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UNITED STATES v. LIPMAN

May 25, 1954

UNITED STATES
v.
LIPMAN et al.



The opinion of the court was delivered by: GRIM

Shortly before June 17, 1949, defendants, among others, received an Invitation for Bids issued by the United States Government through the War Assets Administration for the furnishing of the labor and equipment required in connection with the moving of certain property of the War Assets Administration. The invitation stated that the bids would be opened on June 24, 1949. In compliance with the invitation the defendants submitted a bid on June 17, 1949, to do the work for $ 12,810. The bids were opened on June 24, 1949. There were six bids ranging from defendants' low bid of $ 12,810 to the highest bid of $ 36,190. The bid next lowest to defendants' was in the sum of $ 17,900.

 A bid is merely an offer and it is clear under the ordinary common law of contracts that an offer not under seal nor for a consideration may be withdrawn at any time before it is accepted. Restatement, Contracts, Sec. 34. In Williston on Contracts, Vol. 1, Sec. 55, it is said:

 '* * * Even though a definite time in which acceptance may be made, is named in such an offer, the offeror may, nevertheless, revoke his offer in that period. Nor is it material that the offer expressly states that it shall not be withdrawn; revocation is still possible.'

 The government does not dispute these elementary principles in the ordinary common law of contracts. However, it argues that these principles do not apply to the present case, contending (1) that this case is governed by federal common law which differs from the ordinary common law in reference to this situation and (2) that it is governed by a federal regulation which prevented the withdrawal of the bid. It contends that both under the federal common law and under the federal regulations it is entitled to judgment in its favor.

 The federal common law *fn1" on this subject has been developed largely in the Court of Claims. In Scott v. United States, 1909, 44 Ct.Cl. 524 the low bidder attempted to withdraw his bid after the bids had been opened, but before any bids had been accepted, and gave as his reason an error in the telegraphic transmission of the bid. The government refused to permit him to withdraw. He then sued in the Court of Claims for the return of the deposit which he had made along with his bid. The Court entered judgment in favor of the government, saying 44 Ct.Cl. at page 527:

 'The agents of the Government stand upon a different footing from private individuals in the matter of advertising for the letting of contracts in behalf of the United States. The have no discretion. They must accept the lowest or the highest responsible bid, or reject all and readvertise. Private individuals are not required thus to act. Hence it is apparent that government agents should be allowed a reasonable time after the opening of bids before they are allowed to be withdrawn, so they can be afforded opportunities to ascertain whether collusion or fraud had been perpetrated against the United States by the parties engaged in the bidding. It is also apparent that if the rule of allowing immediate withdrawals after the results of the bidding are made known, frauds innumerable could be perpetrated against the United States, and thus justice would be greatly hampered * * *'

 The Court, however, pointed out that the government had given the plaintiff an opportunity to prove his assertion that the mistake in his bid was due to an error in the telegraphic transmission and that the plaintiff had failed to prove this. It thereby intimated that perhaps the result would have been different if the plaintiff had proved his assertion that the error in the bid was due to an honest mistake.

 In Alta Electric & Mechanical Co. v. United States, 1940, 90 Ct.Cl. 466 a bidder attempted to withdraw his bid after the bids had been opened but before any bid had been accepted. When the bids were opened the lowest bidder discovered that his bid was $ 5,750 lower than the next lowest bid. He then rechecked his bid and discovered that he had misunderstood a quotation from a prospective subcontractor and that the cost of the work to be done by the prospective subcontractor was much higher than he had calculated it to be. It was this information which caused him to attempt to withdraw his bid. The Court had no doubt about the honesty of the plaintiff's mistake and because of this it entered judgment in favor of the plaintiff permitting him to recover the deposit he had made with his bid.

 The federal common law rule, therefore, would appear to be this: Because of the possibility of fraud among bidders the ordinary common law rule that an offer can be withdrawn at any time before it has been accepted does not apply to bids to the United States government, *fn2" but instead the rule is that after the bids have been opened a bidder cannot withdraw his bid, unless he can prove that the desire to withdraw is due solely to an honest mistake and that no fraud is involved.

 In the Invitation for Bids reference was made to a federal regulation known as U.S. Standard Form 22 (Instructions to Bidders) and thus this regulation was incorporated by reference into the Invitation for Bids. The government contends that it is entitled to judgment in its favor because of this regulation. The regulation is: (49 C.F.R.Sec. 4.12 (1949 ed.))

 'Withdrawal of bids

 'Bids may be withdrawn on written or telegraphic request received from bidders prior to the time fixed for opening. Negligence on the part of the bidder in preparing the bid confers no right for the withdrawal of the bid after it has been opened.'


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