Drennan v. Star Packing Co., 333 P.2d 757 (1958).
Facts:
Parties: Drennan, plaintiff-appellant; Star Paving Co., defendant-appellee.
Drennan, a contractor, sued Star Paving Co., a sub-contractor, for refusing to perform paving
work according to a bid it had submitted to the plaintiff.
Plaintiff won; defendant appealed.
The defendant had submitted a bid for about $7,000 to the plaintiff to perform paving work.
The plaintiff used the defendant’s bid in its general bid for a job and won the job.
The next day, the plaintiff stopped by the defendant’s office and introduced himself; the
defendant immediately said that he could no longer do the work because they had made a
mistake in their original bid.
The defendant refused to do the work for less than $15,000, more than twice their original bid.
The plaintiff was forced to find another sub-contractor to do the work for $11,000 and then sued
the defendant.
Issue:
The issue is whether the plaintiff’s reliance on the defendant’s offer made the offer irrevocable.
Rationale:
The defendant claimed that “there was no enforceable contract” because it had made a
revocable offer and revoked the offer before the plaintiff accepted.
The plaintiff claimed that because he relied to his detriment on defendant’s bid, then an
enforceable contract existed.
The court discussed the Restatements Second of Contracts § 45, which says that if performance
is begun in a unilateral contract, which was what happened here, then the offer becomes
irrevocable.
The court further discussed that comment b of § 45 says that an offer will include (often implied,
not directly stated) a “subsidiary promise” that if performance is begun, then the offer is
irrevocable.
The court said that the consideration for this subsidiary promise may be partial performance or
tender of performance of the contract.
The court also said that this subsidiary promise serves to prevent the injustice of offerors backing
out of unilateral contracts where an offeree had relied on an offeror’s bid or promise.
The court stated that the defendant knew that the plaintiff would have reliance on its bid and
even wanted and welcomed this reliance.
Therefore, the court held that the reliance that the plaintiff had was sufficient to bind the
defendant to his bid, and therefore, there was a contract.
Disposition: The court reversed the decision of the lower court and remanded the case with judgment
for the plaintiff.
Holding:
The court held that because the plaintiff had acted in reliance on the defendant’s bid, there was
an enforceable contract and the plaintiff is entitled to damages for breach.
Rules:
When there has been reliance on a bid made by a sub-contractor, the court may use promissory
estoppel to find that an enforceable contract exists.
“Merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for
making a promise binding.”
