A bid containing a mistake may not be reformed or modified, such as increasing the price bid because of a clerical error, after the bid opening since to do so would violate the statutory requirement that contracts be let only to the lowest bidder answering a published call for bids. If the contractor is not able to or does not rescind the bid, he will be held to the bid made. Lemoge Electric v. County of San Mateo, (1956) 46 Cal. 2d 659; Greer v. Hitchcock (1969) 271 Cal. App. 2d 334; Pub. Cont. Code § 5101.
Prior to 1971, the courts allowed a bidder on a public project which was competitively bid to rescind the bid due to an error if the elements for a rescission were met. M.F. Kemper Constr. Co. v. Los Angeles (1951) 37 Cal. 2d 696. The elements of rescission are: (1) a mistake of fact which is material to the contract; (2) the mistake is not the result of a neglect of a legal duty; (3) enforcement of the contract as made would be unconscionable; (4) the other party may be placed in status quo; (5) the party seeking relief must give prompt notice of his election to rescind; and (6) the party seeking relief must restore or offer to restore to the other party everything of value which he has received under the contract. White v. Berrenda Mesa Water Dist. (1970) 7 Cal. App. 3d 894. It has also been held that a mixed mistake of fact and judgment may give rise to the right to rescind an erroneous low bid.
Since 1971, a bidder's remedy for a mistake in its bid on certain types of public projects became governed by the relief of bidders provisions now found in Public Contract Code sections 5100- 5107. These provisions apply only to competitive bidding for the construction, alteration, repair, or improvement of any structure, building, road or other improvement of any kind. Pub. Cont. Code § 5100. For bids subject to these provisions, they provide the exclusive procedure for relief from a mistake in a bid to a public entity. A & A Electric, Inc. v. City of King (1976) 54 Cal. App. 3d 457. Thus, the cases cited above no longer govern the relief of bidders from mistake by way of rescission for bids covered by these statutory provisions. Nevertheless, for bids which do not fall within the provisions of the relief of bidders' statutes, the cases cited above arguably may still provide authority for a bidder to rescind the bid due to error.
Under the statutes for relief of bidders on public contracts, the only mistakes which could release a bidder from its bid are typographical or arithmetical errors, not mistaken submission of a bid. Relief is only allowed if the bidder can establish that the mistake was made in filling out the bid and not due to error in judgment or to carelessness in inspecting the site of the work, or in reading the plans or specifications. (Pub Cont. Code § 5103(d).) This statute clearly does not contemplate relief from the mistaken submission of a bid. MCM Construction, Inc. v. City and County of San Francisco (1998) 66 Cal App 4th 359. Furthermore, relief is available under Pub. Cont. Code §§ 5101, 5103 only for errors in the general contractor's bid and these provisions do not apply to mistaken bids submitted by a subcontractor to the general contractor; the statute is not intended to apply to mistakes in the bid of subcontractors. Pub Cont. Code § 5103(c) provides that to obtain relief, the bidder must show that the mistake made the bid materially different than he or she intended it to be, and if the bid from the general contractor to the public entity is based on the bid received from a subcontractor, the contractor cannot truthfully represent to the public entity that the bid is different from what it intended. Moreover, the range
of materiality would change drastically if it were to be measured against the bid of each subcontractor, rather than against the bid of the general contractor, and § 5103(d) requires that the mistake be made in filling out the bid, that is, in filling out the proposal submitted to the public entity, and subcontractors' bids are not submitted to the public entity. Diede Construction, Inc. v. Monterey Mechanical Co. (2004) 125 Cal App 4th 380.
A bidder who submits an erroneous bid for the construction, alteration, repair, or improvement of any structure, building, road or other improvement may not be relieved from the bid unless by consent of the awarding authority, nor shall any change be made in the bid because of mistake, but the bidder may bring a court action against the public entity for the recovery of the amount forfeited, without interest or costs. Pub. Cont. Code § 5101. A demand for forfeiture of a bid bond is sufficient to allow the bidder to invoke the remedy provided for in these sections even though no actual forfeiture has occurred. Balliet Bros. Constr. Corp. v. Regents of University of California, (1978) 80 Cal. App. 3d 321. If the bidder fails to recover judgment, the bidder must pay all costs incurred by the public entity in the suit, including reasonable attorney's fees. Pub. Cont. Code § 5101. A complaint must be filed and served within ninety days after the opening of the bid. Pub. Cont. Code § 5102.
In order to withdraw a bid, the bidder must establish to the satisfaction of the court that (a) a mistake was made; (b) the bidder gave the public entity written notice of the mistake within five days after the opening of the bids, specifying in the notice in detail how the mistake occurred; (c) the mistake made the bid materially different than the bidder intended it to be; and (d) the mistake was made in filling out the bid and not due to error in judgment or to carelessness in inspecting the site of work, or in reading the plans or specifications. Pub. Cont. Code § 5103. Before the case of Emma Corporation v. Inglewood Unified School District, 114 Cal. App. 4th 1018 (2004), it was believed these grounds for relief must be strictly followed by the bidder in order to have a right to relief. As discussed below, the Emma case placed a potentially heavy burden on the District essentially to inform the bidder of the requirements of the law. It is recommended that questions regarding rescission be reviewed by legal counsel. In A & A Electric, Inc. v. City of King (1976) 54 Cal. App. 3d 457, the contractor, while notifying the city of a mistake in its bid, failed to provide any details of the mistake as required by Public Contract Code section 5103. The court held that rescission was not warranted because of failure to comply with the statutory provisions.
Districts should be cautious when dealing with requests for relief from bids. In the case of Emma Corp. v. Inglewood Unified School Dist (2004) 114 Cal.App.4th 1018, the Court found that the District was estopped from enforcing a contract with Emma Corporation, a low bidder who made a mistake in its bid. Emma Corporation had notified the District in a timely manner that it made a clerical error in its bid of almost $800,000. It, however, failed to include all the information required by statute to be relieved from its bid. The Court essentially determined that the District's employees, out of concern for the cost of the new school construction project upon a re-bid, failed to request additional information from Emma Corporation after the company representative, in a timely manner, had offered to provided additional information. The Court then found that the District was estopped from enforcing the contract against Emma Corporation when Emma sued the District to rescind its contract, and the District was neither permitted to recover on the bid bond nor to recover from Emma Corporation the difference in the amount of the bid from Emma Corporation and the next low bidder. The court stated at page 1031, "We decline to bar estoppel against a public entity where, as here, the public entity deliberately misled a mistaken bidder from timely complying with the bid withdrawal statutes."
Consequently, districts should be cautious in handling bidders who request relief from their bids. An abundance of caution would lead a district to advise the bidder of what additional information it should provide to allow the district to properly relieve it of its bid.
A public entity may, on refusal or failure of the successful bidder to execute the contract, award the contract to the second lowest bidder. Pub. Cont. Code § 5106. A bidder who claims a mistake or who forfeits its bid security is prohibited from participating in further bidding on the project on which the mistake was claimed or security forfeited. Pub. Cont. Code § 5105. Whether a later project is considered the same as a preceding one when the specifications are altered for purposes of the second bid is a question of fact for the trial court. Columbo Construction Co. v. Panama Union School Dist. (1982) 136 Cal. App. 3d 868.