Caseflicks

Court of Appeals for the Second Circuit • 1933

James Baird Co. v. Gimbel Bros., Inc.

64 F.2d 344 | 1933 U.S. App. LEXIS 4091

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Takeaway

In short, this case holds that a subcontractor's revocable price quotation does not become binding merely because a general contractor relies on it in submitting a bid; absent acceptance or consideration, promissory estoppel does not convert an offer to bargain into an irrevocable promise.

Background

Gimbel Bros. sent bid quotations to contractors likely to bid on a Pennsylvania public-building project. Its employee had substantially underestimated the amount of linoleum required, so Gimbel's quoted lump-sum prices were about half what they should have been. The quotation stated that, if the contractor received the general contract, Gimbel's prices would be guaranteed upon "prompt acceptance after the general contract has been awarded."

James Baird Co. received the quotation on December 28 and used Gimbel's price in submitting its own public bid that day. Later that same day, Gimbel discovered its mistake and telegraphed Baird and the other contractors that it withdrew the quotation and would provide a new price at roughly twice the original amount. Baird received the revocation after it had submitted its bid but before the public authorities awarded it the general contract. The authorities accepted Baird's bid on December 30; Baird formally accepted Gimbel's offer on January 2.

Baird sued Gimbel for damages after Gimbel refused to supply the linoleum at the original price. The trial judge, sitting without a jury under the parties' stipulation, entered judgment for Gimbel. Baird appealed.

Issues

Issue #1

Whether Baird's use of Gimbel's quotation in its public bid created a bilateral contract that Gimbel could not revoke.

Holding

No. Using the quotation in Baird's bid neither accepted Gimbel's offer nor supplied the promised exchange; Gimbel revoked before Baird accepted.

Reasoning

Gimbel's offer contemplated a contract only after the general contract had been awarded and the contractor promptly accepted Gimbel's quoted prices. Baird's use of those prices in preparing and submitting its own bid was not an award of the general contract and was not the communicated acceptance the offer called for.

The parties' conduct confirms that submission of a public bid was not intended as acceptance. Had Baird won the public contract and then repudiated it, Gimbel could not have sued Baird for breach or claimed against Baird's bankruptcy estate. Thus Baird had not made a reciprocal promise to buy and pay for the linoleum merely by using Gimbel's figures.

Although Gimbel knew contractors might rely on its quotation in submitting bids, Baird could have protected itself by obtaining a binding commitment before using the figures. The court declined to impose a contract through a strained reading of commercial language when the stated terms required acceptance after the award.

Issue #2

Whether promissory estoppel made Gimbel's revoked subcontractor quotation enforceable because Baird relied on it in making its public bid.

Holding

No. Promissory estoppel did not apply because Gimbel made an offer for an exchange, not a donative promise intended to bind Gimbel before Baird furnished the requested consideration.

Reasoning

Promissory estoppel principally protects reliance on promises made without an expected equivalent exchange, including certain charitable subscriptions and other donative promises. In that setting, the doctrine can prevent the harshness of allowing a promisor to withdraw after foreseeable reliance.

Gimbel's quotation instead proposed a bargain: Gimbel would supply linoleum in return for Baird's promise to take and pay for it. Gimbel sought Baird's acceptance, not Baird's submission of a bid to the public authority; Baird's bid was therefore not the consideration or counterpromise that would transform Gimbel's offer into a binding promise.

Applying promissory estoppel here would hold Gimbel despite the unfulfilled condition it placed on its offer—Baird's acceptance after award. The court also rejected construing the quotation as an option that would bind Gimbel while leaving Baird free to buy elsewhere, because nothing indicated that Gimbel intended such a one-sided obligation.