Facts
- The National Institutes of Health solicited bids for a renovation project in Bethesda, Maryland, with substantial HVAC work.
- Pavel Enterprises, Inc. (PEI), a general contractor, solicited HVAC sub-bids; A. S. Johnson Company, Inc. (Johnson), an HVAC subcontractor, provided a written scope proposal without a price term.
- On bid day, Johnson verbally quoted $898,000 for the HVAC portion; PEI used that figure to submit a $1,585,000 prime bid.
- PEI’s bid was initially second-lowest; after the apparent low bidder was disqualified, NIH informed PEI in mid-August 1993 that its bid would be accepted.
- After that notice, PEI sought revised bids from multiple mechanical subcontractors (including Johnson), requesting repricing that excluded certain controls work PEI planned to procure separately.
- PEI later faxed Johnson a communication purporting to accept Johnson’s bid and requesting Johnson’s attendance at a preconstruction meeting.
- Johnson promptly attempted to withdraw, stating its bid was mistaken and too low; the withdrawal occurred before NIH formally awarded the prime contract to PEI.
- After NIH awarded PEI the prime contract, PEI hired another HVAC subcontractor for $32,000 more than Johnson’s quoted amount and sued Johnson for the difference.
Issues
- Whether a binding subcontract was formed under traditional offer-and-acceptance principles before Johnson withdrew its bid.
- Whether Johnson’s bid was enforceable under detrimental reliance (promissory estoppel) because PEI used the bid to prepare and submit its prime bid.
Decision
- The Court of Appeals of Maryland affirmed judgment for Johnson.
- No bilateral subcontract was formed because Johnson withdrew before effective acceptance and the record did not show agreement on all material terms.
- Detrimental reliance is, in principle, available to general contractors in this setting, but PEI failed to satisfy the doctrine’s requirements on these facts.
- PEI’s post-notice rebidding activity supported the trial court’s finding that PEI did not actually and reasonably rely on Johnson’s bid in a manner that made enforcement necessary to avoid injustice.
Legal Principles
- A subcontract requires offer, acceptance, and mutual assent on material terms; a subcontractor may revoke an offer before acceptance absent a binding option or formed contract.
- Maryland recognizes detrimental reliance under Restatement (Second) of Contracts § 90(1) as a possible basis to enforce a subcontractor’s bid, but applies it narrowly in construction bidding disputes.
- Detrimental reliance requires a clear promise, reasonable expectation of inducing action, actual inducement, and a showing that enforcement is necessary to avoid injustice.
- Reliance may be defeated where the general contractor’s conduct (such as rebidding, bid shopping, or changing the work allocation) shows the bid was not treated as a firm commitment warranting equitable enforcement.
Conclusion
The court held that Johnson’s HVAC bid was revocable and effectively withdrawn before a subcontract was formed, and that PEI’s conduct after learning it would receive the prime contract—particularly soliciting revised bids—prevented PEI from establishing the actual, reasonable reliance and injustice required to enforce the bid under Restatement § 90(1).