37 Cal. 2d 696, [235 P.2d 7]
In July 1948 the City of Los Angeles Board of Public Works published a notice inviting bids for construction of the general piping system for the Hyperion sewer project.1 The notice required each bid to be accompanied by a certified check or surety bond.2 The amount had to equal at least 10 percent of the sum bid.3 This served as a guarantee that the bidder would enter into the proposed contract if awarded.4
It stated that the bond or check would become the property of the city if the bidder failed or refused to execute the required contract.5 The city charter provided that after bids had been opened and declared no bid could be withdrawn without consent for a period of three months.6 Both the notice and the official bid form stated that bidders would not be released on account of errors.7
M. F. Kemper Construction Company learned of the invitation on August 17, 1948 and immediately began preparing its proposal.8 Over a thousand different items were involved in the estimates.9 Three men performed the computations, each calculating the costs of different parts of the work.10 They worked until 2 o'clock on the morning of August 25, the day the bids were to be opened.11
Their final effort required addition and transposition of figures from work sheets to a final accumulation sheet.12 One item estimated at $301,769 was inadvertently omitted from the final accumulation sheet and overlooked in computing the total, resulting in a bid of $780,305.13 When the bids were opened on August 25 the Kemper bid was the lowest.14 The other three bids were $1,049,592, $1,183,000 and $1,278,895.15
Several hours after the bids were opened the company discovered the omission and immediately notified a member of the board.16 On August 27 the company explained the mistake to the board and withdrew its bid.17 A few days later, at the board's invitation, it submitted evidence showing the unintentional omission of the $301,769 item.18 The board passed a resolution accepting the $780,305 bid.19 The company refused to enter into a written contract at that figure.20
On October 15, 1948, without readvertising, the board awarded the contract to the next lowest bidder.21 The city then demanded forfeiture of the Kemper Company's bond, and the company commenced the present action to cancel its bid and obtain discharge of the bond.22 The city cross-complained for forfeiture of the bond and for damages.23 The trial court found that the bid had been submitted as the result of an excusable and honest mistake of a material and fundamental character, that the company had not been negligent in preparing the proposal, that it had acted promptly to notify the board of the mistake and to rescind the bid, and that the board had accepted the bid with knowledge of the error.24 The court further found and concluded that it would be unconscionable to require the company to perform for the amount of the bid, that no intervening rights had accrued, and that the city had suffered no damage or prejudice.25 The trial court cancelled the bid, discharged the bond, and allowed the city nothing on its cross-complaint.26
Whether the company is entitled to relief on the ground of unilateral mistake?27
Rescission may be had for mistake of fact if the mistake is material to the contract and was not the result of neglect of a legal duty, if enforcement of the contract as made would be unconscionable, and if the other party can be placed in statu quo.28
Yes. The omission of the $301,769 item from the company's bid was a material mistake as it represented nearly one third of the intended bid amount.29 The company acted promptly to notify the board upon discovering the error several hours after the bids were opened on August 25.30 The board had actual knowledge of the error before it accepted the bid.31
Enforcement would be unconscionable because the bid was substantially lower than the other bids received and the city had notice of the clerical omission before acceptance.32 The city can be placed in statu quo because it awarded the contract to the next lowest bidder without readvertising and suffered no damage or prejudice.33
The company is entitled to relief on the ground of unilateral mistake.34
Related opinions on this issue
Justice Carter dissented.35 He argued that the majority opinion violated fundamental principles of rescission for unilateral mistake because the city had no knowledge of the mistake at the time the bids were opened.36 The contract to be rescinded was the irrevocable bid itself rather than any construction contract.37
At the time bids were opened the city had no knowledge and had no means of knowing that the bidder had made a mistake.38 Allowing relief would destroy the public policy behind binding bids and forfeiture provisions as expressed in Palo & Dodini v. City of Oakland.39 The proof of whether a bidder has made a mistake is so completely within his control that the public body is helpless to refute it.40 The important considerations of public policy behind those provisions will be completely destroyed.41
Whether the statement in the invitation and bid form that bidders will not be released on account of errors precludes relief for a clerical omission?42
No. The error here was a clerical omission of an item from the final accumulation sheet during transposition of figures, not an error of judgment in estimating costs of labor or materials.45 The distinction between clerical errors and errors of judgment is recognized in the cases allowing rescission.46 The clause does not bar relief for clerical mistakes of this type.47
The statement in the invitation and bid form that bidders will not be released on account of errors does not preclude relief for a clerical omission.48
Related opinions on this issue
Justice Carter dissented on this issue as well.49 He contended that the clause applies to all errors including those in computation.50 Nothing could be more explicit.
There is no room left for claiming mistake.51 Yet the majority say that the errors to which reference is made in the above mentioned documents are of judgment, not in computation.52 To narrow its meaning to exclude clerical mistakes alters the contract of the parties.53
The phrase was used to avoid the precise claim now made by the bidder.54 It was contemplated by the parties that the risk of any mistakes was to be borne by the bidder.55 To limit the errors of the bidder for which he is responsible to those of judgment is to strike at the very purpose of the clause in question and the bid bond.56
Whether the city charter provision that no bid shall be withdrawn after opening bars rescission when the city had notice of the error before acceptance?57
No. Although the charter provides that after bids have been opened and declared no bid shall be withdrawn.60 Such a bid remains subject to rescission upon proper equitable grounds when the city had actual notice of the error before acceptance.61 The cases recognize no distinction between public and private contracts regarding the right to equitable relief from mistake.
The city charter provision that no bid shall be withdrawn after opening does not bar rescission when the city had notice of the error before acceptance.62
Related opinions on this issue
Justice Carter dissented. He maintained that the charter provision and the binding nature of the bid after opening preclude rescission for a naked unilateral mistake.63 There is nothing left therefore but a naked unilateral mistake which is not ground for rescission.64
The majority's holding renders the charter provisions and forfeiture requirements wholly meaningless.65 The important considerations of public policy behind those provisions will be completely destroyed. The policy is expressly declared by the charter that there shall be no relief from forfeiture.66
Whether the bid bond may be forfeited when the bidder refuses to enter the contract after discovering a clerical mistake?67
No. The company had a legal excuse for refusing to enter the contract after discovering the clerical mistake and promptly notifying the board.70 The contingency giving rise to forfeiture under the charter did not occur.71 Decisions permitting rescission of bids uniformly excuse contractors from similar forfeiture provisions.72
The bid bond may not be forfeited when the bidder refuses to enter the contract after discovering a clerical mistake.73