## Facts

- A water district solicited competitive bids for a multi-part public construction project; McAdoo White bid on the regulating reservoir portion and furnished a bid bond from Aetna in the amount of $42,789.
- White’s bid was $427,890; the next lowest bid was $494,320, and the engineer’s estimate was $512,250.
- Before the district accepted any bid, White discovered a substantial computational error in estimating excavation costs, involving the amount of hard rock to be excavated for a large quantity of material.
- White promptly gave the district written notice withdrawing his bid due to the error and requested return of the bid security; he also appeared before the district’s board to explain the mistake.
- After consulting counsel, the board voted to accept White’s bid despite the notice of mistake; White then sent written notice rescinding.
- The district awarded the work to the next lowest bidder and retained the bid bond, seeking the price difference as damages.
- The trial court found the miscalculation material but treated it as a non-relievable “mistake of judgment,” denied rescission, and awarded the district the bond amount on its cross-complaint.

## Issues

1. Whether a contractor who promptly reports a substantial bidding error and seeks withdrawal before acceptance may rescind and recover its bid bond.
2. Whether a miscalculation in estimating hard rock excavation is a relievable “mistake of fact” under California Civil Code § 1577, notwithstanding elements of professional judgment.
3. Whether the public entity may retain the bid bond as damages when it had timely notice of the mistake and can be returned substantially to the status quo.

## Decision

- The Court of Appeal reversed the judgment for the district.
- The court held the error was a relievable unilateral mistake of fact under Civil Code § 1577 rather than a barred “mistake of judgment.”
- Applying established rescission criteria for unilateral bid mistake, the court concluded White satisfied the conditions for rescission.
- The district was not entitled to retain the bid bond or recover the bid-difference damages via the bond.

## Legal Principles

- Rescission for unilateral mistake of fact is available when the mistake is material, not caused by neglect of a legal duty, enforcement would be unconscionable, the other party can be placed in status quo, and the mistaken party gives prompt notice and restores (or offers to restore) what it received.
- Under Civil Code § 1577, “mistake of fact” excludes mistakes caused by neglect of a legal duty; ordinary carelessness in estimating does not automatically constitute such neglect.
- In public bidding, a rigid bar based on labeling an error a “mistake of judgment” is improper where the mistake concerns an objectively ascertainable condition materially affecting performance and the public entity receives prompt notice before acceptance.
- Where the public entity can award to the next bidder and suffers no cognizable reliance loss apart from the lost benefit of the mistaken price, equity supports rescission and return of bid security.

## Conclusion

The court held that a contractor who promptly discloses a material bid miscalculation before acceptance may rescind and recover its bid bond when the mistake qualifies as a mistake of fact under Civil Code § 1577 and the public entity can be returned substantially to its pre-bid position.


White v. Berenda Mesa Water Dist., 7 Cal. App. 3d 894, 87 Cal. Rptr. 338 (Ct. App. 1970)