Pavel Enterprises, Inc. v. A. S. Johnson Company, Inc.

Pavel Enterprises, Inc. v. A. S. Johnson Company, Inc.
Author: Richard

P/S: Plaintiff appealed following a verdict from the Circuit Court, which found in favor of the defendant for a claim of breach of contract by detrimental reliance.

F: P wished to bid on a construction project for the renovation of building, which including heating, ventilation, and air conditioning work (HVAC). P solicited sub-bids from several subcontractors, including D. D responded with an estimate, and with this information, P submitted bid for the project. P won the contract, but D cancelled their offer, stating that it was too low, and was made in error. D neglected to correct the error because it did not expect to receive the contract. P had to use a different subcontractor that cost them $32K more. P filed an action for breach of contract; Trial court found no relationship had been formed, and ruled for D; affirmed on appeal.

I: Whether a relationship existed between the two parties, and if so then PEI can recover the $32K in damages; if not contract, whether P’s detrimental reliance served to bind D to its sub-bid.

H: There was not a traditional contract binding the two parties, and there was no meeting of the minds. Further, there was sufficient evident in the record to support the trial judge’s conclusion that P had not proven its case for detrimental reliance. AFFIRMED, WITH COSTS, FOR D.

Rule: In determining a question of detrimental reliance, there must be a clear and definite promise where the promisor has a reasonable expectation that the offer will induce action or forbearance on the part of the promisee which does induce actual and reasonable action or forbearance by the promisee and causes a detriment which can only be avoided by the enforcement of the promise

Reasoning:

Maryland courts are to apply the test of the Restatement (Second) of Contracts § 90 (1) (1979), which we have recast as a four-part test:

1. A clear and definite promise;
2. Where the promisor has a reasonable expectation that the offer will induce action or forbearance on the part of the promisee;
3. Which does induce actual and reasonable action or forbearance by the promisee; and
4. Causes a detriment which can only be avoided by the enforcement of the promise.

(1) sub-bid was sufficiently clear and definite to constitute an offer, (2) Johnson's reasonable expectation had dissipated in the span of a month (3) PEI did not rely on Johnson's bid (4) case did not merit an equitable remedy