Drennan v. Star Paving Co. – Case Brief Summary
Summary of Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (Cal. 1958).
Facts
Star Paving (D) submitted a subcontractor bid to Drennan (P), a general contractor, for a public school construction project. Drennan used Star Paving’s bid of $7,100.00 to prepare his final bid and was awarded the contract. The next day Star Paving informed Drennan that it had underestimated the cost of the project and refused to do the work for less than $15,000. Drennan hired another subcontractor to do the work for $11,000 and sued Star Paving for the difference between $11,000 and $7,100. The trial court entered judgment for Drennan, holding that Star Paving had made an offer and that Drennan had relied upon that offer when listing Star Paving as the subcontractor. Star Paving appealed.
Issues
- Can reasonable, justifiable, and foreseeable reliance render an offer binding?
- What is the test for applying promissory estoppel?
Holding and Rule (Traynor)
- Yes. An offer that the promissor should reasonably expect to induce action or forbearance of a definite and substantial character by the promisee, and which does induce such action or forbearance, is binding if injustice can be avoided only by enforcing the promise. See Restatement (2d) of Contracts 90.
- In order for promissory estoppel to apply there must be: 1) a clear and definite offer; 2) a reasonable expectation that the offer will induce reliance in the other party; 3) actual and reasonable reliance by the offeree; and 4) a detriment which only can be avoided by enforcement of the offer.
Star Paving’s subcontractor bid constituted a promise to perform under conditions both express and implied, according to the circumstances. It was silent on revocation and therefore the court determined whether there were conditions imposed by law or reasonably inferred. The court turned to Restatement (2d) of Contracts 45; merely acting in justifiable reliance on a unilateral offer is sufficient to make that offer irrevocable for a reasonable period of time to complete performance.
Public Policy
Whether implied in law or fact, enforcement of Star Paving’s promise precluded the injustice that would result if the offer could be revoked after the offeree acted in detrimental reliance upon it. Reasonable reliance resulting in a foreseeable and prejudicial change in the promisee’s position affords the compelling basis for implying a subsidiary promise not to revoke a unilateral offer. Star Paving had a stake in Drennan’s reliance on the bid in making Drennan’s bid on the general contract. The court held that it was only reasonable that Drennan have the opportunity to accept Star Paving’s bid after Drennan was awarded the general contract if Drennan justifiably and reasonably relied on Star Paving’s offer.
As for Star Paving’s mistake defense, Drennan could not have justifiably relied on Star Paving’s bid if Drennan had reason to believe that Star Paving’s bid was in error. The mistake that Star Paving made in its bid was not one of which Drennan knew or should have known and Drennan’s reliance was justified.
Disposition
Judgment for Drennan affirmed.
Notes
Promissory estoppel must only be used if there is no consideration. Drennan effectively overruled James Baird Co. v. Gimbel Bros. Inc. and is the seminal case for the modern approach to applying promissory estoppel in the context of subcontractor bidding disputes based on mistake.
See Adarand Constructors, Inc. v. Peña for another case involving general contractor and subcontractor bids.