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41. Which of the following statements correctly describes the firm's legal rights, if any, against the first subcontractor?
The municipality awarded the construction contract to the firm. Later that day, before the firm told the subcontractor of the award, the subcontractor told the firm that it was withdrawing its bid because it had recently undertaken a new project that would absorb all its capacity for the next 18 months. The firm nevertheless accepted the subcontractor's bid and demanded that it perform the electrical work on the plant, but the subcontractor refused. The firm had to hire another subcontractor to perform the electrical work, at a cost of $115,000. The firm completed the construction of the plant at a profit.
An engineering firm submitted a bid to a municipality for the construction of a new wastewater treatment plant. The firm's bid included a subcontractor's bid to complete the electrical work on the plant for $100,000.
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Here, the subcontractor knew that the firm would rely on the offer in making a bid for the municipality's project. Additionally, the subcontractor knew that the firm could not accept its offer until the municipality accepted the firm's overall bid on the project. Since the subcontractor could not revoke its bid, its attempt at revocation was ineffective, and the bid was still open at the time the firm accepted it. Therefore, a contract was formed, and the best remedy for the breach is expectation damages.
A is incorrect. A contract was formed when the firm timely accepted the subcontractor's offer. Therefore, the firm is entitled to recover expectation damages. The damages are measured by the difference in the amount paid to the second subcontractor and the amount of the first subcontractor's bid.
B is incorrect. The most appropriate measure of recovery for the subcontractor's breach is expectation damages, not reliance damages.
D is incorrect. Although generally, an offeror may revoke an offer up until the moment of acceptance, detrimental reliance by the offeree can transform the offer into an option contract, meaning it is irrevocable for a limited time. Here, the firm's reliance on the subcontractor's bid meant that the subcontractor could not revoke its bid for a reasonable time.