The legal rules surrounding the bid process are driven by considerations of fairness -- to other bidders, to the awarding authority, and to a contractor who makes a mistake in his bid. Often these considerations are in tension. In some circumstances the law comes down on the side of a low bidder's right to withdraw a bid and decline a contract based on an honest mistake.
Courts are not blind to the realities of the bidding process and the opportunities for inadvertent error. “Contractors do not work under ideal conditions in the rush to meet the deadline for submitting bids and equity recognizes that honest, sincere men, even in the exercise of ordinary care, under such pressure can make mistakes of such a fundamental character that enforcement of the apparently resulting agreement would be unconscionable. In such a situation, if the parties may still be placed in statu quo, equitable relief will be granted.” Kenneth E. Curran, Inc. v. State, 106 N.H. 558, 561 (1965).
In Curran, the State advertised for bids for an addition to Silver Hall at Plymouth State College. The plaintiff submitted a bid of $102,171.98, far below the other six bids which ranged from $159,957 to $189,945. When the bids were opened and read, plaintiff knew at once that something was amiss, and soon found the problem – an adding machine incapable of recording a total of more than $99,999.99. Plaintiff promptly asked for permission to withdraw its bid, but was advised that it would be held to its bid and its bid bond called if it refused to perform. Plaintiff sued for rescission, and won. The Supreme Court adopted a four part test: “'Equitable relief by way of rescission will be granted by most courts, in the case of unilateral mistakes, when the following conditions are present: (1) The mistake is of such consequence that enforcement would be unconscionable. (2) The mistake must relate to the substance of the consideration, that is a material feature. (3) The mistake must have occurred regardless of the exercise of ordinary care. (4) It must be possible to place the other party in status quo.”
Elaborating on the third factor, the Court stated that “it is only when negligence of a contractor resulting in a mistake in submitting his bid amounts to such carelessness or lack of good faith in calculation as to violate a positive duty in making up a bid, taking into consideration the nature of the transaction and position of the offeree, that equitable relief will be denied.” The defective calculator case is a rarity, but it points up the operative principle: arithmetic and clerical errors, such as writing down sub-bids incorrectly or failing to enter the number intended on a spread sheet, are precisely the types of mistakes that courts are likely to excuse. A misreading of specs or a failure to gauge a measurable quantity in a take-off, by contrast, would be unlikely to qualify.
The practical lesson of the Curran case is that relief from a unilateral mistake in a bid is more likely to be granted (1) the sooner notice is given to the awarding authority (before contracts are signed and other bidders are off to other projects), (2) the less the negligence of the bidder (clerical and arithmetic errors rather than inattention to plans and specs), and (3) the greater the disparity between the erring bid and the second low bid (such that the awarding authority knows or should know that a mistake has likely been made).
It is noteworthy that the remedy for unilateral mistake in a bid is rescission rather than reformation, i.e., withdrawal of the bid rather than award of the contract followed by a modification of the contract price to correct the bid error. This is the teaching of Midway Excavators, Inc. v. Chandler, 128 N.H. 654, 658 (1986), where a contractor “which chose not to exercise its option to rescind the bid and re-attain its bid bond, cannot now seek to reform the bid, and therefore the contract.” My personal view is that this is too harsh a rule when the correction of an arithmetic error would still keep the low bidder’s bid below the next lowest bid. But I don’t wear the black robe.
Courts are not blind to the realities of the bidding process and the opportunities for inadvertent error. “Contractors do not work under ideal conditions in the rush to meet the deadline for submitting bids and equity recognizes that honest, sincere men, even in the exercise of ordinary care, under such pressure can make mistakes of such a fundamental character that enforcement of the apparently resulting agreement would be unconscionable. In such a situation, if the parties may still be placed in statu quo, equitable relief will be granted.” Kenneth E. Curran, Inc. v. State, 106 N.H. 558, 561 (1965).
In Curran, the State advertised for bids for an addition to Silver Hall at Plymouth State College. The plaintiff submitted a bid of $102,171.98, far below the other six bids which ranged from $159,957 to $189,945. When the bids were opened and read, plaintiff knew at once that something was amiss, and soon found the problem – an adding machine incapable of recording a total of more than $99,999.99. Plaintiff promptly asked for permission to withdraw its bid, but was advised that it would be held to its bid and its bid bond called if it refused to perform. Plaintiff sued for rescission, and won. The Supreme Court adopted a four part test: “'Equitable relief by way of rescission will be granted by most courts, in the case of unilateral mistakes, when the following conditions are present: (1) The mistake is of such consequence that enforcement would be unconscionable. (2) The mistake must relate to the substance of the consideration, that is a material feature. (3) The mistake must have occurred regardless of the exercise of ordinary care. (4) It must be possible to place the other party in status quo.”
Elaborating on the third factor, the Court stated that “it is only when negligence of a contractor resulting in a mistake in submitting his bid amounts to such carelessness or lack of good faith in calculation as to violate a positive duty in making up a bid, taking into consideration the nature of the transaction and position of the offeree, that equitable relief will be denied.” The defective calculator case is a rarity, but it points up the operative principle: arithmetic and clerical errors, such as writing down sub-bids incorrectly or failing to enter the number intended on a spread sheet, are precisely the types of mistakes that courts are likely to excuse. A misreading of specs or a failure to gauge a measurable quantity in a take-off, by contrast, would be unlikely to qualify.
The practical lesson of the Curran case is that relief from a unilateral mistake in a bid is more likely to be granted (1) the sooner notice is given to the awarding authority (before contracts are signed and other bidders are off to other projects), (2) the less the negligence of the bidder (clerical and arithmetic errors rather than inattention to plans and specs), and (3) the greater the disparity between the erring bid and the second low bid (such that the awarding authority knows or should know that a mistake has likely been made).
It is noteworthy that the remedy for unilateral mistake in a bid is rescission rather than reformation, i.e., withdrawal of the bid rather than award of the contract followed by a modification of the contract price to correct the bid error. This is the teaching of Midway Excavators, Inc. v. Chandler, 128 N.H. 654, 658 (1986), where a contractor “which chose not to exercise its option to rescind the bid and re-attain its bid bond, cannot now seek to reform the bid, and therefore the contract.” My personal view is that this is too harsh a rule when the correction of an arithmetic error would still keep the low bidder’s bid below the next lowest bid. But I don’t wear the black robe.
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