Elsinore Union Elementary School District v. Kastorff
353 P.2d 713, 54 Cal. 2d 380 (1960)
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Rule of Law:
A contractor is entitled to rescind a bid for a public contract if it contains a material clerical error made in good faith, the other party is notified promptly, enforcement of the bid would be unconscionable, and the other party can be returned to the status quo. Such a clerical error, even if resulting from some carelessness, does not constitute a 'neglect of a legal duty' that would bar equitable relief.
Facts:
- Contractor E.J. Kastorff was preparing a bid under time pressure for construction work for the Elsinore Union Elementary School District.
- While compiling subcontractor bids on his worksheets, Kastorff made a clerical error and failed to carry over the amount for the plumbing work into the final total.
- Kastorff submitted his erroneous bid of $89,994, which was approximately $11,306 less than the next lowest bid.
- On the night the bids were opened, the School Board asked Kastorff if his figures were correct; without his worksheets to check, he confirmed they were, and the board voted to award him the contract.
- The next morning, Kastorff discovered the error upon reviewing his worksheets.
- Kastorff immediately drove to the architect's office to report the mistake and, the following day, sent a formal letter to the School Board explaining the error and requesting to withdraw his bid.
- The School Board held a special meeting and voted not to release Kastorff from his bid.
- Kastorff subsequently refused to sign the formal written contract sent to him by the School District.
Procedural Posture:
- Elsinore Union Elementary School District sued contractor E.J. Kastorff and his surety in a California trial court.
- The School District sought to recover the difference between Kastorff's bid and the amount paid to the next lowest bidder after Kastorff refused to perform.
- The trial court found in favor of the plaintiff School District, ruling that Kastorff was bound by his bid and was not entitled to rescission.
- Defendants Kastorff and his surety appealed the trial court's judgment to the Supreme Court of California.
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Issue:
Does a contractor have the right to rescind a bid due to an honest clerical error of a material nature after the bid has been opened and accepted, but before a formal contract is executed, if the contractor provides prompt notice of the error?
Opinions:
Majority - Schauer, J.
Yes. A contractor is entitled to relief through rescission when a bid is based on an honest, material mistake of fact and not a neglect of legal duty. The evidence clearly demonstrated that Kastorff made a clerical error by omitting the cost of plumbing, which was a material part of the bid. This type of error is one that can occur in the course of business and does not rise to the level of 'neglect of a legal duty' that would prohibit rescission. Forcing Kastorff to perform at the mistaken price would be unconscionable, especially since the School District was promptly notified of the error before it suffered any prejudice or change in position. The School District cannot enforce an inequitable bargain resulting from a known mistake.
Analysis:
This decision solidifies the equitable principle allowing for rescission of a contract based on a unilateral mistake of fact, particularly in the competitive and high-pressure context of public construction bids. It clarifies that a simple clerical error, as opposed to a mistake in judgment, does not constitute the 'neglect of a legal duty' that would bar relief. The ruling prevents public entities from taking opportunistic advantage of a contractor's known, honest mistake to secure an inequitable bargain. This precedent provides a crucial safety valve for contractors, ensuring that manifest clerical errors do not lead to financially ruinous outcomes.
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