Court Opinion

ID: 9463706
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:13:47.134796+00
Date Added: 2024-06-11T17:38:14.582208
License: Public Domain

WALLACE, Circuit Judge,
dissenting:
I respectfully dissent.
This appeal requires us to decide whether the district judge was correct in granting a motion for summary judgment. There were two central issues: formation of the contract and application of the Statute of Frauds.
The district court correctly determined that a summary judgment was not appropriate on the formation issue. The key question was whether Borg’s offer was revocable, because if it was not, there was evidence showing that Fedrick accepted the offer and a contract was thereby formed.1 Under the California law governing the construction industry, a subcontractor’s offer to a general contractor, who reasonably and foreseeably relies on that offer in making his prime bid, is irrevocable until the general contractor has had a reasonable time after being awarded the prime contract to accept the offer.2 Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (1958). Even though there is no considera*859tion for the irrevocability of the offer “in the sense of something that is bargained-for and given in exchange,” the general contractor’s reasonable reliance on the implied “subsidiary promise” not to revoke serves to hold the offeror in lieu of the consideration ordinarily required. 51 Cal.2d at 414, 333 P.2d at 760.
It would seem, then, that Borg was powerless to alter or withdraw its offer for a reasonable time after Fedrick used the subcontract bid in computing the prime bid. The majority, however, would limit the Drennan principle of promissory estoppel to subcontractor cases in which both goods and services are involved, thereby rendering it inapplicable as to Borg, who is only a supplier of goods. I fail to see any rational basis for distinguishing cases in which goods and services are provided from those where only goods are the subject of the agreement.3
The majority also asserts that “Borg’s telephonic communication of May 30 in and of itself was subject to revocation . . .” This conclusion is based ostensibly on the Statute of Frauds, Cal.Comm.Code §§ 2201(1) and (2). It is my understanding that those statutory provisions refer to contracts, not offers. Admittedly, once the contract between Borg and Fedrick comes into existence, section 2201 may be asserted in an effort to preclude enforcement. But I cannot adhere to the theory of unenforceability espoused in the majority opinion.
As a trial would be required on the formation issue, the second and crucial issue becomes the enforceability of the contract. As a general proposition, California courts have applied the doctrine of equitable estoppel to bar a Statute of Frauds defense in those cases where the defense would lead either to an unjust enrichment or to an unconscionable injury. Monarco v. Lo Greco, 35 Cal.2d 621, 220 P.2d 737 (1950); Goldstein v. McNeil, 122 Cal.App.2d 608, 265 P.2d 113 (1954). In my opinion, both the district court and the majority incorrectly relied upon Caplan v. Roberts, 506 F.2d 1039 (9th Cir. 1974), to support their positions that the injury to Fedrick was not unconscionable. Caplan and the California case upon which it relies, Little v. Union Oil Co., 73 Cal.App. 612, 238 P. 1066 (1925), were eases where the plaintiff attempted to recover an expectancy, i. e., the profit he would have made on the resale of goods had the defendant performed.4 This case, however, does not involve an attempt to recover lost profits. Here Fedrick seeks to recover the out-of-pocket losses which it incurred when, in order to meet its contractual responsibilities, it purchased pumps at a price significantly higher than that offered by Borg.
The majority contends that even if Fed-rick incurred a loss on the pumps, there was still no unconscionable injury inasmuch as Fedrick made a profit on the prime contract. In essence, the majority would offset the $95,903 loss on the Borg transaction with any profit derived from Fedrick’s independent transactions with other suppliers and subcontractors. I can see no reasonable justification for such a principle, and Caplan certainly does not require it. Accordingly, the district court’s opinion should be reversed and the case remanded for trial.

. If the offer was not revoked, two issues involved in the formation of the contract arise: What was the substance of the offer, and was it accepted? There was a material question of fact as to the first issue because the parties differ as to the existence of exceptions in the offer. As to acceptance, the district court determined that if the factual questions concerning the substance of the offer were resolved in Fedrick’s favor, there was an acceptance of the offer as a matter of law. Upon a review of the record, I agree that Fedrick’s letter of July 19, 1974, wherein Fedrick advised Borg that it “is willing to issue a purchase order to you for the price and on the terms of your bid to Fedrick,” was an acceptance of Borg’s offer as Fedrick understood it. Thus, if the offer was not revoked, there are material questions of fact involved in the formation issue which cannot be resolved on summary judgment.

. For a discussion of practices in the construction industry, and the use of promissory estoppel to prevent injustice, see Saliba-Kringlen Corp. v. Allen Engineering Co., 15 Cal.App.3d 95, 92 Cal.Rptr. 799 (1971).

. Basing its decision in part on Drennan, the Seventh Circuit has applied promissory estoppel to a supplier of goods. Janke Construction Co. v. Vulcan Materials Co., 527 F.2d 772 (7th Cir. 1976).

. Whereas the plaintiffs in Caplan and Little were absolved of their obligations to the third parties, Fedrick was bound — at the original bid price — to its contract with the government.