Dynalectric Co. v. Clark & Sullivan Constructors, Inc.
127 Nev. 480, 255 P.3d 286 (2011) (2011)
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Rule of Law:
The appropriate measure of damages for a promissory estoppel claim is flexible, allowing for expectation, reliance, or restitutionary damages as justice requires. In the context of a general contractor's reliance on a subcontractor's bid, the presumptive measure of damages is expectation damages, calculated as the difference between the nonperforming subcontractor's original bid and the cost of the replacement subcontractor's performance.
Facts:
- In 2004, the University Medical Center (UMC) solicited bids for an expansion project.
- Clark and Sullivan Constructors, Inc. (C&S), a general contractor, sought bids from subcontractors to prepare its own master bid for the UMC project.
- Dynalectric Company of Nevada, Inc. submitted a bid to C&S to perform the electrical work for the project.
- Dynalectric repeatedly assured C&S of the accuracy of its bid.
- C&S incorporated Dynalectric’s bid into its master bid submitted to UMC for the general contract.
- UMC awarded the general contract to C&S, which was the low bidder.
- After C&S was awarded the contract, Dynalectric repudiated its obligations and refused to perform the electrical work.
- As a result, C&S contracted with three replacement subcontractors to complete the electrical work.
Procedural Posture:
- Clark and Sullivan Constructors, Inc. (C&S) sued Dynalectric Company of Nevada, Inc. in district court (trial court) on theories including promissory estoppel.
- Dynalectric filed counterclaims against C&S.
- After a 12-day bench trial, the district court entered a judgment in favor of C&S on its promissory estoppel claim.
- The district court awarded C&S $2,501,615 in damages, representing the difference between Dynalectric’s bid and the cost of replacement subcontractors.
- Dynalectric (appellant) appealed the judgment to this court, with C&S as the respondent.
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Issue:
Does a court err in awarding expectation damages on a promissory estoppel claim when a subcontractor repudiates its bid after a general contractor has relied on it for a public works project?
Opinions:
Majority - Per Curiam
No. A court does not err by awarding expectation damages on a promissory estoppel claim because the remedy should be flexible to achieve what justice requires, and expectation damages are often appropriate. Adopting the flexible approach from the Restatement (Second) of Contracts § 90, the court holds that remedies for promissory estoppel can include expectation, reliance, or restitutionary damages, depending on what is necessary to avoid injustice. The court finds no rational reason to distinguish between promissory estoppel and traditional breach of contract in terms of available damages. Citing the seminal case of Drennan v. Star Paving Co., the court affirms that the well-established measure of damages in the subcontractor bidding context is the difference between the original subcontractor's bid and the cost of the replacement. This measure constitutes expectation damages because it places the general contractor in the position it would have occupied had the subcontractor performed as promised. In this case, justice required such an award because Dynalectric made an unequivocal and repeatedly assured promise, it was foreseeable that C&S would rely on it, and the resulting damages were proven with reasonable certainty.
Analysis:
This decision formally adopts the flexible remedial approach of the Restatement (Second) of Contracts § 90 for promissory estoppel claims in Nevada, clarifying that available remedies are not limited to reliance damages. It establishes that expectation damages, which aim to give the non-breaching party the 'benefit of the bargain,' are often appropriate to achieve justice. By designating the Drennan rule as the presumptive measure of damages in the subcontractor bidding context, the court provides certainty and reinforces the binding nature of a subcontractor's bid once a general contractor has relied upon it.
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