US Court of Appeals for Seventh Circuit Holds Gross Discrepancy in Bid Price Not Sufficient to Relieve Vendor of Obligation to Subcontractor

Architectural Metal Systems, Inc. v. Consolidated Systems, Inc.,
58 F.3d 1227 No 94-3898 (7th Cir. July 5, 1995)

Offer and Acceptance – Under the Illinois U.C.C., a price quotation that specifies the items to be sold, the quantity and price of each specified item, and the delivery terms is not hopelessly vague, as long as the remaining terms regarding warranty, excuses, remedies and the like can be inferred from trade usage. Promissory Estoppel and the Statute of Frauds – Under the Illinois U.C.C., while the statute of frauds is applicable to a claim of promissory estoppel, if the alleged promise is a price quotation and such term is in writing, the statute of frauds is not a bar to the claim. Discrepancy in Bids Does Not Create Presumption of Mistake – a bid that is more than 50% lower than another bid does not, as a matter of law place the buyer on notice that the low bid contains a mistake.

Plaintiff subcontractor ASM submitted a bid to the general contractor on a train station rehabilitation project to provide metal decking. The bid was based upon a price quotation from defendant CSI, which bid was expressly made contingent upon CSI first obtaining corporate approval of said quotation. After certain revisions in project specifications were made, ASM submitted two subsequent bids to the general contractor based upon CSI’s revised price quotations. CSI’s revised price quotations were more than 50% lower than those of the other supplier from whom ASM solicited a price quotation. These second and third CSI quotes were not contingent upon subsequent corporate approval.

After some negotiation, the general contractor accepted ASM’s bid for the metal decking. Thereafter, CSI alleged that it had made a mistake in the initial quotes and s that the test for an offer is whether it induces a reasonable belief in the recipient that by accepting said offer the seller can be bound. The court explained that while a hopelessly vague offer could not have such effect, where, as here, the price, quantity and delivery terms are specified, the requisite detail is established.

The court further found that there existed triable issues of fact precluding summary judgment on the issues of whether the condition in the first price quotation which conditioned the quote upon subsequent corporate approval was omitted from the later second and third price quotations by mistake and whether ASM had reason to know about the alleged mistake.

Finally, the court rejected the district court’s finding on a summary judgment motion that ASM should have at least suspected that CSI’s price had been mistakenly computed as it was more than 50% lower than the other bid. The court explained that it may have been the other bid that was erroneous.

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