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Conduit and Foundation Corp. v. City of Atlantic City

Decided: February 28, 1949.


Civil action. On complaint.

Haneman, J.s.c.


This is a suit seeking the rescission of a bid made by the plaintiff to the defendant for certain work to be performed in the City of Atlantic City, and the return of a deposit of $5000 accompanying said bid.

The facts adduced at the time of trial exhibited that on August 23, 1945 the City of Atlantic City, having theretofore advertised that it would receive bids for the performance of certain work, the plaintiff submitted its bid for the repair of concrete sub-structures in the construction of a new boardwalk. Accompanying said bid, in accordance with the terms of the advertisement and specifications, plaintiff deposited a check for $5000 to assure its execution of the contract, if it were the successful bidder. There was a total of six other bidders who sought this contract on the day and time above set forth. When the bids were opened it was disclosed that plaintiff was the low bidder with a price of $143,171 and that the next highest bid was $205,395. The highest bid received was $334,604. As might have been anticipated, the difference in the bids somewhat upset Harry L. Halloran, president of the plaintiff corporation. When he returned to Philadelphia, the principal place of business of the corporation, he discovered, on August 24, 1945, that he had made an error in his computation and that the price which he bid should have been $193,421. Upon the discovery of this error he immediately called Director William F. Casey, a City Commissioner of the City of Atlantic City, who had charge of the department concerned with the boardwalk, and suggested that he had made an error in his bid and would like to discuss the same with the Director. Director Casey replied that the entire city commission would meet during the following week and suggested that if Halloran desired he could then attend the meeting and explain the situation to the governing body of

Atlantic City. Halloran did attend the meeting referred to and advised the city commission that he had made an error in computation and was withdrawing his bid. He further advised that the discrepancy was so great that the plaintiff could not proceed with the contract and, as a matter of fact, it was doubtful whether the plaintiff could obtain a performance bond as required under the specifications. He was then informed that the city commission would take the matter under consideration. At a regular meeting of the commissioners of the City of Atlantic City the contract was awarded to the plaintiff on September 14, 1945. Plaintiff was thereupon notified that it had been awarded the contract and a form of said contract was forwarded to it for execution. In the face of the error in computation, plaintiff was unable to obtain a performance bond as required and thereupon returned the contract to the defendant, setting forth that not only would it sustain a loss if it were compelled to complete the contract, but that it was impossible to obtain the performance bond required. The defendant thereupon declared the $5000 deposited by plaintiff forfeited.

Plaintiff's explanation of the cause of the error in computation was as follows: Halloran, together with one John Sloan, general superintendent of the plaintiff corporation, prepared the estimates on the cost figures for the contract. They examined the site of the work for this contract and for two other contracts for which defendant had advertised it would receive bids, a week or more in advance of the date for submitting the bids. During the succeeding week, other employees of the plaintiff as well aided in obtaining prices for materials, sub-contracts, etc. With these prices in hand, Halloran and Sloan commenced correlating the various figures on the contract here in question, as well as the two other contracts above referred to, on Tuesday afternoon, August 21, 1945. They continued their computations Tuesday evening, Wednesday afternoon and Wednesday evening, until the early hours of Thursday morning. Halloran testified that he had only one hour of sleep before all three bids were submitted on Thursday, August 23, 1945. The method pursued, which

apparently is the normal ordinary method adopted for preparing estimates on work of this type, was for Halloran and Sloan to compute the cost of the various items on separate work sheets. The per item unit for direct or gang cost was transferred to one sheet and the total general cost for all items to a second sheet. The first sheet represented the actual field cost per item, i.e. , labor, materials, etc. The second sheet represented the general cost attributable to the job, i.e. , field office, tools, insurance, taxes, etc. The figures on this second sheet should have been distributed among the direct cost item for each unit on the first sheet. This analysis of cost, together with estimated profit, comprising several different sheets, was then transposed to the bid form. The second sheet, representing the overall cost, had apparently been mislaid, or in any event was not used in finally determining the costs. As a result, when the final estimate was prepared, an item of $50,250 was omitted. The explanation for this mistake, given by Halloran and Sloan, was that they both were tired, having worked almost continuously from Tuesday afternoon until early Thursday morning, and that each one had anticipated that the other had included the costs in the computation. They as well testified that this is the customary manner in which their bids had been made up, and in the years they had been in business, such a mistake had never been made before.

In order to determine the rights of the several parties it is first necessary to consider the nature of the "bid" submitted to the defendant.

In Lupfer & Remick v. Freeholders of Atlantic , 87 N.J. Eq. 491, 100 A. 927, the court said at page 497:

"A competitive bid submitted under statutory privilege and regulation is in the nature of an option to the municipality, based upon a valuable consideration, to which the principles of law governing options, generally, are applicable. The consideration passing is the privilege of bidding and the legal assurance to the successful bidder of an award as against all competitors. Such an option pending action consistent with its terms, expressed or implied, is a vested right of contract, of which the municipality cannot be deprived, except perhaps by its consent, and is remediable at law by an action for damages, or enforceable in equity by specific performance, if

feasible, or may be summarily dealt with by forfeiture of the penalty prescribed. To sanction any other rule would open the door to fraud, and render wholly abortive the ...

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