Huntington Beach Union High School Dist. v. Continental Infor. Sys. Corp., 452 F. Supp. 538 (C.D. Cal. 1978) (full-text).
Factual Background Edit
Huntington Beach Union High School District ("School District") invited bids for the purchase of data processing equipment, including an IBM System 370/145 computer system. Continental Information Systems ("CIS") submitted a bid of $352,915.34. CIS was awarded the contract and was timely notified of this action. By the terms of the contract, CIS was to deliver, install, and have completely operational a 370/145 system by July 31, 1977. Both prior to and after the award of the contract, agents of CIS represented to the School District that CIS had the ability to meet its bid obligations and would deliver the computer system within the three month period set forth in the bid specifications.
During the next three months, a third party advised the School District that the computer serial number set forth in CIS's bid was not available and that the computer serial number set forth in CIS's revised bid was not in CIS's possession.
On July 20, 1977, CIS informed the School District that it would not meet its bid obligation. Following notification of non-performance, the School District attempted to award the contract to the second lowest bidder, but was informed that that bid would no longer be honored.
On August 4, 1977, the School District rebid the system and awarded the bid to the lowest responsible bidder for $412,340.00. Because of CIS's failure to perform and the necessary delay from rebidding, the School District did not obtain delivery of a 370/145 computer system until October 1977.
Trial Court Proceedings Edit
The School District brought an action for breach of contract against CIS and its agents involved in the bidding. The district court found that only CIS, and not its agents, could be held liable for damages. The court ruled that the School District was entitled to recover (1) the costs which it had incurred in the purchase of peripheral equipment in anticipation of delivery of the computer and (2) the costs incurred in hiring an additional programmer and reprogramming software for use on the existing equipment.
In entering a judgment of $12,403.06 plus 7% interest in general damages and $9,782.10 plus interest in incidental and consequential damages, the court stated that plaintiff had proven no malice which would support an award of punitive damages and that there was no proof of fraud or negligent misrepresentation on the part of any defendant.
The court did not award all of the damages claimed by plaintiff because it found that the School District should have foreseen the problems with CIS and declared the contract breached at a time when it could have reawarded the contract to the second lowest bidder, rather than waiting until the time for performance had expired and then having to call for new bids.