Saliba-Kringlen Corp. v. Allen Engineering Co.
| Decision Date | 08 February 1971 |
| Docket Number | SALIBA-KRINGLEN |
| Citation | 15 Cal.App.3d 95,92 Cal.Rptr. 799 |
| Court | California Court of Appeals Court of Appeals |
| Parties | CORP., et al., Plaintiffs, Appellants and Respondents, v. ALLEN ENGINEERING CO., Defendant, Appellant and Respondent. Civ. 36413. |
Samuel D. Hale, Jr., Gill & Baldwin and Leroy M. Gire, Los Angeles, for plaintiffs, appellants and respondents.
Shapiro & Maguire, Grant & Popovich and Irvin Grant, Los Angeles, for defendant, appellant and respondent.
Plaintiffs consist of an individual, a corporation and a partnership acting as joint venturers in the business of a licensed general contractor and will hereinafter be referred to collectively as the general contractor. Defendant is a corporation doing business as a licensed electrical contractor.
The general contractor submitted a bid in the amount of $8,590,118.75 to the State of California for certain freeway construction and was awarded the contract. Defendant had submitted to the general contractor the low bid in the amount of $217,129 to perform the electrical work as a subcontractor. Defendant refused to perform the electrical work and the general contractor engaged another electrical contractor to perform that work at a cost of $40,871 more than defendant's bid. By this action, the general contractor sought to recover the $40,871 from defendant and was awarded half that amount ($20,435). Both parties appeal, the general contractor claiming that it was entitled to $40,871 and the defendant claiming that the general contractor was entitled to nothing.
'A promise which the promissor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise.' (Rest. Contracts, § 90.) This principle is applicable to a proposed subcontractor (promissor) who makes a bid (and with it an implied subsidiary promise to keep the bid open for a reasonable time after the awarding of the general contract) to a general contractor (promisee) who in turn bids on a construction contract with a third person in reliance upon the subcontractor's bid (and subsidiary promise) and is the successful bidder. (Drennan v. Star Paving Co. (1958) 51 Cal.2d 409, 333 P.2d 757.) The principal question on appeal is whether the trial court properly applied the rule to the facts in this case.
Sealed bids by general contractors were scheduled to be opened by the State of California at 2:00 p.m., July 9, 1964. Bids usually are not submitted until immediately preceding the scheduled opening time. Proposed subcontractors and suppliers of materials are unwilling to make their bids to a general contractor until immediately preceding the time set for the opening of the general contractors' bids. This reluctance stems principally from the fact that if a proposed subcontractor or supplier of materials submits his bid many hours in advance, the general contractor will have an opportunity to use that bid in an attempt to persuade another subcontractor or supplier of materials to lower his bid to a figure lower than the figure quoted by the first proposed subcontractor or supplier of materials. Thus it is customary, as was the case here, for the general contractors to receive bids from proposed subcontractors and suppliers of materials only an hour or two before the opening of the general contractors' bids, thereby placing the general contractors in the position of having all they can do to record the bids, prepare their own written bids and get them filed by the deadline.
The general contractor in this case determined that bids from proposed subcontractors should be received no later than noon in order to be considered. An employee of defendant whose duty it was to prepare the bid for the electrical work used a set of plans reduced in size to one-half of the size of the original set of plans. Thus a line on the original set of plans which indicated a length of 20 feet appeared on the half scale set of plans to indicate a length of 10 feet. A substantial quantity of conduit and wire was called for by the plans. Defendant's employee used a ruler to determine how many feet of conduit and wire were called for by the plans. When he ascertained the total footage, he forgot to double the figure as he should have done because he was working from half scale plans, even though he was accustomed to working from half scale plans and he knew that these plans were half scale. As a result of the failure to double the footage for conduit and wire, defendant ascertained that it could do the electrical work for $217,129 which was approximately $55,000 below the figure it would have used had its employee not forgotten to double the footage for conduit and wire.
Shortly before noon on July 9, 1964, a secretary employed by defendant telephoned numerous general contractors who were seeking the contract with the state and told each of them that defendant's bid for the electrical subcontract was $217,129. The general contractor in this case received defendant's bid about noon.
When the secretary had completed her calls, she received telephone calls from some of those with whom she had placed bids requesting that defendant's bid be checked again because it seemed to be out of line with bids from other proposed electrical subcontractors. The secretary was unable to do anything about these requests until someone with authority returned to the office from lunch. An officer of defendant returned from lunch after 1:00 p.m., became convinced that defendant's bid was at least $50,000 too low (although he then did not know the reason), and made the decision to withdraw the bid. The general contractor in this case received word at 1:50 p.m., at its office that defendant was withdrawing its bid because of an error.
When the general contractor received defendant's bid shortly before noon, it was compared with three other bids for electrical work in the amounts of $265,543, $270,381 and $299,962. Using defendant's bid for the electrical work, the general contractor calculated its bid to the state, reduced it to writing and delivered the sealed envelope containing the bid to the appropriate state office at 1:00 p.m. Ten minutes elapsed between the time when defendant telephoned the general contractor's office to withdraw the bid and the time when the sealed envelopes containing the bids were opened 20 miles away in a state office.
Defendant claims that the general contractor in its bid to the state did not rely on defendant's bid to do the electrical work and that the trial court's finding that the general contractor relied on defendant's bid is not supported by the evidence. Defendant claims that the general contractor did not rely on Any bid of a proposed supplier or a proposed subcontractor.
The evidence discloses that the general contractor was successful in entering into contracts with most suppliers and subcontractors at prices lower than the bid prices. Sometimes the contract negotiated for a lower price was with the original low bidder and sometimes it was not. Defendant claims that by this conduct the general contractor entered into contracts with subcontractors and suppliers for a total of $89,156.67 less than the lowest bid prices. The general contractor denies that this figure represents an increase in its profits due solely to its negotiations because some of the contracts reflected changes in the work to be done or the materials to be supplied from what was called for from prospective subcontractors and suppliers at bid time. Although the trial court made no finding of the exact amount of money by which the general contractor increased its profits by negotiations, the record is clear that it was a substantial amount.
But the fact that the general contractor with respect to a given item did not enter into a contract with the lowest bidder at the price of that bid is not evidence that the general contractor did not rely on that bid. It is simply evidence that if the general contractor was able to get a better price either from the original lowest bidder or from someone else, the general contractor did so.
The facts of this case demonstrate precisely in what way the general contractor relied upon the bids of prospective subcontractors. As already indicated, the general contractor entered into several subcontracts at less than the original bid price, sometimes with the original bidder and sometimes not. In at least one case, the general contractor entered into a subcontract with someone who did not make the low bid, but at the exact price of the low bid. But in no case did the general contractor ever enter into a contract with a subcontractor or supplier at a price higher than the low bid. It is thus quite clear from the record that unless the general contractor engotiated a contract with another subcontractor or supplier at or below the low bid, the contract was made with the low bidder. Therefore it is obvious that the general contractor relied upon the low bids in the sense that those bids provided a protective ceiling on the cost of work to be contracted out to subcontractors and of supplies to be obtained from materialmen.
If the general contractor had reason to believe that defendant's bid was in error, it could not justifiably rely on it. (Drennan v. Star Paving Co. (1958) 51 Cal.2d 409, 333 P.2d 757.) Defendant asserts that there was no substantial evidence to support the finding of the court that the general contractor 'did not know and did not have reason to know that there was any error or mistake in' defendant's bid.
Defendant claims that the general contractor should have known that there was an...
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