Drennan v. Star Paving Co.
51 Cal.2d 409, 333 P.2d 757 (Cal. 1958)

  • Drennan, a licensed general contractor, was preparing a bid on the “Monte Vista School” in California.  It was customary in that area for general contractors to receive the bids of subcontractors by telephone on the day of bidding and to rely upon these bids in computing their own bids.  Star Paving placed the lowest bid for paving work ($7131.60).
  • Drennan computed his own bid accordingly and submitted it with the name of the Star Paving as the subcontractor for paving.  When the bids were opened, Drennan’s bid was lowest and he was awarded the contract.
  • The next morning, Drennan stopped at Star Paving’s office.  He was immediately told that the bid placed by Star Paving was a mistake. Star Paving refused to do the paving work for less than $15,000.
  • After several months of soliciting bids from other subcontractors, Drennan was able to find another subcontractor who could do the paving work for $10,948.60. Drennan sued for $3,817 (the difference between Star Paving’s bid and the cost of the paving to Drennan) plus court costs.
    • Star Paving argued there was no enforceable contract between the parties because the offer was revocable and it was revoked before Drennan communicated his acceptance to Star Paving.
      • “There was no evidence that the defendant offered to make his bid irrevocable in exchange for the plaintiff’s use of its figures in computing his bid.”
  • The Trial Court found for Drennan and awarded $3,817 in damages.  Star Paving appealed.
  • The Appellate Court affirmed.
    • The Appellate Court found that there was neither an option supported by consideration, not a bilateral contract binding on both parties.
    • However, the Court found that the Star Paving reasonably induced reliance on the part of the Drennan.
    • If you make a promise that you should reasonably expect will cause the promisee to act in reliance to their detriment, and it actually does cause them to act, then you may be bound to that promise if necessary to avoid injustice. (aka the doctrine of promissory estoppel)
    • The loss resulting from the mistake should fall on the party who caused it.
  • The Drennan Rule is that, held implicit in the subcontractor’s bid, is a subsidiary promise to keep the bid open for a reasonable time after award of the prime contract to give the general contractor an opportunity to accept the offer on which he relied in computing the prime bid.
    • Notice that the general contractor is not bound by any promise to the subcontractor!
  • This decision is in opposition to the decision in James Baird Co. v. Gimbel Bros. (64 F.2d 344 (2nd Cir. 1933)), decided 20 years earlier. This case helped establish that reliance (aka promissory estoppel) is a reasonable way to make an offer irrevocable.