Flintco Pacific, Inc. v. TEC Management Consultants, Inc.
1 Cal.App.5th 727, 2016 Cal. App. LEXIS 594, 205 Cal. Rptr. 3d 21 (2016)
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Rule of Law:
A general contractor's reliance on a subcontractor's bid is not reasonable for the purpose of promissory estoppel if the general contractor disregards material terms and conditions that directly affect the bid price. A subsequent subcontract proposal from the general contractor that materially differs from the subcontractor's bid constitutes a counteroffer, which terminates the general contractor's power to accept the original bid.
Facts:
- On May 17, 2011, subcontractor TEC Management Consultants, Inc. (TEC) submitted a written bid to general contractor Flintco Pacific, Inc. (Flintco) for glazing work on a construction project for $1,272,090.
- TEC's bid included several key conditions: a required 35% deposit, a 15-day acceptance period, and a 3% per quarter price escalation clause if not accepted within that period.
- On the same day, Flintco used TEC’s bid price in its own master bid for the project and listed TEC as the subcontractor.
- Flintco was awarded the prime contract for the project.
- On July 5, 2011, Flintco sent TEC a 'letter of intent' that made the contract award contingent on new terms, including TEC's acceptance of liquidated damages provisions.
- On July 14, 2011, Flintco sent TEC its standard form subcontract which did not include TEC's 35% deposit requirement and added other conflicting terms, such as a requirement for a performance bond.
- TEC's CEO contacted Flintco to discuss the 'major differences' between TEC's bid and Flintco's proposed subcontract.
- On August 23, 2011, after discussions failed to resolve the differences, TEC sent Flintco a letter stating its decision not to pursue the contract.
Procedural Posture:
- Flintco Pacific, Inc. sued TEC Management Consultants, Inc. in a California trial court, alleging a single cause of action for promissory estoppel.
- Following a bench trial, the trial court found in favor of TEC.
- The trial court entered a final judgment for TEC.
- Flintco Pacific, Inc., as the appellant, appealed the judgment to the California Court of Appeal, an intermediate appellate court.
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Issue:
Does a general contractor's reliance on a subcontractor's bid price, while ignoring material conditions in the bid that affect the price, constitute reasonable reliance for the purposes of a promissory estoppel claim?
Opinions:
Majority - Aldrich, Acting P. J.
No. A general contractor’s reliance on a subcontractor's bid is not reasonable when it disregards material conditions that are integral to the bid price. The doctrine of promissory estoppel requires that the promisee's reliance be reasonable. Here, TEC’s bid was not merely a price; it included express, material conditions such as a 35% deposit, a price escalation clause, and exclusions for bonds and liquidated damages, all of which affected the price. Flintco's business practice of ignoring all bid conditions except for price, scope, and duration was unreasonable because it disregarded terms that were central to TEC's offer. Furthermore, Flintco's letter of intent and standard form subcontract, which included terms that materially conflicted with TEC's bid, constituted a rejection of TEC's offer and a counteroffer. This counteroffer terminated Flintco's power to accept TEC's original bid, thereby giving TEC the right to withdraw.
Analysis:
This decision refines the application of promissory estoppel in construction bidding, particularly the doctrine established in Drennan v. Star Paving Co. The court clarifies that the 'reasonable reliance' element is not satisfied when a general contractor selectively relies on a bid's price while ignoring express written conditions that are material to that price. It establishes that a written bid with conditions is a complete offer, and a general contractor cannot 'cherry-pick' the price and then attempt to renegotiate the other terms. This ruling protects subcontractors by affirming that a general contractor's counteroffer, which materially alters the subcontractor's bid, extinguishes the original offer and frees the subcontractor from any obligation.
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