On February 25, 1982, Acme Construction Co. contracted with the United States Navy to remodel the engine maintenance shop at…

On February 25, 1982, Acme Construction Co. contracted with the United States Navy to remodel the engine maintenance shop at Mir Mar Marine Corps Air Station. The contract price was $750,500. The work included installation of heating, ventilating and air conditioning systems (HVAC). A chilled water system was part of the HVAC.

In preparing his bid for the work, Acme solicited “budgetary bids” from subcontractors. These bids are used as the basis for estimating the component parts of the work and as back-up protection if other bids are not received.

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Coyote Sheet Metal (Coyote), had submitted a $94,000 bid to Acme for the HVAC exclusive of the chilling water system which would cost an additional $16,000 to the proposed bid.

Acme contacted Roy Runner and told Runner that another subcontractor (E. Fudd) had put in a $86,500 bid to do the HVAC work and that this bid had a 20% profit margin, but for personal family reasons he could not sign a contract and go forward with the project. Runner met with the president of Acme (Roger Rabbit) who related Fudd’s assurance to him “there was a profit in it” and Runner signed that same day a contract identical to that turned down by Fudd. Fudd later told Runner at the time he had not done “much examination” of the plans or specifications. He was asked for his opinion of the newly signed deal and after checking the job site and the plans more closely, Fudd told Runner the cost of the job “far exceeded” the contract price. The plans included the chilled water system in the HVAC which cost an additional $16,000 not contemplated by the contract. Runner promptly told Acme the $86,500 price would not cover the HVAC with the chilled water system and unless the parties modified the amount, he could not do the work. Acme’s Rabbit responded with the comment he would get another contractor and “sue [Runner] for the difference.”

Acme then turned back to Coyote Sheet Metal, awarding two subcontracts to Coyote; one for $94,000 and one for $16,000 for the HVAC with the chilled water system and sued Runner for the difference between his bid ($86,500) and the combined Coyote bids ($110,000).

What legal issues do you believe are raised by the dealings of the parties in this case? Identify the issues and discuss what you believe will be the outcome of the case.

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