridge, on the brief).

Richard F. Plechner, Metuchen, for appellant Township of Madison (Robert G. Hampson, Metuchen, on the brief).

William R. Blair, Jr., Red Bank, for respondent Borough of Rumson (Parsons, Canzona, Blair & Warren, Red Bank, attorneys).

Jay M. Hollander, Woodbridge, for respondent Cardell, Inc. (Hutt & Berkow, Woodbridge, attorneys).

Before Judges LORA, ALLCORN and HANDLER.

PER CURIAM.

Both of these appeals turn on the issue of whether the lowest responsible bidder for public work, whose bid was improperly rejected and the contract awarded to another bidder by the municipal governing body, is entitled to recover damages against the municipality. Accordingly, they will be treated in a single opinion.

In Rumson the borough on October 22, 1970 received bids for the construction of a portion of its sanitary sewer system in response to advertisement. Seven bids were received, of which that of Stephen was the lowest. On November 25, 1970 the governing body formally rejected all of the bids and directed the borough clerk to readvertise for new bids. The present action was commenced on December 10, 1970, and on January 5, 1971 the trial court entered summary judgment in favor of the municipality. On appeal that judgment was reversed and the cause remanded for plenary trial to determine whether, in rejecting all of the bids, the municipality had acted in good faith. 117 N.J.Super. 431, 285 A.2d 55 (App.Div.1971).

In the interim the borough received the bids which had been solicited by the read-vertisement. The plaintiff submitted no bid on this occasion, although invited to do so. The contract was awarded to another contractor and, Stephen not having pursued an application for a stay, the work was substantially completed prior to the argument on the first appeal. On the remand the trial court determined that the rejection of all the October 22, 1970 bids was arbitrary and wrongful, but that inasmuch as the work had been completely performed, no 'legal remedies are now available' to Stephen--the judge having earlier granted the motion of the borough to strike the issue of damages from the complaint and the pretrial order, on the ground that Stephen was 'not entitled to damages as a matter of law.' 118 N.J.Super. 523, 524, 288 A.2d 873 (Law Div.1972).

In Madison bids were solicited and received on October 10, 1968 for resurfacing of streets. Although Cardell was the low bidder, because of errors in calculation by Cardell the totals did not so indicate and the township governing body awarded the contract to the next lowest bidder. Thereupon Cardell commenced an action to set aside the award and to compel the township to award the contract to it. Although unsuccessful in the Law Division and the Appellate Division, Cardell ultimately prevailed in that action in the Supreme Court. Cardell, Inc. v. Madison Tp., 105 N.J.Super 594, 253 A.2d 820 (Law Div.1969), aff'd 105 N.J.Super. 604, 253 A.2d 826 (App.Div.1969), rev'd 54 N.J. 151, 253 A.2d 814 (1969).

Following some delay the contract award to the second lowest bidder was vacated and the township awarded the contract to Cardell. A portion of the included work having previously been performed by the second lowest bidder (apparently pursuant to a resolution adopted by the governing body in spite of a stay of the Law Division judgment) ¹, Cardell undertook performance of the balance of the work and completed it in September 1970.

The present action was commenced by Cardell against the township in May 1971, seeking damages 'for increased costs to plaintiff due to delay in awarding and executing the contract; (and) loss of anticipated profits' for that portion of the work under the contract performed by the second lowest bidder. There is also included a claim for $10,000 'on a certain book account' and 'upon an account stated,' the nature of which is not stated.

Before trial was had the township moved 'for an order of summary judgment dismissing the plaintiff's complaint for consequential damages.' The motion was denied. The present appeal was taken from said denial, upon leave granted by this court.

We are thus brought to the single issue in each of these appeals: Does the wrongful rejection of the bid of the lowest responsible bidder by a municipality render the municipality liable in damages to the bidder--whether for loss of profits, increased costs of performance, costs of preparing and submitting the bid, or for other alleged consequential losses? ²

The contractor-plaintiffs assert that where a public agency is required to advertise for bids for the performance of work or furnishing of materials and supplies, and to award contracts to the lowest responsible bidder, the responsible bidder who submits the lowest proposal in response to an invitation thereby establishes or creates in himself a right to the award of the contract, which right is breached by the wrongful rejection of his bid; and where, through no fault of the low bidder, the only adequate remedy for the wrongful breach of such right is damages, the municipality is liable for such damages. Contractor-plaintiffs misconceive both the nature of the relationship between the bidder and the party or agency soliciting bids, as well as the purpose and effect of the laws governing the letting of contracts by public agencies.

It is a fundamental of contract law that a bid for the performance of work or for the furnishing of materials submitted in response to a solicitation therefor constitutes no more than an offer. Unless and until there is an acceptance of that offer, no contract comes into being. 1 Williston on Contracts (3d ed. 1957), § 31 at 82. Thus, in the area of private business, when bids are submitted by various bidders in response to invitation, the person soliciting the bids has the unrestricted power to accept such one of said bids as he may wish, in his complete and absolute discretion. As between him and the bidders he may accept the highest bid, an intermediate bid, the lowest bid, or none of them; and he may select the bid submitted by the bidder who may be the most or the least responsible, or somewhere in between--all without breaching any right of or any duty or obligation owing to the bidders. In short, the submission of a bid, without more, creates no rights in the bidder. 1 Williston on Contracts, Supra.

The same fundamental of the law of contracts applies equally in the public sector. Submission of a bid for public work in response to an invitation likewise constitutes no more than an offer, and it does not and cannot ripen into a contract unless and until there is an acceptance of that offer by the appropriate public authority. Compare Trap Rock Industries, Inc. v. Kohl, 59 N.J. 471, 478, 284 A.2d 161 (1971), cert. den. 405 U.S. 1065, 92 S.Ct. 1500, 31 L.Ed.2d 796 (1972). The single circumstance that the public official acts in a fiduciary capacity for the benefit of the members of the public whom he represents and, as such, owes them the common law obligation of exercising his discretion honestly and in good faith, or may by statute be directed to make his award to the lowest responsible bidder or to the responsible bidder whose bid is most advantageous to the public authority, in no way changes the basic rule or the nature or extent of the correlative rights and duties as between a bidder and the solicitor of the bid. For, that obligation is imposed for the public good, not for the benefit of the bidder. Murray v. Bayonne, 73 N.J.L. 313, 63 A. 81 (Sup.Ct.1906); Peter's Garage v. Burlington, 121 N.J.L. 523, 3 A.2d 634 (Sup.Ct.1939), aff'd 123 N.J.L. 227, 8 A.2d 910 (E. & A. 1939); Hillside Tp. v. Sternin, 25 N.J. 317, 136 A.2d 265 (1957); Commercial Clean Corp. v. Sullivan, 47 N.J. 539, 546, 222 A.2d 4 (1966).

In sum, and whatever may be the specifics of the duty owing by a public official in a given case to the members of the public to accept the bid proposal which best serves the public interest, that duty by its very nature runs to the members of the public, and to them alone. It does not run to the bidders, and does not create any right or rights in the bidders. As stated in Hillside Tp. v. Sternin, Supra:

For many years our statutory law has required contracts for the performance of public work . . . to be let upon competitive bidding solicited through public advertisement. * * * The purpose is to secure competition and to guard against favoritism, improvidence, extravagance and corruption. Statutes directed toward these ends are for the benefit of the...