Any thoughts on the following hypo?

A general contractor advertises for a subcontractor to pour foundations on a project the general is bidding on; the general makes it clear in the ad that it will use the lowest subcontractor bid in its own bid on the project.

Many subcontractors bid, and Sub I is the low bidder.  Sub I's offer required that to accept the offer, the general contractor must reply to the offer via fed ex within 2 business days of the general being awarded the project.

The general contractor uses Sub I's bid in calculating its own bid, and winds up awarded the job.   The general contractor then learns reliable information of definite action on the part of Sub I inconsistent with an intention to enter into the contract [Rest. 2d § 43].  I have jazzy facts for this that I won't trouble you all with, but let's assume that it's reliable information.

Here's my question - if the general contractor then sends the acceptance via fed ex, but a week late - did Sub I's offer lapse by its terms, or is it nonetheless irrevocable due to the general contractor's reasonable reliance [under Rest. 2d § 87(2)] and Drennan?

Without the lapse issue, Sub I's offer is irrevocable under Drennan and § 87(2); it's an offer that the offeror should reasonably expect to induce action of a substantial character on the part of the offeree before acceptance and which does so - so it's binding as an option contract to the extent necessary to prevent injustice. 

But what result if the general contractor attempts to accept an offer it relied on, after an implied revocation, and beyond the stated terms of the offer?   In other words, which will be dispositive - the lapse [§ 41] or the option contract [§87]?  My sense is that the lapse should be controlling- but I am having trouble finding support for this idea.  § 37 provides that an offeree's power of acceptance under an option contract is not terminated by rejection, counteroffer, revocation or death or incapacity, but § 37 does not include lapse - is this meaningful?  I am not finding anything on this point, so any thoughts would be appreciated.






Miriam R. Albert
Visiting Associate Professor of Law
Hofstra University School of Law
121 Hofstra University
Hempstead, NY 11549
(516) 463-4538 phone
(516) 463-1017 fax
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