Regional School Dist. No. 4 v. United Pacific Ins. Co.

• Decision Date: 28 May 1985
• Docket Number: No. 2809,2809
• Citation: 4 Conn.App. 175,493 A.2d 895
• Court: Connecticut Court of Appeals
• Parties: , 25 Ed. Law Rep. 838 REGIONAL SCHOOL DISTRICT NUMBER 4 v. UNITED PACIFIC INSURANCE COMPANY.

Page 895

493 A.2d 895

4 Conn.App. 175, 25 Ed. Law Rep. 838

REGIONAL SCHOOL DISTRICT NUMBER 4 v. UNITED PACIFIC INSURANCE COMPANY.

No. 2809.

Appellate Court of Connecticut.

Argued March 7, 1985.

Decided May 28, 1985.

J. Paul Kane, Hartford, with whom was Steven B. Kaplan, Hartford, for appellant (defendant).

James D. Reardon, Essex, for appellee (plaintiff).

Before HULL, BORDEN and DALY, JJ.

HULL, Judge.

The defendant, United Pacific Insurance Company, the surety on the bid bond attached to Ray Adler, Inc.'s bid on the construction of additions and alterations to the Valley Regional High School in Deep River, appeals from the trial court's judgment for the plaintiff in an action on that bond. The plaintiff claimed that Ray Adler, Inc., the low bidder on the project, failed to enter into a contract at its bid price of $1,910,000, thereby causing the plaintiff a loss of $203,000, incurred when it was forced to accept the bid of the second lowest bidder. The defendant claimed, by way of a special defense, that Adler, its principal, made an error in computing the bid, as a result of which it was entitled to withdraw the bid without liability. The court found (1) that Adler was guilty of negligence in the preparation of its bid which barred it from claiming equitable relief, (2) that despite Adler's attempted withdrawal of its bid, the plaintiff awarded the contract to it, thus binding Adler to perform the contract for the bid price and, upon Adler's default, obligating the defendant on the bid bond, and (3) that the plaintiff was entitled to $191,000 in damages, being the amount of the bid bond provided by the defendant.

United raises three claims on appeal: (1) that the court erred in finding the defendant to be obligated on its bond in the absence of acceptance of Adler's bid by the plaintiff; (2) that the court erred in requiring that Adler be free of negligence when claiming relief from any obligation under the terms of its erroneous bid; and (3) that the court erred in its computation of damages. Because we find error with respect to the second claim raised by United, we do not consider claims one and three. ¹

On February 1, 1980, Ray Adler, Inc., submitted the low bid on the plaintiff's project. That bid was accompanied by the defendant's bond in the amount of $191,000, which constituted 10 percent of the amount of the bid. February 1 was the deadline for bids on the plaintiff's project and, at some time after 3 p.m. on that day, the plaintiff opened all of the bids. On that same day, Adler discovered an error in its bid and sent a mailgram to the plaintiff to that effect. That message was confirmed by telephone on February 4, 1980, at which time a representative of Adler offered to accept the contract if a $110,000 correction were allowed. Even with such a correction, Adler's bid would have been $93,000 lower than that of the next lowest bidder, Custom Concepts Builders of Connecticut. This offer was reiterated to the plaintiff at a meeting on February 20, 1980, but was rejected. Instead, the plaintiff awarded the contract to Custom Concepts and brought this action on Adler's bid bond, seeking damages in the amount of $191,000.

At trial, the defendant argued, by way of a special defense, that a unilateral mistake had been made by Adler in transcribing the cost of certain custom-made windows into the final computation of its bid. The plaintiff asserted, and the court found, that Adler's error was the result of a "guesstimate" based on prior experience which did not take into account the fact that the windows were to be custom-made. The trial court concluded "that [Adler] was negligent in the preparation of its bid," and that the defendant had, therefore, failed to establish its special defense. Thus, the court rendered judgment for the plaintiff.

The defendant's second claim of error, which we find dispositive, is directed to the trial court's use of a standard of care which required that Adler be free of negligence in order for the defendant to prevail on its special defense of unilateral mistake. The defendant claims that the proper standard to be applied is that of gross negligence. While we disagree with the defendant's characterization of the proper standard, we agree with the result which the defendant advocates.

This issue is the subject of an annotation entitled "Right to Rescind Bid on Public Contract," found at 2 A.L.R. 4th 991. As a general proposition, the cases discussed in that annotation suggest that two lines of authority exist as to the criteria under which a bid may be rescinded. Both lines of authority tend to agree on three requirements: (1) the mistake must relate to a material aspect of the contract; (2) the mistake must be so great that enforcement of the bid would be unconscionable; and (3) no substantial prejudice should result to the party who has not made the mistake. Id., § 2[a].

The fourth criterion, upon which the two schools of authority disagree, is either: (1) whether the mistake was made in the absence of negligence by the mistaken party; or (2) whether the mistake was made in the absence of gross negligence by the mistaken party. See id., §§ 3[a], 5[a]. Neither of these approaches has ever been adopted in Connecticut. We decline to follow either path, as each imposes an artificial impediment to the true guiding principle in these cases, which is the achievement of equity under all of the circumstances.

We adopt the rationale used by the court in Geremia v. Boyarsky, 107 Conn. 387, 140 A. 749 (1928), in deciding a case involving an error in an estimate on a private carpentry and housepainting contract. There, the defendant was asked to stop the work which he was doing and to compute the total cost of the job in question. In so doing, the defendant made an error in addition which reduced the estimate from $2210.40 to $1450.40. The court held that "[i]t may be conceded that the error in addition made by the defendant ... when he hastily totaled the items of his estimate at the request of the plaintiff, involved some degree of negligence. It would be inequitable under the circumstances to permit the plaintiff, who had good reason to know before the contract was signed that there must have been a substantial omission or error in the amount of the bid, to take advantage of such error while the contract was still executory and he had been in no way prejudiced, and to require the defendants to do the work for an amount much less than the actual cost. In similar situations when a price has been bid which, because of erroneous arithmetical processes or by the omission of items, was based on a mistake, rescission has been allowed where the contract was still executory and it would be inequitable to permit the other party to gain an unfair advantage from a mistake which has not prejudiced him in any way. Moffett, Hodgkins & Clarke Co. v. Rochester, 178 U.S. 373, 20 S.Ct. 957 [44 L.Ed. 1108 (1900) ]; Bromagin v. Bloomington, 234 Ill. 114, 84 N.E. 700 [1908]; St. Nicholas Church v. Kropp, 135 Minn. 115, 160 N.W. 500, L.R.A. 1917D, 741 [1916]; Board of School Comrs. v. Bender, 36 Ind.App . 164, 72 N.E. 154 [1905]; Barlow v. Jones (N.J.Eq.) 87 Atl. 649 [1913]; Everson v. International Granite Co., 65 Vt. 658 [1893].

"The mistake of the defendants was of so fundamental a character that the minds of the parties did not meet; it was not, under the circumstances, the result of such culpable negligence as to bar the defendants of redress, and the plaintiff before the contract was signed had good reason to believe that a substantial error had been made and, while the contract was still executory and he had been in no way prejudiced, refused to permit the correction of the error and attempted to take an unconscionable advantage of it. The defendants were clearly entitled to a decree canceling the contract." (Emphasis added.) Geremia v....