SUBJECT: Construction Contracts | Mistaken Bids
1. Pl., school district, called for bids. Def., had copy of plans, prepared a bid to be submitted by deadline (Aug. 12, 1952).
2. Various subcontractors, added amounts he accepted in a column of worksheets.
3. First bid for plumbing $9285. Another bid closer to deadline, $6500. He thought he entered the first bid, so subtracted the second from the total, resulting in $89,994 (which included no allowance for plumbing).
4. After bids, discovered Def.’s bid was $11,306 less than next lowest. Pl. agents asked Def. if bids were correct, Def. checked with assistant, came back, said they were correct.
5. Board voted to award Def. contract.
6. Next morning (Aug. 13) Def. notices error. Drives to L.A., saw architect. Architect called school superintendent (Pl.), informed of error. Pl, wrote a letter and requested bid be rescinded (Aug 14).
7. Aug 15- Pl. says no, submitted k to be signed, Sept. 8, Pl returned k, another letter explaining error, asks Pl. again to reconsider.
8. Pl. received additional bids, let k go to next lowest at $102,900, brought action to recover $12,906 difference as well as $4,499.60 against Def.s surety under terms of the bond.
[A surety or guarantee, in finance, is a promise by one party (the guarantor) to assume responsibility for the debt obligation of a borrower if that borrower defaults. The person or company that provides this promise, is also known as a surety or guarantor.]
Judgment given for Pl. in amounts sought, Def. appeals.
-We have concluded because of an honest clerical error in the bid and Def.’s subsequent prompt rescission he was not obliged to execute the contract, and that the judgment should be reversed.
-Relief from mistaken bids is consistently allowed where one party knows or has reason to know of the other’s error and the requirements for rescission are fulfilled.
-The type of error here involved is one which will sometimes occur in the conduct of reasonable and cautious businessmen (not caused by neglect of legal duty). We cannot say as a matter of law that it constituted a neglect of legal duty such as would bar the right to equitable relief.
Knowledge of a Mistake: If an offeree knows of has reason to know, of the offeror’s material mistake at the time of acceptance, the offeror is not bound.
“An acceptance is a voluntary act of the offeree whereby he exercises the power conferred upon him by the offer, and thereby creates the set of legal relations called a contract.”
“The offerer has, in the beginning, full power to determine the acts that are to constitute acceptance.”
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