Universal Computer Systems, Inc. v. Medical Services Association of Pennsylvania
628 F.2d 820 (1980)
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Rule of Law:
A principal is bound under the doctrine of promissory estoppel by a promise made by its agent if the agent possessed apparent authority to make the promise, and the promisee reasonably and detrimentally relied on that promise.
Facts:
- Medical Services Association of Pennsylvania (Blue Shield) solicited bids for a computer lease, setting a submission deadline of 12:00 Noon on August 18, 1975.
- Joel Gebert, a Blue Shield employee, was designated as the sole liaison for prospective bidders.
- Warren Roy Wilson, President of Universal Computer Systems, Inc. (Universal), informed Gebert that he would be sending Universal's bid via airline.
- Wilson asked Gebert if a Blue Shield employee could pick up the bid proposal from the Harrisburg airport on the morning of the deadline to ensure timely submission.
- Gebert assured Wilson that someone would pick up the proposal at the airport and deliver it to Blue Shield before the deadline.
- Relying on Gebert's promise, Wilson dispatched the bid via Allegheny Airlines on the morning of August 18.
- When Wilson called Gebert to provide the pickup information, Gebert rescinded the promise, stating he had changed his mind and could not retrieve the proposal.
- Universal's subsequent attempts to arrange an alternative pickup were delayed, causing the bid to arrive after the noon deadline, at which point Blue Shield rejected it as untimely.
Procedural Posture:
- Universal Computer Systems, Inc. filed a complaint against Medical Services Association of Pennsylvania (Blue Shield) in the United States District Court for the Middle District of Pennsylvania, seeking damages for breach of promise.
- The case was tried before a jury, which returned a verdict for Universal in the amount of $13,000.
- Following the verdict, Blue Shield filed a motion for judgment non obstante veredicto (n.o.v.) and a motion for a new trial.
- The district court granted Blue Shield's motion for judgment n.o.v., setting aside the jury's verdict on the issue of liability.
- The district court denied Blue Shield's motion for a new trial.
- Universal appealed the district court's entry of judgment n.o.v. to the U.S. Court of Appeals for the Third Circuit.
- Blue Shield filed a cross-appeal challenging the denial of its motion for a new trial.
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Issue:
Under Pennsylvania law, is a principal liable under promissory estoppel for its employee's promise to accommodate a bidder, when the bidder reasonably relied on that promise to its detriment and the employee had apparent authority to make such a promise?
Opinions:
Majority - Rosenn, Circuit Judge.
Yes. A principal is liable under the doctrine of promissory estoppel for a promise made by its agent when the agent acted with apparent authority and the promisee's reliance on the promise was reasonable and resulted in a detriment. The court found that Joel Gebert, as Blue Shield's sole designated contact for bidders, was clothed with apparent authority to make administrative accommodations such as arranging to pick up a bid. Universal's reliance on Gebert's promise was justified because the bid solicitation documents provided insufficient notice that federal procurement regulations might prohibit such an accommodation. Because Universal reasonably relied on Gebert's promise to its substantial detriment—by forgoing other delivery options and subsequently missing the deadline—injustice could only be avoided by enforcing the promise.
Analysis:
This decision reinforces the principle that a principal's liability can extend beyond formally negotiated contracts to informal promises made by agents with apparent authority. It establishes that the reasonableness of a third party's reliance is judged from their perspective, based on the principal's outward manifestations, rather than on obscure rules the third party has no reason to be aware of. The case solidifies the role of promissory estoppel in commercial transactions, ensuring that parties who make reasonable, detrimental reliance on promises from company agents are protected from injustice. This holding obligates companies to be mindful of the scope of authority they appear to give their employees who interact with the public.
