Drennan v. Star Paving Company

Supreme Court of California · 1958 · Contracts

51 Cal. 2d 409 (1958)

Updated July 26, 2026

ContractsPromissory estoppelSubcontractor bidsIrrevocable offersRestatement section 90reliancesubcontractor bidgeneral contractor

Facts

On the day bids were due for a school construction project, defendant's estimator telephoned plaintiff's office and submitted a paving bid of $7,131.60 according to the plans and specifications. Plaintiff, a general contractor, used that figure in calculating his own bid and listed defendant as the paving subcontractor; plaintiff's bid was the lowest and he was awarded the general contract. The next morning defendant told plaintiff it had made a mistake and would not do the paving for that price, demanding $15,000 instead. After attempting for several months to obtain the lowest available replacement bid, plaintiff hired another paving company for $10,948.60 and sued for the difference.

Issue

When a subcontractor submits a bid that a general contractor reasonably relies on in making and submitting the general contract bid, does that reliance make the subcontractor's offer irrevocable even though there was no consideration for an option and no bilateral contract? Also, does the subcontractor's mistake permit revocation where the general contractor had no reason to know of the error?

Rule

Under Restatement section 90, a promise that the promisor should reasonably expect to induce action or forbearance of a definite and substantial character, and that does induce such action or forbearance, is binding if injustice can be avoided only by enforcement of the promise. Accordingly, a subcontractor's bid is binding and effectively irrevocable for a reasonable opportunity to accept after award of the general contract when the subcontractor should reasonably expect the general contractor to rely on the bid, the contractor does so rely in submitting its own bid, and the contractor's reliance is justifiable. If the general contractor knew or had reason to know the bid was mistaken, reliance is not justifiable and section 90 does not apply.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, general contractor Nora Ellison was assembling a bid for a public library project due at 5:00 p.m. Desert Crest Masonry telephoned a definite bid of $84,000 for the brickwork according to the plans and specifications, and Nora used that figure in her general bid, which won the project. The next morning, before Nora sent any formal written acceptance, Desert Crest said it had undercounted labor and would perform only for $118,000.

Can Nora most likely enforce Desert Crest's original bid?

Explanation. Under the majority rule, a definite subcontractor bid may become binding under Restatement section 90 when the subcontractor should reasonably expect the general contractor to rely on it, the contractor actually relies by submitting the general bid, and injustice can be avoided only by enforcement. No traditional option or bilateral contract is required. The subcontractor's later claim of mistake does not defeat enforcement if the general contractor had no reason to know of the error.