EA Coronis Assocs. v. M. Gordon Constr. Co.
90 N.J.Super. 69, 216 A.2d 246 (1966)
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Rule of Law:
The doctrine of promissory estoppel can make a subcontractor's bid irrevocable when a general contractor reasonably and substantially relies on that bid to submit its own general contract offer, even if the subcontractor's bid does not qualify as a 'firm offer' under the Uniform Commercial Code.
Facts:
- M. Gordon Construction Company (Gordon), a general contractor, sought bids from various subcontractors, including E.A. Coronis Associates (Coronis), for the structural steel work needed for two buildings at the Port of New York Authority's Elizabeth Piers project.
- On April 22, 1963, Coronis sent a letter to Gordon offering to supply and erect structural steel for $155,413.50; Gordon contends this letter merely confirmed a prior oral agreement.
- Bids for the overall Port Authority project were opened on April 19, 1963, and Gordon's bid was the lowest; Gordon alleges Coronis was informed of its low bid on the same day.
- The Port Authority officially awarded the general contract for the project to Gordon on May 27, 1963.
- On June 1, 1963, Coronis sent a telegram to Gordon stating, 'Due to conditions beyond our control, we must withdraw our proposal of April 22nd 1963 for structural steel'.
- On June 3, 1963, Gordon replied by telegram informing Coronis that it was holding them to their bid of April 22, 1963.
- Coronis never performed the structural steel work for Gordon's project as per the original bid.
- Gordon subsequently hired Elizabeth Iron Works to perform the structural steel work for $208,000, which was $52,586.50 more than Coronis's initial proposal.
Procedural Posture:
- Plaintiff E.A. Coronis Associates (Coronis) initiated a lawsuit against defendant M. Gordon Construction Company (Gordon) concerning three separate contracts.
- Defendant Gordon admitted liability on the three contracts but filed a counterclaim against Coronis, alleging breach of an agreement to supply and erect structural steel.
- The Superior Court, Law Division (trial court), granted summary judgment on cross-motions in favor of Coronis concerning Gordon's counterclaim, meaning the trial court ruled that Coronis was not bound by its offer.
- Defendant Gordon appealed this summary judgment ruling to the Superior Court of New Jersey, Appellate Division, as the appellant.
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Issue:
Does the doctrine of promissory estoppel apply to make a subcontractor's bid irrevocable when a general contractor relies on that bid to prepare and submit its own bid for a larger project, thereby precluding the subcontractor from withdrawing its offer before formal acceptance?
Opinions:
Majority - Collester, J.A.D.
Yes, the doctrine of promissory estoppel can apply to make a subcontractor's bid irrevocable, and the case is remanded for a factual determination of its elements. The court first addressed whether Coronis's April 22 letter constituted a 'firm offer' under Uniform Commercial Code (UCC) § 2-205. It concluded that the letter did not meet the UCC's requirement of a 'signed writing which by its terms gives assurance that it will be held open.' Thus, without such assurance, the offer was revocable under common law principles for lack of consideration, unless another legal doctrine applied. The court then considered the doctrine of promissory estoppel, referencing Restatement, Contracts, § 90. While acknowledging that no prior New Jersey case had applied this doctrine to subcontractor bids in this specific context, the court noted that the state's highest court had implied its applicability in appropriate circumstances. The court recognized promissory estoppel as a departure from the strict requirement of consideration in contract formation, functioning to enforce promises where a promisee suffers detriment due to reliance on a gratuitous promise. Citing several cases from other jurisdictions, notably Drennan v. Star Paving Co., the court adopted the view that it is 'only right and just' to enforce a promise that a promisor knows will induce substantial action, particularly when a general contractor relies on a subcontractor's bid to secure a larger contract. The court emphasized the need for legal principles to evolve and remain 'abreast of the times.' Consequently, the court reversed the summary judgment, finding that the factual elements of promissory estoppel must be thoroughly investigated at a full trial.
Analysis:
This decision marks a significant expansion of promissory estoppel's application in New Jersey, particularly within the construction bidding context. It provides crucial protection for general contractors by limiting the ability of subcontractors to revoke bids after they have been relied upon, thus promoting stability and fairness in the competitive bidding process. The court's embrace of the Drennan rationale signals a judicial willingness to adapt contract law to modern business realities, moving beyond strict adherence to traditional consideration requirements. This ruling effectively shifts some risk to subcontractors, obliging them to be more diligent in their bid submissions, as their offers can become binding through reliance even without formal acceptance.
