Contracts I, Pages 334–348

Pavel Enterprises v. A.S. Johnson Co.

Court of Appeals of Maryland, 1996

Judgment:

Judgment affirmed with costs.

Facts:

The National Institutes of Health solicited bids for a renovation. Plaintiff prepared a a bid for the work and solicited sub-bids from various subcontractors. Defendant responded with a written scope of work proposal. Plaintiff then verbally submitted a quote to NIH, using defendant's sub-bid in computing its bid. NIH notified plaintiff that its bid would be accepted despite only being the second lowest, after disqualifying the actual lowest bidder. Plaintiff's president, Pavel, met with defendant's chief estimator, Kick to discuss defendant's role in the work. Plaintiff asked if defendant would object to plaintiff subcontracting directly with Powers, which defendant did not. Plaintiff then faxed all subcontractors, asking for new bids without the cost for subcontracting Powers. Plaintiff informed NIH of this, and faxed a letter to defendant, formally accepting their bid and requesting them to attend a preconstruction meeting. After receiving plaintiff's fax, defendant replied and said that their bid contained an error making their bid price too low, and that they wished to withdraw their bid. NIH then formally awarded the contract to plaintiff. Plaintiff found another subcontractor and brought suit to recover the $32,000 difference between defendant's bid and the substitute's.

Procedural History:

The trial court held that no contractual relationship had been formed, finding that:

  1. Plaintiff relied upon defendant's sub-bid in making its bid for the project.
  2. Plaintiff was not the lowest bidder and only got the contract when the actual lowest was disqualified.
  3. Before NIH awarded plaintiff the contract, defendant withdrew its bid.
  4. Plaintiff's letter to its subcontractors indicates that there was no definite agreement with defendant, and that plaintiff was not relying upon defendant's bid.

Issue:

Does detrimental reliance apply to general contractors such as here so as to make them irrevocable?

Rule:

Maryland courts are to apply R2C § 90(1), not R2C § 87(2).

Reasoning:

Defendant's offer was withdrawn before being accepted as it was a bilateral contract and Maryland chooses to reject R2C § 87(2) because it could lead to bid shopping. Plaintiff's belief that the bid remained open showed that he was not relying on it.

Holding:

Page 334, Paragraph 1, Middle

Although theory of detrimental reliance is available to general contractors, it is not applicable to the facts of this case.

Takeaway:

Maryland doesn't help. Just look at Restatement § 87(2). It's basically made for this exact situation.