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Low Bid Was Not a 'Palpable Unilateral Mistake'

Monday, December 03, 2018 02:22 pm


Contracts --- Bids

Rai Indus. Fabricators, LLC v. Fed. Ins. Co., 2018 U.S. Dist. N.D. Cal. Lexis 181978 (October 23, 2018)

A sub argued that the general contractor knew (or should have known) that the sub's very-low-priced bid constituted a mistake and used this knowledge to its advantage rather than ask the sub to correct the error. The sub further claimed the "palpable unilateral mistake" voided the parties' subcontract, but a district court disagreed.

In 2014, the Army Corps of Engineers (the Corps) awarded a design-build contract for a training complex at Fort Hunter Liggett in Monterey County, California to Sauer, Inc. (Sauer). Sauer subsequently entered a subcontract with Agate Steel, Inc. (Agate) to erect structural steel for the project.

Agate claimed that, during the course of the project, Sauer changed the drawings significantly and directed the sub to perform work beyond the subcontract's scope. Agate also contended that Sauer owed it $650,000 for extra work and materials. The sub sued Sauer, asserting multiple claims, including breach of contract, unjust enrichment, and breach of the covenant of good faith and fair dealing. However, it is Agate's claim of a "palpable unilateral mistake" that's at issue here.

Agate alleged that when Sauer reviewed the project bids, it recognized that Agate's bid was substantially lower than others and yet failed to fulfill its "duty to notify Agate of the mistake and invite Agate to co [...]

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