Opinion ID: 1204270
Heading Depth: 2
Heading Rank: 1

Heading: NGC Estopped from Revoking its Bid

Text: In its final judgment, the superior court ruled: 17. The elements necessary for imposition of promissory estoppel have been proven. NGC made promises to Plaintiff which Defendants NGC and R.J. Braunschweig reasonably have expected to induce substantial action by Plaintiff. Plaintiff took action which amounted to a substantial change in its position in reliance on those promises. This action caused Plaintiff to be injured financially. The interests of justice require compensation of Plaintiff for the damage NGC caused. This ruling is reversible only if the findings of fact supporting it are clearly erroneous. State v. First National Bank of Ketchikan, 629 P.2d 78, 82 n. 4 (Alaska 1981) (applying Jamison v. Consolidated Utilities, 576 P.2d 97, 102 (Alaska 1978)). A finding of fact is clearly erroneous if it leaves the reviewing court with a definite and firm conviction on the entire record that a mistake has been made, even though there may be evidence to support the finding. Martens v. Metzgar, 591 P.2d 541, 544 (Alaska 1979) (footnote omitted). Deference to the findings of the superior court is particularly appropriate when ... the bulk of the evidence at trial is oral testimony. Id. (footnote omitted). Alaska follows the Restatement of Contract's formulation of promissory estoppel. Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1284 (Alaska 1985). Following Corbin, we have reformulated Restatement Section 90(1) into a four part test: 1) The action induced amounts to a substantial change of position; 2) it was either actually foreseen or reasonably foreseeable by the promisor; 3) an actual promise was made and itself induced the action or forbearance in reliance thereon; and 4) enforcement is necessary in the interest of justice. Zeman, 699 P.2d at 1284. At trial, NGC admitted that the first three factors existed. It disputes only the fourth element: whether enforcement is necessary in the interest of justice. The necessity of enforcement presents a factual question. Ketchikan, 629 P.2d at 82 n. 4. On appeal, NGC argues that M-N did not rely on NGC's bid but instead continued to negotiate with NGC for the purpose of extracting a better bargain. NGC argues that M-N attempted to vary materially the terms of NGC's performance after accepting NGC's bid and claims that the written subcontract proffered by M-N contained many additional duties not described in the bidding documents. Citing C.H. Leavell & Co. v. Grafe & Associates, 90 Idaho 502, 414 P.2d 873 (1966), and R.J. Daum Construction v. Child, 247 P.2d 817 (Utah 1952), it argues that estoppel does not apply where the offeree does not unequivocally accept the offer. Resolution of the parties' dispute requires an appreciation of the complexities of construction bidding. A general contractor's addition to the formal subcontract of terms not present in the bidding documents does not necessarily impose materially different duties. The bidding documents in this case did not purport to express completely the relationship between the general and its subcontractors. Rather, they described the respective duties assumed by the project owner and the general contractor and specifically required the general contractor to include certain provisions in any subcontract. The documents contemplated a contractual relationship between general and subcontractor distinct from the relationship between owner and general. The bidding documents thus did not purport to be the exclusive agreement between general and subcontractor. Rather, they provided NGC with enough information to calculate its bid within the owner's requirements. The documents only outlined the duties owed by NGC to M-N and left the task of detailing the parties' respective obligations for a separate agreement. At the time NGC bid on its subcontract, it should have expected to be bound by reasonable additional terms governing standard conditions implicit in the relationship between subcontractor and general contractor. Both industry custom, as expressed in standard form subcontracts, and the circumstances surrounding the particular project, dictate the kinds of provisions NGC should reasonably have expected in its final subcontract. NGC charges that M-N unreasonably imposed additional terms on it. First, NGC argues that M-N's written subcontract expanded the scope of NGC's performance beyond the duties reasonably assumable by NGC during bidding. The additional duties allegedly not mentioned in the bidding documents included provisions for: (a) bonding; (b) no damage for delay clause; (c) payments; (d) indemnity; (e) lien waivers; (f) notice and change order procedures including the duty to continue work despite not agreeing on a change or price; (g) termination takeover... . Second, NGC claims that M-N accelerated the time for NGC's performance from two years to one. Third, NGC claims that M-N demanded personal guarantees not required in the original agreement. NGC concludes that [t]here can be no estoppel where, as here, the promisors' offer was not been [sic] accepted. At trial, the parties introduced conflicting testimony about their bidding expectations and the course of their contract and performance negotiations. Judge Shortell concluded that much of [NGC's] evidence was not credible. On appeal, we defer to his ability to observe the witnesses' demeanor and resolve doubts in favor of M-N. See Curran v. Hastreiter, 579 P.2d 524, 527 (Alaska 1978). We can more readily analyze NGC's claims by considering the bond and personal guarantees as a single dispute. Thus, NGC's claims involve: 1) the performance guarantees; 2) the performance schedule; and 3) other alleged additional subcontract obligations.
The parties dispute whether M-N asked NGC to bond its work when recording NGC's phone bid. An M-N manager testified that an M-N employee asked NGC if it would bond its work at the time of the phone bid. [1] M-N asserts that NGC agreed to supply a bond. [2] NGC, however, argues that it merely stated it could bond the project; it claims, however, that it would only have bonded such a small project for a higher premium from M-N. Judge Shortell made no specific finding about the bond discussion during the bidding. The evidence on both sides conflicts and relies on inferences from company policy. M-N testified that it routinely asked potential subcontractors if they would bond the project; a yes on the bid checklist marked next to bondable meant that the subcontractor had agreed. However, no M-N employee testified from personal knowledge either that the M-N employee had communicated the policy or that NGC had agreed. For its part, NGC claimed that it routinely refused to include bonds in its bids. None of its employees, however, testified from personal knowledge of the conversation with the M-N employee. In our balancing of conflicting company policies, NGC's lack of credibility requires resolution of the doubt against its version. Thus, the bond requirement represented not an unreasonably imposed additional duty but rather a duty assumed by NGC at the time of bidding. M-N's later attempt to get personal guarantees from NGC's shareholders represents not an additional demand but rather an acceptance of a substitute for an obligation already assumed by NGC.
NGC's claimed accelerated performance obligations fail for lack of specificity and credibility. The bidding documents projected a two year construction deadline for completion of the hospital addition. NGC points to nothing in the record demonstrating the time for window installation required by the bidding documents. At trial, R.J. Braunschweig testified that he had prepared his bid on the basis of the two year project schedule but did not indicate when he expected NGC's performance to be due under that schedule. Indeed, he had earlier stated in an affidavit that NGC had prepared its bid on the assumption of a November 1983 completion date. M-N testified that the architect's deadline represented the final permissible date for all construction to finish. Contractors customarily attempt completion before the deadline to maximize profits by freeing their resources for other projects. At the time of bidding, NGC should have expected to perform at a reasonable time within the two year schedule. In any event, from the time M-N first notified NGC of the award, NGC knew that M-N needed the glass and windows installed before the onset of that year's winter. NGC did not object when it confirmed its bid in writing and never objected to the timetable until its letter of repudiation in September. The record does not support a view that a November 1983 window installation was an unreasonable demand within this schedule. NGC's failure to object to M-N's timetable until two months before completion was due seriously weakens its claim that the timetable materially altered NGC's performance obligations. In short, although Judge Shortell made no express finding as to NGC's bid expectations, the record does not support NGC's claim of accelerated obligations.
The remaining entries in the litany of additional obligations allegedly imposed by M-N's form subcontract similarly fail to establish that M-N unreasonably added to NGC's duties. These terms covered issues which can be implied from industry custom or left open for further negotiations. Their mere inclusion in the subcontract does not demonstrate that M-N imposed duties on NGC materially different from those NGC should have known would apply. M-N sent NGC its standard subcontract. The record contains no evidence that NGC objected to any of the terms of payment, indemnity, change order procedures, etc. Indeed, NGC twice readily signed the subcontract, striking out only the bonding requirement of the first draft and altering product specifications and warranties in the second draft. These other terms can hardly be deemed material additions to the contract when NGC apparently did not consider them consequential at the time. NGC has defended this action by accusing M-N of bid shopping, implying that M-N forced an unwilling NGC to accept additional terms or lose the contract. We could not condone such a practice. Here, however, the record demonstrates that during the summer-long contract negotiations, NGC seriously disputed only the bonding requirement. M-N allowed NGC to substitute personal guarantees for the bond. As the deadline for starting work approached, NGC unilaterally limited warranties on products in contravention of the bidding documents. One day after executing the subcontract, NGC unilaterally revoked it. A subcontractor cannot string along the general until the time for performance nears and then suddenly limit its promised performance. [3] Such conduct forces the general to accept a substitute performance or face delays in finding a substitute subcontractor. NGC relies on two cases in which courts have refused to apply the doctrine of promissory estoppel in the area of construction bidding. C.H. Leavell & Co., 414 P.2d 873; R.J. Daum Construction, 247 P.2d 817. They are distinguishable from the instant situation because the general contractors in each attempted to expand the scope of the duties required of the subcontractor. Here, no such expansion occurred. The record does not support NGC's claim that M-N materially altered the conditions reasonably assumable by NGC when bidding. When M-N notified NGC in writing to proceed, it unequivocally accepted NGC's bid. At that point, the parties had a contract with terms covering the details of their agreement left open. The mere addition of terms to the proposed final contract does not establish a material alteration of NGC's promises. On this record, the additional terms are not material. In Alaska Bussell Electric v. Vern Hickel Construction, 688 P.2d 576 (Alaska 1984), we estopped a subcontractor from revoking its bid prior to the general contractor's acceptance. We accepted the view that the general's incorporation of the subcontractor's bid into the general bid constituted justifiable reliance sufficient to enforce the subcontractor's promise. Id. at 588. This case presents stronger reasons for enforcement of the subcontractor's promise than did Alaska Bussell. M-N demonstrated its reliance not only by incorporating NGC's bid but also by relying on the bid during summer-long negotiations with NGC for a final contract. Moreover, as noted above, M-N expressly accepted NGC's bid before NGC withdrew it. The trial court's equitable enforcement of NGC's bid was not clearly erroneous. The interests of justice necessitated enforcement. See Zeman, 699 P.2d at 1284. M-N relied not only on the original bid, but on four months of repeated assurances of performance and lack of objections by NGC. By its own words and conduct, NGC obligated itself to perform. NGC is, therefore, estopped to deny M-N's entitlement to compensation for damages incurred due to its reasonable reliance on NGC's promise.