James Baird Co. v. Gimbel Bros., Inc.
64 F.2d 344 (1933)
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Rule of Law:
A general contractor's use of a subcontractor's bid in submitting a general contract bid does not constitute acceptance of the subcontractor's offer. The doctrine of promissory estoppel cannot be invoked to make a subcontractor's offer for a bargained-for exchange irrevocable.
Facts:
- Gimbel Bros., Inc., a merchant, sent an offer to approximately thirty contractors, including James Baird Co., to supply linoleum for a public building project.
- The offer was based on a miscalculation that underestimated the required yardage by about half.
- The offer stated it was for "prompt acceptance after the general contract has been awarded."
- On December 28, Baird received the offer and used Gimbel's quoted prices to submit a lump-sum bid for the general contract.
- On the same day, after Baird had submitted its bid, Gimbel discovered its error and sent a telegraph to all contractors withdrawing the offer.
- Baird received the telegraphic withdrawal after submitting its bid but before the general contract was awarded.
- On December 30, the public authorities awarded the general contract to Baird.
- On January 2, Baird attempted to formally accept Gimbel's original, withdrawn offer.
Procedural Posture:
- James Baird Co. sued Gimbel Bros., Inc. in the trial court for breach of contract.
- The case was tried before a judge who directed a judgment for the defendant, Gimbel Bros., Inc.
- The plaintiff, James Baird Co., as appellant, appealed the judgment to the U.S. Court of Appeals for the Second Circuit.
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Issue:
Does a general contractor's reliance on a subcontractor's bid when submitting a general bid constitute acceptance of the subcontractor's offer or otherwise make the offer irrevocable under the doctrine of promissory estoppel, even after the subcontractor has withdrawn the offer?
Opinions:
Majority - L. Hand
No. A subcontractor's offer is not accepted merely by the general contractor's use of it in a primary bid, nor is the offer made irrevocable by such reliance under the doctrine of promissory estoppel. The offer was for an exchange—the linoleum for a promise to pay—and could be withdrawn at any time before acceptance. The offer's explicit language, which called for "prompt acceptance after the general contract has been awarded," clearly contemplated a future, formal acceptance, not an acceptance implied by the mere use of the figures in a bid. Furthermore, the doctrine of promissory estoppel is intended to enforce donative promises where reliance creates injustice, not to make offers for commercial bargains irrevocable. An offer for an exchange does not become a binding promise until the offeror receives the stipulated consideration, which in this case was Baird's acceptance. To apply estoppel here would be to transform a simple offer into a binding option contract without consideration, which the law does not permit.
Analysis:
This decision represents a traditional and strict application of contract formation principles, emphasizing that an offer can be revoked until it is formally accepted. Judge Hand's opinion distinguishes between commercial bargains and donative promises, limiting the application of promissory estoppel to the latter. This ruling placed the risk of a subcontractor's bid revocation squarely on the general contractor, encouraging them to secure firm option contracts before relying on bids. This case is a foundational counterpoint to the later California Supreme Court decision in Drennan v. Star Paving Co., which reached the opposite conclusion by applying promissory estoppel to make a subcontractor's bid irrevocable.
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