file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
No. 01-022
IN THE SUPREME COURT OF THE STATE OF MONTANA
2002 MT 1
E. H. OFTEDAL AND SONS, INC., a Montana
corporation with its principal place of business
in Miles City,
Plaintiff and Appellant,
v.
THE STATE OF MONTANA, ACTING BY AND THROUGH
THE MONTANA TRANSPORTATION COMMISSION
AND THE MONTANA DEPARTMENT OF TRANSPORTA-
TION, with its principal place of business in Helena,
Defendant and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
Honorable Thomas C. Honzel, Judge Presiding
COUNSEL OF RECORD:
For Appellant:
Ronald G. Schmidt, Schmidt, Schroyer & Moreno, Pierre,
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (1 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
South Dakota
Patrick E. Melby, Luxan Murfitt, Helena, Montana
For Respondent:
Timothy W. Reardon and Stephen Garrison, Department of
Transportation, Helena, Montana
Submitted on Briefs: May 17, 2001
Decided: January 14, 2002
Filed:
__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.
¶1 E. H. Oftedal and Sons, Inc. (Oftedal) brought this action in the First Judicial District,
Lewis and Clark County, seeking an upward revision of the contract sum on a federal-aid
highway project, because of an error in its submitted bid. Oftedal initially sought relief
from the Montana Transportation Commission (Commission) by requesting either the
withdrawal of the bid or an upward revision to reflect the amount of the error. After the
Commission's denial of Oftedal's request, Oftedal sought equitable relief from the District
Court pursuant to § 28-2-1611, et seq., MCA. The parties agreed that no issues of material
fact existed and that the matter would be appropriate for summary judgment upon
presentation of stipulated facts and documents. The parties submitted cross-motions for
summary judgment, and on September 25, 2000, the District Court entered its order
denying summary judgment to Oftedal and granting summary judgment to the State.
Oftedal subsequently filed a Rule 59, M.R.Civ.P., Motion to Alter or Amend Judgment,
and on November 29, 2000, the District Court denied Oftedal's motion. On appeal, Oftedal
requests this Court to reverse the decision of the District Court and order the District Court
to effect an upward revision of the executed contract to reflect the amount of Oftedal's
error, and to order specific enforcement of the contract as so revised.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (2 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
¶2 We reverse the District Court's grant of summary judgment to the State and denial of
summary judgment to Oftedal.
BACKGROUND
¶3 Pursuant to authority granted in § 60-2-111, MCA, the Montana Department of
Transportation (MDT) advertised for sealed bids for federal-aid highway project No. PLH-
STPS-CT314-1(13)32-Northern Cheyenne Border-North (project). MDT prepared all
forms for the proposal, which the stipulated documents refer to as the Bid Package. The
Bid Package informed each bidder that the successful bidder would have to pay a portion
of the total contract amount to the Tribal Employment Rights Office of the Northern
Cheyenne Tribe, an assessment known as a "TERO" tax.
¶4 On August 19, 1999, Oftedal and two other bidders, in response to the invitation for
bids, submitted sealed bids for the project to MDT. Pursuant to §§ 18-1-201 and -202,
MCA, MDT must, as a condition precedent to considering such bids, require that each
bidder submit bid security in the amount of 10 percent of the bid price as an indemnity
against the bidder's failure or refusal to enter into any written contract that may be
awarded upon or following the acceptance of the bid. Oftedal complied by furnishing an
appropriate corporate bid bond. On August 19, 1999, the bids were opened and publicly
read. A representative of Oftedal was present and heard the total dollar amount of each
submitted bid, as well as MDT's own estimate for the project. Oftedal's bid was in the
amount of $7,818,265.98, which was $1,419,207.00 (15 percent) lower than MDT's
engineer's estimate of construction costs of the project, $1,277,882.00 lower than the
second lowest bidder, and $1,545,749.00 less than the third bidder.
¶5 After the bid opening, Oftedal's officers and employees, including its estimator,
Cameron Lundby, suspected mistakes. Lundby reviewed the bid but could find no error
and so advised management, which relied upon his review. Lundby, immediately
following the August 19 bid opening, had numerous other company duties and obligations
as well as personal family concerns which required that he be absent from the state from
August 24 through August 31, 1999. During this same time, Lundby was also the project
manager for two major Wyoming highway reconstruction projects, was procuring work at
an Idaho mine, procuring trucking work on a federal highway project in Yellowstone Park,
and preparing a bid for a complex project for the Bonneville Power Administration.
Lundby was the only Oftedal employee who had worked on this bid and was capable of
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (3 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
reviewing the bid for errors.
¶6 On September 1, 1999, the Commission met and voted to award the project to Oftedal.
As of that date, Oftedal had not advised MDT or the Commission of any problems with its
bid, and neither had MDT contacted Oftedal about the bid since the bid opening. On that
same day, MDT mailed a written notice to Oftedal that it had been awarded the project,
which included four copies of the contract for the project, as well as written explanation of
the insurance and bonding requirements.
¶7 After Oftedal received notice of the award, Lundby began converting the bid to a
computerized project budget, and during this process discovered the following bidding
errors, as indicated in the parties' stipulation:
1. The select surfacing item was bid as an embankment item instead of a gravel
item. The bid work sheets, true copies of which have at all times been in the
possession of the MDT, disclose that Oftedal did not include any money in the bid
for a pug mill operation, the necessary compaction equipment, or the hauling and
compaction of additional material equal to the moisture added at the pug mill.
Oftedal's additional cost for this work is $483,000;
2. Oftedal omitted the 3% TERO tax to be paid to the Northern Cheyenne Tribe for
work on the Reservation. The cost of this tax is $234,500;
3. Oftedal's estimator did not save the cost entered for crushing the cover material
grade4A which resulted in the estimating software reverting to the cost of zero. The
cost of this crushing is $44,500; and
4. Oftedal's estimator did not update the price of diesel fuel for this estimate which
resulted in underestimating this cost by $.17 per gallon. This fuel cost would be
$27,000.
If Oftedal had not made these errors, the bid would have been in the sum of
$8,607,265.98, $789,000 higher than the actual bid. If the contract amount was revised
upward to reflect Oftedal's errors, Oftedal's revised bid would still be the low bid for this
project by $428,625.33.
¶8 Immediately upon discovery of these errors on September 2, 1999, Lundby called
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (4 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
MDT's Chief Engineer at its Billings office, Myron Wilson, to inform him of the errors
and, in his absence, left him a message. Wilson returned Lundby's call on September 3,
1999, and referred Lundby to Craig Favero, MDT's engineering project manager, to
discuss alternative construction methods to mitigate Oftedal's mistakes. MDT's engineers
could not determine any construction method to mitigate Oftedal's mistakes.
¶9 On September 7, 1999, Lundby discussed the mistakes and opinions of MDT's
engineers with Oftedal's president, Bill Oftedal, and comptroller, Ray James. Oftedal's
officers concluded that their only option was to request withdrawal of the bid and directed
Lundby to immediately write a letter to MDT requesting withdrawal. The letter was
mailed and faxed to Favero that same day, and was forwarded to the Commission on
September 9, 1999. On September 16, the Commission met and denied Oftedal's request
to withdraw its bid, even though one of the commissioners noted that Oftedal's mistake
would have appeared obvious when the bids were opened. The Commission then gave
notice that Oftedal had twenty calendar days from the date of award to execute and return
the contract or the Commission would require forfeiture of Oftedal's bid bond in the
amount of $781,826.60.
¶10 After the Commission's denial of Oftedal's request to withdraw its bid, Oftedal wrote
MDT on September 20, 1999, requesting an upward revision of its bid to reflect the
mistakes. The letter further stated that, under the threat of forfeiting its substantial bid
bond, Oftedal would have no choice but to sign the contract under protest with reservation
of rights to litigate this matter should the Commission not grant the requested relief.
¶11 Oftedal again wrote MDT the next day, September 21, 1999, requesting that the
Commission, in addition to considering an upward revision of the bid amount, reconsider
Oftedal's previous request to withdraw its bid, based upon Paragraph F of MDT's bid
proposal form, entitled REVISION OF BID, which provides:
In submitting this bid, bidder agrees that it waives any right or ability to claim,
request or receive any upward revision of this bid without the express written
consent of the Department and in accordance with the standard specifications. If
bidder discovers a material mistake in its bid (factual mistake, not judgmental), it
understands and agrees that it may either perform the contract as originally bid, or
else bidder understands and agrees that it may request the Transportation
Commission for permission to withdraw its bid. It is agreed that the Commission
will review the request to determine if a mistake occurred, was material and factual,
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (5 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
and whether the bid should be allowed to be withdrawn.
¶12 The Commission met on September 22, 1999, and rejected Oftedal's request to rescind
the award without forfeiture of the bid bond and award the project to the second low
bidder, and further rejected Oftedal's request to modify and revise the contract sum
upward to reflect the inadvertent mistakes, and enter a contract accordingly. Present at this
meeting was chief counsel for MDT, who agreed that it was obvious that Oftedal had
made a mistake and further, that Oftedal did not intend to make the mistake. Also present
at the meeting was the Division Deputy Administrator of the Federal Highway
Administration (FHWA) who informed the Commission that, if the Commission released
Oftedal from its bid without forfeiting its bid bond, FHWA would not allow federal
money to be used for any increased cost to MDT over and above Oftedal's original bid.
This was a consideration in the Commission's denial of Oftedal's request. Oftedal then
signed a contract, under protest, for the amount originally bid and initiated this action.
ISSUE
¶13 Whether the District Court erred in denying equitable relief to Oftedal pursuant to
§ 28-2-1611, et seq., MCA.
DISCUSSION
¶14 This Court reviews an order granting summary judgment de novo. Oliver v. Stimson
Lumber Co., 1999 MT 328, ¶ 21, 297 Mont. 336, ¶ 21, 993 P.2d 11, ¶ 21 (citations
omitted). We review the facts presented to the district court to determine whether, based
on Rule 56, M.R.Civ.P., the prevailing party is entitled to judgment as a matter of law.
Gentry v. Douglas Hereford Ranch, 1998 MT 182, ¶ 23, 290 Mont. 126, ¶ 23, 962 P.2d
1205, ¶ 23 (citation omitted).
¶15 Section 28-2-1611, MCA, provides:
When written contract may be revised by court. When, through fraud or a mutual
mistake of the parties or a mistake of one party while the other at the time knew or
suspected, a written contract does not truly express the intention of the parties, it
may be revised on the application of a party aggrieved so as to express that
intention, so far as it can be done without prejudice to rights acquired by third
persons in good faith and for value.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (6 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
Section 28-2-409, MCA, provides:
What constitutes mistake of fact. Mistake of fact is a mistake not caused by the
neglect of a legal duty on the part of the person making the mistake and consisting
in:
(1) an unconscious ignorance or forgetfulness of a fact, past or present, material to
the contract; . . .
Section 28-2-1612, MCA, provides:
Presumption that parties intended equitable agreement. For the purpose of
revising a contract, it must be presumed that all the parties thereto intended to make
an equitable and conscientious agreement.
Section 28-2-1613, MCA, provides:
Scope of court's inquiry. In revising a written instrument, the court may inquire
what the instrument was intended to mean and what were intended to be its legal
consequences and is not confined to the inquiry what the language of the instrument
was intended to be.
¶16 As a preliminary matter, we note the State's argument that § 28-2-1611, MCA, is
generic, applying to contracts in general, but that the statute has no application to public
works contracts. The State contends that the competitive bidding statutes in Title 60 are
applicable here and determinative of the issues Oftedal has raised.
¶17 We agree with the State that there is a difference between public works contracts and
other contracts, and that public works contracts are let in accordance with Title 60.
Competitive bidding statutes are primarily intended for the benefit of the public rather
than for the benefit or enrichment of bidders, and consideration of advantages or
disadvantages to bidders must be secondary to the general welfare of the public. Baker v.
State (1985), 218 Mont. 235, 239, 707 P.2d 20, 23; Stuewe v. Hindson (1912), 44 Mont.
429, 437, 120 P. 485, 487. Also see 64 Am. Jur. 2d Public Works and Contracts § 82
(1972) (statutes for letting of public contracts are enacted for the benefit of the public and
should be carried out with the sole reference to the public interest, and accordingly the
rights of bidders must always be held subordinate to that interest).
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (7 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
¶18 However, that the competitive bidding statutes were established for the benefit of the
public rather than to establish the rights of bidders does not necessarily exempt public
contracts from fundamental contract analysis, or remedies at law or in equity provided by
other statutes. Nothing in the competitive bidding statutes places public contracts
somehow out of reach of the equitable relief provided by § 28-2-1611, MCA, if a party
otherwise qualifies for such relief under the terms of the statute.
¶19 Further, the public bidding statutes and contract modification statutes are not
inherently inconsistent. "It is good statutory construction law that where one part of the
law deals with a subject in general and comprehensive terms, while another part of it deals
in a more minute and definite way, the two parts should be read together and, if possible,
harmonized, with a view to giving effect to a consistent legislative policy." Section 1-2-
101, MCA; Schuman v. Bestrom (1985), 214 Mont. 410, 415, 693 P.2d 536, 538-39; City
of Butte v. Industrial Accident Board (1916), 52 Mont. 75, 156 P. 130; Stadler v. City of
Helena (1912), 46 Mont. 128, 127 P. 454. As § 28-2-1611, et seq., MCA, does not conflict
with the public contracting process set forth in § 60-2-110, et seq., MCA, we conclude that
§ 28-2-1611, et seq., MCA, can be applied to public contracts.
A. Contract Formation
¶20 Oftedal argues that the District Court erred by concluding that Oftedal did not give
timely notice of the mistakes prior to the award, as opposed to prior to the "written
contract," as referenced in § 28-2-1611, MCA. The District Court found, even in light of
the MDT commissioner's comment that Oftedal's mistakes would have appeared obvious
at the bid opening, that the Commission was not aware of, nor should it have suspected,
Oftedal's mistakes when it awarded the project. The District Court concluded, therefore,
that MDT could not "at that time, know or suspect" that the contract did not truly express
the intention of the parties, as required for relief under § 28-2-1611, MCA.
¶21 Oftedal contends that it gave a timely, good faith notice of its mistakes immediately
upon discovery, which was the day that the Notice of Award was received, and
approximately twenty days prior to the deadline for executing a written contract. Oftedal
argues that a contract was not formed by the Commission's award of the project, and
therefore, it gave timely notice of its mistake prior to the formation of the project contract,
and thus, MDT did "know at the time" of Oftedal's errors.
¶22 The State replies that, for public contracts, a contract is created when the project is
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (8 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
"awarded" rather than at the execution of the written instrument and that, for MDT to
"know at the time" as required by § 28-2-1611, MCA, MDT was required to know of
Oftedal's mistake prior to the award. The State contends that our decision in Baker v.
State, supra, is controlling on the question of formation of public contracts. Thus, the State
argues that, even if § 28-2-1611, MCA, does apply to public contracts, the conditions
required under that statute for judicial modification upon unilateral mistake have not been
met, as MDT neither knew or suspected the mistake prior to the formation of the contract.
¶23 To support its contention, the State points to dicta in Baker, which states that "[t]he
advertisement for bids is not an offer which by acceptance constitutes a contract. It is
merely an invitation to every bidder to make an offer, which the board may accept, and a
contract result . . ." Baker, 218 Mont. at 239-40, 707 P.2d at 23 (citing Stuewe, 44 Mont. at
436, 120 P. at 487). The State argues for a broad interpretation of Baker, contending that
this language confirms that contracts are always formed at the award of the contract, the
execution being merely a memorial of the agreement.
¶24 However, in Baker we did not squarely address the question of whether or what kind
of contractual relationship is formed immediately after the award of the contract and prior
to the execution of the written instrument. Baker merely demonstrates that an invitation
for bids is not itself an offer, but merely an invitation to make an offer. See also Peerless
Food Products, Inc. v. State of Washington (1992), 119 Wn.2d 584, 595, 835 P.2d 1012,
1017; 64 Am. Jur. 2d Public Works and Contracts § 53 (1972) (stating "[t]he
advertisement, being nothing more than a solicitation of bids or proposals for doing the
work or furnishing the materials, does not of itself impose any contractual obligation").
Thus, the holding in Baker does not support the State's argument that a binding contract is
necessarily formed at the acceptance of a low bidder's bid. We are faced with that precise
issue here, and must define the rights acquired by each party upon award to Oftedal of the
project, as well as upon execution of the written instrument after the award, as the answer
to these questions will be determinative of the applicability of § 28-2-1611, MCA.
¶25 In support of its argument that no contract is formed prior to the execution of the
written instrument, Oftedal notes two provisions under the project's Specifications and
Contract Provisions (Specifications), provided in the Bid Package. First, Oftedal contends
that the award is conditional based upon § 103.07 of the Specifications, which provides:
EXECUTION AND APPROVAL OF CONTRACT. Return to the Depart-ment
within 20 calendar days after receipt of the contract documents:
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (9 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
A. The signed Contract;
B. The contract bond;
C. A copy of the insurance policy or a certificate of insurance;
D. A copy of the current special fuel users permit issued under 15-70-302
MCA.
A proposal will not be binding unless all the above requirements have been
satisfied.
Do not begin work before:
A. The Contract is executed;
B. Contract bond is completed;
C. Evidence of the required insurance is provided.
The Contract, bond, and insurance are subject to legal approval after execution by
the Contractor and Surety.
¶26 Second, Oftedal notes that § 103.04 of the Specifications allows the Commission to
cancel the award of the contract at any time prior to the execution of the written
instrument. Section 103.04 provides:
CANCELLATION OF AWARD. The award of the Contract may be canceled at any
time before the execution of the Contract by all parties without liability against the
Department.
¶27 Based upon the above provisions, Oftedal contends that the District Court's conclusion
that Oftedal's mistakes had to be discovered and the Commission notified prior to the
award, rather than prior to the execution of the contract, is erroneous as a matter of law.
¶28 The State, in further support of its argument that the contract was formed at the
"award" rather than at the execution of the written instrument, cites to the District Court
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (10 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
order of November 29, 2000, denying Oftedal's motion to alter or amend. The District
Court noted that various requirements take effect immediately after the award by the
Commission. First, Oftedal was required to return to the MDT within twenty days the
signed contract pursuant to § 103.07 of the Specifications. Second, § 18-1-204(1), MCA,
specifically requires that if the bidder refuses to enter into a written contract after the
award, the bidder shall forfeit its bid security. For these reasons the District Court required
Oftedal to prove that the Commission had knowledge of the mistake prior to the award
rather than prior to signing the written contract to fall within the parameters of § 28-2-
1611, MCA.
¶29 It is a matter of some division in various state jurisdictions whether a public contract
is formed at the time when the project is awarded, or whether the contract is formed only
upon executing the written instrument. Often the determination is heavily fact dependent.
As stated by the Supreme Court of Alaska in State of Alaska v. Johnson (Alaska 1989),
779 P.2d 778, "[t]he numerous cases dealing with the awarding of public contracts do not
establish a bright line rule as to how and when a public body accepts a bid and becomes
bound. Much of the divergence in the case law is due to the varying statutes and bid
invitations. The statutes and bid invitation documents constitute the primary guidelines for
the parties and the court." Johnson, 779 P.2d at 780 (holding that the statutes, bid
documents, and notification letter taken together, could not lead to the reasonable belief
that the State had exhausted its discretion to reject the bid and re-let the contract).
¶30 In Johnson v. City of Jordan (Minn. App. 1984), 352 N.W.2d 500, the Court of
Appeals held that a contract was formed immediately at the award of the contract because
no discretion remained in the city or its officials to withdraw after the award. The City of
Jordan advertised for bids and included a written contract with the materials provided to
potential bidders. Appellant Johnson was the low bidder and was awarded the contract.
Soon thereafter, the city council rejected its first award and awarded the contract to the
second low bidder. Johnson petitioned for a writ of mandamus, requesting that the District
Court order the City of Jordan to execute the contract between itself and Johnson.
¶31 The Court of Appeals found that the issue of whether a contract had been entered by
the award was "subject to the intent of the parties." City of Jordan, 352 N.W.2d at 503.
The Court held that the drafting of a written contract and its attachment to the proposal,
thereby becoming part of the request for bids, was sufficient to indicate an intent to enter
into such a formal contract, and constituted an objective manifestation of final acceptance
by the City, finding "[t]here was no discretion remaining in the city or its officials to deny
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (11 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
the contract . . . ." City of Jordan, 352 N.W.2d at 503 (emphasis supplied).
¶32 In so holding, the Court of Appeals recognized that a contract need not always form at
the award, citing to 1 Williston on Contracts, § 31 (3d ed. 1957):
In the case of public contracts, the requirement of certain formalities by law or by
the request for bids, such as a written contract, or the furnishing of a bond, often
indicates that even after acceptance of the bid no contract is formed until the
requisite formality has been complied with.
City of Jordan, 352 N.W.2d at 503 (emphasis supplied).
¶33 Further, the Court held that the requirement of a bid bond does not determine the
issue, distinguishing bid bonds from performance bonds, and noting that the purpose of
the bid bond "is to guarantee the making of a contract by the successful bidder, and in case
of his failure to do so, to indemnify the municipality for the damages and expenses
sustained or incurred thereby. . . ." City of Jordan, 352 N.W.2d at 504.
¶34 In MacKinnon-Parker, Inc. v. Lucas Metropolitan Housing Authority (1992), 84 Ohio
App.3d 453, 616 N.E.2d 1204, appellant bidder argued that the Housing Authority's
Notice of Contract Award constituted acceptance, and that a contract had been formed.
The Notice stated: "This is to advise you that your proposal for the above referenced
project has been accepted by this Authority and approved by HUD, Cleveland. We are
preparing the necessary Construction Contract documents . . . in order that they may be
executed by your firm." MacKinnon, 84 Ohio App.3d at 457, 616 N.E.2d at 1207.
¶35 In holding that no contract was formed until the formal execution of the written
instrument, the Court of Appeals relied on the requirement of Ohio's public bidding statute
that a contract must be executed within sixty days after the bids are opened, and noted that
the bid documents required the successful bidder, upon receiving the Notice of Contract
Award, to deliver a contract "in the prescribed form" and to furnish a contract performance
bond within ten days after the contract is presented for signature. MacKinnon, 84 Ohio
App.3d at 457, 616 N.E.2d at 1206. The Court further noted that the required bid bond
was simply a guarantee that the successful bidder would later enter into a bona fide
contract and provide a performance bond, or, upon the bidder's failure to do so, that the
Housing Authority would be compensated for the damages caused by such failure.
MacKinnon, 84 Ohio App.3d at 456, 616 N.E.2d at 1206.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (12 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
¶36 In so holding, the Court of Appeals distinguished Commissioners of Highland Cty. v.
Rhoades (1875), 26 Ohio St. 411, wherein the Ohio Supreme Court had held that a
contract is formed upon acceptance and notice of acceptance of a bid, the only purpose of
the later agreement being to evidence the contract entered into. This rule is not applicable,
the Court stated, "where it is understood that the acceptance of the bid and execution of a
formal contract are both conditions to the formation of a contract between the parties."
MacKinnon, 84 Ohio App.3d at 455, 616 N.E.2d at 1205 (citing Commissioners of
Highland Cty. v. Rhoades (1875), 26 Ohio St. 411 and Hughes v. Clyde (1884), 41 Ohio
St. 339, 340). "This two-part acceptance of the contract may be imposed by the invitation
to accept the bids or by virtue of the fact that the party seeking the bid is authorized by
statute to contract only under certain circumstances, i.e., by a formal written contract."
MacKinnon, 84 Ohio App.3d at 455, 616 N.E.2d at 1206.
¶37 In the instant matter, a bid bond, or "bidder's security," was required to be submitted
by Oftedal pursuant to § 18-1-201(2), MCA, which provides that the public authority:
shall require, as a condition precedent to considering any such bids, as evidence of
good faith on the part of the bidder, and as indemnity for the benefit of such public
authority against the failure or refusal of any bidder to enter into any written
contract that may be awarded upon and following acceptance of bid . . . that any bid
shall contain a written covenant of indemnity conditioned as herein prescribed and
that the bid shall be accompanied by bid security of the nature herein specified for
the performance of such covenant. [Emphasis supplied.]
¶38 Section 18-1-202(2), MCA, requires that the bid bond be in the amount of 10 percent
of the bid price, again to "protect and indemnify the public authority against the failure or
refusal of the bidder to enter into the contract . . . ." (Emphasis supplied.)
¶39 Section 18-1-202(1)(a), MCA, provides in part that the advertisement for bids must
distinctly specify that all contractors shall "expressly covenant in any bid that if the bidder
is awarded the contract, the bidder will, within the time required as stated in the
advertisement or solicitation, enter into a formal contract and give a good and sufficient
bond to secure the performance of the terms and conditions of the contract." (Emphasis
supplied.)
¶40 If, after the award, the successful bidder refuses to enter into and execute the contract,
§ 18-1-204, MCA, requires that "any bidder whose bid is accepted and who shall
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (13 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
thereafter refuse to enter into and execute the proposed contract, . . . as stated in the
covenant in the bid and herein, shall absolutely forfeit such moneys or bank instruments to
the public authority . . ." (Emphasis supplied.)
¶41 Included with the bid proposal documents, § 103.02 of the Specifications reserves the
right of the Commission to reject all bid proposals accompanied with the return of all
proposal guarantees (bid bonds). Section 103.04 of the Specifications further reserves the
right of the Commission to cancel the award prior to execution of the contract: "The award
of the Contract may be canceled at any time before the execution of the Contract by all
parties without liability against the Department."
¶42 Section 103.05 of the Specifications provides that all bid bonds will eventually be
returned, including the bid bond of the successful bidder, following receipt of a separate
contract bond, securing the performance of the terms and conditions of the contract, and
execution of the contract. See also § 18-1-205, MCA.
¶43 Section 103.07 of the Specifications provides the successful bidder must, within
twenty days after receipt of the contract documents following award of the project,
provide MDT with the signed contract, a satisfactory contract performance bond and
satisfactory evidence of the required insurance policy. If the successful bidder fails to
provide the above in a satisfactory manner within the twenty days after the award, §
103.08 of the Specifica-tions provides that the award may be canceled and the bid bond
forfeited under the provisions of § 18-1-204, MCA.
¶44 It is clear that Oftedal submitted the bid bond solely as an indemnity for the benefit of
MDT against Oftedal's refusal to enter into the written contract. Sections 18-1-201(2) and -
202(2), MCA. The full amount of the bid bond was to be returned to Oftedal after the
execution and approval of the contract by MDT, as there would no longer be a need to
secure Oftedal's covenant to enter into a written contract. Section 103.05, Specifications. It
is also clear that, immediately after the award and up to the time of the execution of the
contract, MDT was not bound by the terms of the contract and retained discretion to
withdraw the award of the contract at any time without liability. Sections 103.02 and
103.04, Specifications. This fact is commonly found to be critical in a court's review of the
issue: see State of Alaska v. Johnson, supra, (no contract at award because state had not
exhausted its discretion to reject the bid and rebid the contract), and Johnson v. City of
Jordan, supra, (contract formed at award because city no longer retained discretion to
reject the bid).
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (14 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
¶45 In the instant case, based upon the above-referenced statutes and Contract
Specifications, it is clear that conditional requirements must be met and a formal contract
executed in order to bind MDT. Under these circumstances, 1 Williston on Contracts §
4:10 (4th ed. 1990), is informative:
In the case of public contracts, certain additional formalities are often required by
statute or by the request for bids under such statutes, such as the execution of a
written contract, or the requirement that a satisfactory bond be furnished. In such
cases, even after acceptance of the bid has occurred, no contract is formed until the
requisite formality has been complied with. [Emphasis supplied.]
¶46 We conclude, therefore, as a matter of law, that no contract for the performance of this
federal highway project was formed by award of the project to Oftedal on September 1,
1999. Consequently, the District Court erred in concluding that Oftedal did not give timely
notice of the mistakes prior to the award, because no such notice was necessary at that
time to obtain relief pursuant to § 28-2-1611, MCA. As no contract was formed prior to
the execution of the written contract on September 22, 1999, there could be no
requirement that MDT have knowledge of Oftedal's unilateral mistake prior to the award
of the project on September 1, 1999.
B. Reformation of Contract
¶47 Reformation of a contract is an equitable remedy which allows a court to revise a
contract to reflect the true intentions of the parties. In re Marriage of Pfennigs, 1999 MT
250, ¶ 31, 296 Mont. 242, ¶ 31, 989 P.2d 327, ¶ 31. The grounds for reformation of a
contract in Montana are fraud, mutual mistake or unilateral mistake of which the other
party knew or suspected, which results in a contract that does not truly express the
intention of the parties. Section 28-2-1611, MCA. A mistake is an unconscious ignorance
or forgetfulness of a fact, past or present, material to the contract. Section 28-2-409, MCA.
¶48 This Court has previously refused to allow reformation of contract where a party
making a unilateral mistake entered into a contract while having actual knowledge of the
mistake. Goodman Realty, Inc., v. Monson (1994), 267 Mont. 228, 883 P.2d 121. In
Goodman we held that reformation "belongs to the aggrieved party who is laboring under
a mistake known or suspected by the other party," as opposed to an aggrieved party who
knew of the mistake prior to signing the contract while the other party had no knowledge.
Goodman, 267 Mont. at 232-33, 883 P.2d at 124.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (15 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
¶49 Neither situation exists in this case. Oftedal did not have knowledge of the mistake in
the absence of knowledge by MDT, nor did MDT have knowledge of the mistake in the
absence of knowledge by Oftedal. Rather, because both parties knew of Oftedal's
unilateral mistake prior the execution and formation of the contract, our holding in
Goodman is inapplicable to the facts in the present situation. In the instant case it is clear
that the mistakes in Oftedal's bid were unilateral on the part of Oftedal and that specifics
of these mistakes were made known to MDT immediately after Oftedal discovered the
mistakes and prior to execution of the written instrument-and therefore, in this case, prior
to the formation of the contract. It is also clear from the parties' Stipulation of Facts, as
well as from comments made at the Commissioners' meetings, the minutes for which are
part of the stipulated documents, that Oftedal did not intend to make the mistakes in its
bid. The Stipulation provides:
As a direct result of Oftedal's mistakes, the bid was different than Oftedal might
otherwise have intended the bid to be. If Oftedal had not made such mistakes, the
bid would have been in the sum of $8,607,265.98, which revised contract sum
would reflect Oftedal's original bid modified and revised upward to reflect the
inadvertent omissions in the sum of $789,000.00.
¶50 The State argues that Oftedal should be denied its requested relief on a number of
additional grounds. First, the State argues that general principles of contract law provide
that recision, not reformation, is the proper remedy for unilateral mistakes. Second, the
State argues that the errors in Oftedal's bid were the result of Oftedal's negligent business
practices which prevented Oftedal from discovering the errors between the opening of the
bids and the award of the contract, and as such, equity does not provide relief for those
who have not been vigilant. Third, the State argues that the Commission's decision
regarding to whom it will award public works contracts is not subject to judicial review
absent a showing of bad faith, fraud or corruption, none of which has been shown by
Oftedal. Fourth, the State contends that allowing a low bidder to raise its bid amount while
still remaining the low bidder opens the door for much "mischief and abuse" by bidders
and is tantamount to destroying the integrity of the public bidding process. Fifth, the State
argues that Oftedal contracted to waive his right to an upward revision of the bid without
the express written consent of MDT. Finally, the State argues that Montana's taxpayers
will be prejudiced in the amount of any upward revision as the State will be required to
fund the total amount of the upward revision as the FHWA will not participate with
federal funding above Oftedal's original bid amount.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (16 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
¶51 We first address the State's objection to Oftedal's eligibility for contract reformation
relief. While the State argues that reformation is inappropriate for unilateral mistake, its
position is not consistent with Montana law. As stated above, one ground for reformation
of contract in Montana is unilateral mistake of which the other party knew or suspected, as
clearly provided by § 28-2-1611, MCA.
¶52 Contrary to the State's second argument, negligence of the party creating the mistake
is not necessarily a bar to judicial reformation of a contract. As stated by the Supreme
Court of Washington, "[i]f negligence were a defense to a reformation claim, then
reformation would almost never be available as a remedy because mistake is most
frequently a basis for reformation, and negligence generally results from mistake."
Washington Mut. Savings Bank v. Hedreen (1994), 125 Wn.2d 521, 531, 886 P.2d 1121,
1126. "It is not essential, therefore, that one seeking the aid of a court of equity to reform a
contract show that he is wholly free from fault. Mere negligence not rising to the dignity
of a violation of a positive legal duty, as negligence that is a mere inadvertence, does not
preclude relief." Hedreen, 125 Wn.2d at 530, 886 P.2d at 1126 (citing Meyer v. Young
(1945), 23 Wn.2d 109, 113, 159 P.2d 908).
¶53 Hedreen is consistent with Montana statute. Section 28-2-409, MCA, defines mistake
in the contract context as one not caused by "neglect of duty," yet "consisting in . . . an
unconscious ignorance or forgetfulness of a fact, past or present, material to the contract."
This defines an error of "mere inadvertence." Hedreen, 125 Wn.2d at 530, 886 P.2d at
1126.
¶54 In the instant matter, the parties stipulated and recognized that Oftedal's mistakes were
inadvertent, and the bid was not what Oftedal intended it to be. Although some negligence
may be inherent in Oftedal's mistakes, viewed in light of the parties' agreed assessment of
the nature of the errors, Oftedal's mistakes cannot be said to preclude equitable relief
under the statutes.
¶55 Contrary to the State's third argument, judicial modification of the contract in this
matter will not interfere with the discretion of the Commission to award public contracts
to qualified bidders, based on its own determination. Oftedal did not appeal the decision of
the Commission denying Oftedal's request to either rescind the award or to revise the
contract sum upward. Oftedal signed the written contract, and then pursued the equitable
remedy of reformation for its unintended mistakes in its bid that are now included as part
of the contract. Nor does such relief jeopardize the public bidding process, as contended
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (17 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
by the State in its fourth argument. Reformation of a written contract will be allowed only
where a mistaken party so deserves under § 28-2-1611, MCA, and a bidder attempting to
circumvent the public bidding laws with intentionally low bids faces an uphill battle in
attempting to demonstrate that it committed the kind of mistake constituting "an
unconscious ignorance or forgetfulness of a fact, past or present, material to the contract"
that the State knew or suspected, and which resulted in a written contract that does not
express the intention of the parties, as Oftedal has demonstrated here. Section 28-2-409,
MCA.
¶56 The State next argues that Oftedal waived any right to request or receive any upward
revision of its bid. The bid proposal reads, "In submitting this bid, bidder agrees that it
waives any right or ability to claim, request or receive any upward revision of this bid
without the express written consent of the Department and in accordance with the standard
specifications." Oftedal requested such relief, and the Commission, exercising its
discretion, refused to give its consent to any upward revision. However, as stated, Oftedal
did not appeal from this discretionary decision of the Commission, making such language
irrelevant to Oftedal's requested modification pursuant to § 28-2-1611, MCA.
¶57 Additionally, the State confuses reformation of bid with reformation of contract.
Under the terms of the bid documents, the Commission retains discretion to either grant or
deny a request for an upward revision of the bidder's bid. Once the contract is formed and
both parties are bound, a request for a modification is a request to modify the contract and
must be requested pursuant to § 28-2-1611, MCA, which is applicable only where parties
have entered into a written contract and some form of mistake is subsequently discovered,
or, as the situation exists here in the context of a public bid letting, where Oftedal
discovered the mistakes and MDT knew of the mistakes prior to contract formation.
¶58 Finally, the State argues that Montana's taxpayers will be prejudiced if an upward
revision is allowed, as the State will be responsible to fund any amount of the contract
over and above Oftedal's original bid amount. Oftedal argues that the State will not lose
any money in the long run because the federal funds not able to be used on this project can
be shifted to another federally funded project. This Court is without sufficient information
to determine whether this is correct, but what is clear at this juncture is that the State will
be responsible to pay any amount of the contract above Oftedal's original bid, if FHWA
does not reconsider its decision not to participate. While this is unfortunate, it is also clear
that absent an upward revision of the contract sum, the State will receive the benefit of
$789,000 of work and material provided by Oftedal, and expended for the improvement of
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (18 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
the highways for the benefit of the public, without any compensation returned to Oftedal.
This Court is required pursuant to § 28-2-1612, MCA, for the purpose of revising a
contract, to presume that all parties intended to make an equitable and conscientious
agreement. This Court cannot presume that Oftedal intended to incur the hardship of
supplying $789,000 of work and material to the State without compensation, and further,
we cannot presume that the State harbored such intention, either.
¶59 The decision of the District Court is reversed and remanded. Upon remand, the
District Court is ordered to enter judgment in favor of Appellant E. H. Oftedal and Sons,
Inc., revising the contract sum upward in the stipulated amount of $789,000, to a modified
contract price of $8,607,265.98, and ordering the contract to be performed as so revised.
/S/ JIM RICE
We concur:
/S/ TERRY N. TRIEWEILER
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
Justice Patricia O. Cotter, dissenting,
¶60 I dissent. Not only does the majority's conclusion completely upset the public contract
bidding process, it jettisons basic contract principles of offer and acceptance, and ignores
the tenets of equitable relief. The ultimate effect of this Opinion is to impose a stricter
obligation on MDT to find mistakes in a submitted bid than is imposed on the bidder
himself; thus allowing a bidder to amend an offer, after it is accepted, even though he
created the offer in haste, failed to use care in checking the details prior to submitting the
offer, failed to effectively rule out suspicions that the figures were wrong, and then waited
until the contract was accepted before fully reviewing the offer for errors.
¶61 Although the majority applies the standard for reviewing an order granting summary
judgment, it ultimately grants relief by reforming Oftedal's contract. Clearly this is a case
in equity. This Court has repeatedly held that equitable issues are a matter of discretion
resting with the district court and will be sustained unless an abuse of discretion is shown.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (19 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
Ruegsegger v. Welborn (1989), 237 Mont 317, 321, 773 P.2d 305, 308 (citations omitted).
The District Court did not abuse its discretion in refusing to reform Oftedal's contract
pursuant to § 28-2-1611, MCA. Nor did the District Court err when it concluded a contract
was formed between Oftedal and MDT upon acceptance of Oftedal's bid.
¶62 In Baker, the Court stated that "[i]t is a well founded principle of contract law that a
contract does not exist prior to the acceptance of a bid by an agency." Baker v. State, 218
Mont. 235, 238, 707 P.2d 20, 22. The majority rejects the Commission's reliance on Baker
for the proposition that a binding contract is formed upon the acceptance of a low bidder's
bid.
¶63 However, this Court applied similar language in Modern Machinery v. Flathead
County (1982), 202 Mont. 140, 656 P.2d 206, when it held that a written bid, issued in
response to a call for bids to purchase a piece of equipment, amounted to an offer that
ripened into a contract upon acceptance by the commissioners. Modern Machinery, 202
Mont. at 146, 656 P.2d at 210. We stated: "a written bid has consistently been construed as
nothing more than an offer to perform labor or supply materials, and the offer does not
ripen into a contract until accepted by the offeree." Modern Machinery, 202 Mont. at 145,
656 P.2d at 209 (citing Carriger v. Ballenger (1981), 192 Mont. 479, 483-84, 628 P.2d
1106, 1108-1109) (emphasis added). In Modern Machinery, we concluded that a binding
contract was formed between the county and the manufacturer when the commissioners
accepted the offered bid by seconding and recording a motion to accept the bid during a
commissioners' meeting. Modern Machinery, 202 Mont. at 146, 656 P.2d at 210.
¶64 The conclusion that a contract is formed upon acceptance of an offered bid follows
time-honored Montana precedent. In State v. Toole (1901), 26 Mont. 22, 29, 66 P. 496,
499, this Court found that once the statutory prerequisites essential to a valid acceptance
are complied with, and a contract is awarded, "there springs into existence vested rights,
which the board cannot destroy or impair," and conditions may not be inserted into the
formal written contract if they are "not consonant with the contract already made by virtue
of the acceptance of the bid" (the furnishing board's attempt to rescind a contract, which
was formed upon the board's acceptance of plaintiff's offer, was void) (citation omitted).
In Stuewe v. Hindson (1912), 44 Mont. 429, 436-37, 120 P. 485, 487, while holding there
was no mandamus remedy available to an unsuccessful bidder, we stated:
In general terms, it is said that a contract is consummated by an offer from one party
and its acceptance by another. The advertisement for bids is not an offer which by
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (20 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
acceptance constitutes a contract. It is merely an invitation to every bidder to make
an offer, which the board may accept, and a contract result; but a party whose offer
is not accepted cannot complain or invoke the aid of courts to compel the board to
accept his offer (citation omitted). [Emphasis added.]
¶65 The Commission's reliance on the language of Baker, supra, is not misplaced. There is
a century of case law for the proposition that an offer, once accepted, ripens into a binding
agreement. I disagree with the majority's conclusion that the contract was not created until
execution of the "formal" contract. Accordingly, I disagree that the contract should be
revised, especially given that MDT had no knowledge of any errors at the time it accepted
Oftedal's bid.
¶66 The majority attempts to infer limits on liability based on the mere formality of
executing a written contract. This reasoning is not only circular, it also underscores the
fact there is no explicit specification prohibiting liability. The procedure of signing the
"formal" contract was not a condition precedent to the contract's enforceability. Section 18-
1-202(1), MCA, provides: "The advertisement, request, or solicitation for bids or offers
must distinctly specify that all bidders, offerors, tenderers, or contractors shall: (a)
whenever bids are solicited . . . expressly covenant in any bid that if the bidder is awarded
the contract, the bidder will, within the time required as stated in the advertisement or
solicitation, enter into a formal contract and give a good and sufficient bond . . .
" (emphasis added). In addition, bidders must also provide bid security, pursuant to § 18-1-
201, MCA.
¶67 From these statutes and Specifications in the Bid Package, the majority crafts a
condition precedent to the creation of a contract between Oftedal and MDT. The majority
relies on an excerpt from Williston on Contracts to support the proposition that these
statutory requirements are intended as conditions precedent to the execution of the
"formal" contract. However, the majority fails to refer to § 18-1-201(2), MCA, which
describes the requirements for bidder's security, and states in part that:
[I]n all cases where a public authority or obligee is authorized by law to solicit
bids . . . such public authority shall require, as a condition precedent to considering
any such bids, as evidence of good faith on the part of the bidder, and as indemnity
for the benefit of such public authority against the failure or refusal of any bidder to
enter into any written contract that may be awarded upon and following acceptance
of bid . . . that any bid shall contain a written covenant of indemnity conditioned as
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (21 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
herein prescribed and that the bid shall be accompanied by bid security of the nature
herein specified for the performance of such covenant. [Emphasis added.]
These safeguards are in place as conditions precedent to the public body considering the
offer proposed by the bidder, not as conditions precedent to the formation of a binding
agreement between the public authority and the successful bidder. Oftedal met these
requirements when it promised in its bid proposal that it would sign the contract, and when
it provided the required bid security. Based on these promises, MDT considered and
ultimately accepted Oftedal's bid.
¶68 Further, as stipulated by the parties, it is "each bidder's responsibility to submit its bid
in accordance with the bid documents and its review of the scope of work, site of work,
and the contract documents." When it signed the proposed bid, Oftedal agreed to
subsection (F) of the Proposal: "In submitting this bid, bidder agrees that it waives any
right or ability to claim, request or receive any upward revision of this bid without the
express written consent of the Department and in accordance with the Standard
Specifications." Oftedal also affirmed, pursuant to the Proposal, that it examined the site,
proposal, standard specifications, supplemental specifications, and special provisions, and
that it had sufficient time to prepare its bid. Oftedal assented "to all provisions and
requirements of the Contact, as defined in the Standard Specifications." Oftedal agreed it
"would not submit this bid if it did not agree to each and every provision of the Contract."
Oftedal, a seasoned bidder, clearly was aware of all the components and requirements of
the agreement between the MDT and Oftedal; thus there was a meeting of the minds
between the two parties. See Chadwick v. Giberson (1980), 190 Mont. 88, 92, 618 P.2d
1213, 1215 ("there must be mutual assent or a meeting of the minds on all essential
elements or terms to form a binding contract").
¶69 I would hold that a contract was formed upon the acceptance of Oftedal's submitted
bid, or in the least I would hold that Oftedal should not be rewarded for its negligence in
submitting the bid and failing to thoroughly review the figures when it suspected there was
error.
¶70 Even if I were to agree with the majority's conclusion that the contract was formed
upon execution of the written agreement, the statute the Court relies on, § 28-2-1611,
MCA, is permissive, and does not require revision by a court. All the errors at issue were
attributable to only Oftedal, and specifically its employee, Lundby, in his preparation of
the bid. In an attempt to explain the errors, Oftedal asserted that Lundby's workload was
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (22 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
such that time did not allow complete review, and that due to company organization,
Lundby was the only person who could review the bid. These are clearly business practice
choices made by Oftedal, for which the State should not suffer given Oftedal's substantial
errors. Moreover, Lundby admitted in a letter to the Department that the mistakes were
due to "poor time management" and were a "direct result of [him] not allowing [himself]
adequate time to estimate the project." Clearly these mistakes were not due to ignorance or
forgetfulness of facts, and thus did not meet the definition of mistake of fact as required
under § 28-2-409, MCA. I agree with the District Court's conclusion that: "Oftedal chose
to conduct business in a seemingly hectic atmosphere without the benefit of having a
second person check the bid before it was submitted or other similar 'safety net.' "
¶71 Oftedal should not reap the benefits of its errors, at the expense of the State of
Montana. Section 28-2-1611, MCA, states that a court may revise a contract, "so far as it
can be done without prejudice to rights acquired by third persons in good faith and for
value." A court is not mandated to revise a contract under § 28-2-1611, MCA. A district
court's decision to provide equitable relief is a matter of discretion which we will sustain
absent a showing of an abuse of discretion. Ruegsegger, 237 Mont. at 321, 773 P.2d at
308. Abuse of discretion exists when "the trial court acted arbitrarily without employment
of conscientious judgment or exceeded the bounds of reason resulting in substantial
injustice." Lee v. USAA Cas. Ins. Co., 2001 MT 59, ¶ 27, 304 Mont. 356, ¶ 27, 22 P.3d
631, ¶ 27 (citation omitted). Based on the magnitude and nature of Oftedal's errors, its
failure to thoroughly review its bid even when mistakes were suspected, and the absence
of any fault attributable to the State, the District Court clearly did not act "arbitrarily
without conscientious judgment or exceeded the bounds of reason resulting in substantial
injustice."
¶72 By allowing upward revision of the contract price, the majority also guts the bond
forfeiture statute, § 18-1-204, MCA. Section 18-1-204, MCA, states in pertinent part: "[A]
ny bidder whose bid is accepted and who shall thereafter refuse to enter into and execute
the proposed contract . . . as stated in the covenant in the bid and herein, shall absolutely
forfeit such moneys . . . to the public authority concerned and become immediately liable
on the bid bond . . . ." In light of the Court's holding, successful bidders who want to
revise their bid are better off to sign a contract, and later seek relief through the district
court, than accept loss of bond pursuant to § 18-1-204, MCA. The majority asserts that
this decision does not jeopardize the public bidding process (See ¶ 55 herein). I disagree.
This decision has the effect of inviting a party to prolong the uncertainty in the bidding
process, by by-passing an appeal of the decision of the Commission in favor of the pursuit
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (23 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
of equitable relief from the court.
¶73 The clean hands doctrine provides that "[p]arties must not expect relief in equity,
unless they come into court with clean hands." See Kauffman-Harmon v. Kauffman, 2001
MT 238, ¶ 19, 307 Mont. 45, ¶ 19, 36 P.3d 408, ¶ 19 (citation omitted). Moreover, "[n]o
one can take advantage of his own wrong." Section 1-3-208, MCA. Accordingly, "this
Court will not aid a party whose claim had its inception in the party's wrongdoing,
whether the victim of the wrongdoing is the other party or a third party." Kauffman-
Harmon, ¶ 19 (citation omitted). "Equity, of course, aids only those who have been
vigilant, and will refuse relief to one who has been dilatory or wanting in diligence in
prosecuting his cause of action." Housing Authority of the City of Butte v. Murtha (1943),
115 Mont. 405, 410, 144 P.2d 183, 185 (citation omitted). Further, courts must inquire
carefully into purported mistakes in order to prevent collusion and fraud by the parties
making the proposals and are:
justified in refusing relief when there is good cause for believing that some other
reason than mere mistake is behind the bidder's unwillingness to perform the
contract or his desire to withdraw from the bid. Relief may be denied on the ground
that it did not clearly appear that the mistake was one of material fact as
distinguished from an unwise, hasty, or careless statement of prices intended to be
bid. If the mistake might have been avoided by the exercise of ordinary care and
diligence on the part of the bidder, he or she will be denied equitable relief.
64 Am. Jur. 2d Public Works and Contracts § 83 (2001) (emphasis added).
¶74 Had Oftedal exercised ordinary care and diligence, the mistakes would have been
caught in the twelve days that passed between the bid opening and the award of the
contract. Clearly Oftedal does not have clean hands in this matter--in fact, it was its own
negligence that created the situation from which we have now rescued Oftedal. Even if I
were to agree that the contract between Oftedal and MDT was not created until execution
of the formal contract, revision of such a contract is not mandatory under § 28-2-1611,
MCA. The State should not have to bear the burden of Oftedal's negligence. Oftedal's
errors were not unconscious ignorance or the result of forgetfulness. Because Oftedal's
hands were not clean, it is not entitled to equitable relief.
¶75 The primary function of Montana's bidding statutes is to benefit the citizens. Baker,
218 Mont. at 239, 707 P.2d at 23. "Competitive bidding statutes are primarily intended for
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (24 of 25)12/8/2006 11:50:07 AM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm
the benefit of the public rather than for the benefit or enrichment of bidders, and
consideration of advantages or disadvantages to bidders must be secondary to the general
welfare of the public." 72 C.J.S. Public Contracts § 8 (1975). With this Opinion, we have
placed the bidder's pecuniary interests ahead of the interests of the public.
¶76 I would conclude the District Court did not abuse its discretion either in refusing to
reform Oftedal's contract or in concluding that a contract was formed between Oftedal and
MDT upon acceptance of Oftedal's bid. I would therefore affirm the decision of the
District Court.
/S/ PATRICIA COTTER
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-022%20Opinion.htm (25 of 25)12/8/2006 11:50:07 AM