completion of the contract and that the City should therefore be held liable for the breach.
It is well established that "on judicial review, courts, absent proof of fraud, collusion, bad faith or abuse of power, do not inquire into the wisdom of municipal actions and judicial discretion should not be substituted for administrative discretion." Weber v. City of Philadelphia, 437 Pa. 179, 183, 262 A.2d 297, 299 (1970) (emphasis in original). See also Flaherty v. Allegheny Port Authority, 450 Pa. 509, 299 A.2d 613 (1973); E-Z Parks, Inc. v. Philadelphia Parking Authority, 100 Pa. Commw. 303, 514 A.2d 318 (1986). Upon review of the City's decision to reject ACI's letter of credit, I find that the City's decision was not motivated by fraud, collusion or bad faith and was in no way entered into in an arbitrary or capricious manner. On the contrary, the City demanded from ACI what it demands from every bidder -- performance bonds as a surety. The fact that the City required that such bonds be supplied was clearly delineated and understood by ACI at each and every stage of the bidding process.
As a result, this court need not decide whether a letter of credit is a valid substitute for a performance bond. All of the documents agreed to and signed by the parties explicitly refer to the fact that the bidder who is selected must provide the City with performance bonds. While it may be true that, under certain circumstances, a letter of credit is a commercially acceptable substitute for a performance bond,
I find that, under the terms of its agreement, the City was under no obligation to accept such a letter, nor was it under any obligation to "lawfully release" ACI from its bid.
The only question remaining is the extent of the damages recoverable by the City for the breach. In this regard, the defendant reiterates its argument that Paragraph 11, which specifies the measure of damages in the event of a breach, should not apply because that paragraph only applies to a bidder who "refuses" to supply the bonds. Because I find that the damages in the case would result in the same calculation under general common law contract principles as it would under the damages provision of Paragraph 11, I find it unnecessary to inject my judicial interpretation of the language of that paragraph.
It is a well established tenet of contract law that contract damages are "intended to give [the injured party] the benefit of his bargain by awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed." Restatement (Second) of Contracts § 347 comment a (1981). See Maxwell v. Schaefer, 381 Pa. 13, 21, 112 A.2d 69, 73 (1955); Bellefonte Area School District v. Lipner, 81 Pa. Commw. 334, 339, 473 A.2d 741, 744 (1984). In this case, placing the City in "the same economic position [it] would have [been in] if the contract had been performed,"
would entitle the City to recover an amount equal to the difference between ACI's bid on the project and the next lowest bid which the City accepted as a result of the defendant's breach. ACI's bid was $ 230,500.00. The next lowest bid, submitted by the Delaware Car Corporation, was $ 296,210.00, a difference of $ 65,710.00. The difference between ACI's bid and that of Delaware Car Corporation minus the initial bid surety check of $ 12,275.00, is $ 53,435.00. Accordingly, I will enter judgment in favor of the plaintiff City of Philadelphia and order the defendant to pay $ 53,435.00 plus interest from the date of the breach,
November 12, 1986, and costs.
An appropriate order follows.
AND NOW, this 14th day of December, 1988, upon consideration of the cross motions for summary judgment, and for the reasons set forth in the accompanying memorandum, it is hereby ORDERED and DECREED that the motion of the plaintiff City of Philadelphia is GRANTED, the motion of the defendant American Coastal Industries, Inc. is DENIED, and defendant's counterclaim against plaintiff is DISMISSED with prejudice. Judgment is entered for plaintiff City of Philadelphia and against defendant American Coastal Industries, Inc. in the amount of $ 53,435.00, plus interest at the legal rate of 6% from the date of the breach, November 12, 1986, and costs.