James Baird Co. v. Gimbel Bros. Inc. – Case Brief
James Baird Co. v. Gimbel Bros. Inc., 64 F.2d 344 (2d Cir. 1933).
Facts: Gimbel Brothers (D) sent subcontractor bids to approximately 20 to 30 contractors, offering to supply all of the linoleum for the construction of a building for the Pennsylvania Department of Highways. In preparing the bid Gimbel Brothers underestimated the size of the project by 50% and therefore mistakenly quoted a price that was only half the necessary amount. Contractor James Baird Co. (P) received the offer and used the quoted price to submit a bid on the main contract. Later the same day Gimbel realized the mistake and retracted the bid by telegraph and quoted a new price approximately twice that of the original. James Baird did not receive the retraction until after submitting the bid on the main contract and was awarded the main contract two days later.
James Baird formally accepted Gimbel Brothers’ offer two days after receiving Gimbel Brothers’ withdrawal of the offer. Gimbel Brothers refused to recognize the existence of a contract and James Baird sued for damages. The trial court entered judgment for Gimbel Brothers and James Baird appealed.
Issue: 1) Can promissory estoppel be used to enforce an offer that is not meant to become binding until consideration has been received? 2) Does promissory estoppel render a subcontractor’s bid irrevocable?
Holding and Rule (Learned Hand): 1) No. Promissory estoppel cannot be asserted to compel an offeror to perform where the offer is not meant to become a binding contract until consideration has been received. 2) No. Promissory estoppel does not render a subcontractor’s offer irrevocable even if the contractor has relied upon it in submitting a bid for a general contract.
The court held that if an offer is withdrawn before it is accepted, the acceptance is too late. James Baird argued that Gimbel Brothers’ offer should have been irrevocable in the event James Baird used it to submit its bid for the general contract and that it would have been an unreasonable hardship to expect it to lose the contract and forfeit its deposit. Offers are ordinarily made in exchange for a consideration; either a counter-promise or some other act. In such cases they propose bargains and presuppose that each promise or performance induces the other. The doctrine of promissory estoppel is used to avoid the harsh results of allowing the promissor to repudiate when the promisee has acted in reliance upon the promise.
The court held that an offer for an exchange is not meant to become a promise until a consideration has been received; either a counter-promise or whatever else is stipulated. Gimbel Brothers offered to deliver the linoleum in exchange for James Baird’s acceptance, not in exchange for James Baird’s bid on the general contract. That offer could become a promise to deliver only when James Baird promised to take and pay for it. Promissory estoppel is not applicable in this case.
Disposition: Affirmed; Judgment for Gimbel Brothers.
Notes: The rule here is the minority rule; promissory estoppel does not make a subcontractor’s bid irrevocable even though the contractor may have relied upon it in submitting its bid to the owner. This case has since been overturned by Drennan v. Star Paving.