In Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., No. D060849, filed November 20, 2012, the Fourth Appellate District held a defendant subcontractor could recover attorneys’ fees pursuant to a prevailing party fees provision in a bid even though the bid did not result in an enforceable contract.
CMC provided a bid in response to general contractor Barnhart’s solicitation related to construction of a library. The bid had a thirty-day expiration and included a prevailing party attorneys’ fees provision. More than thirty days after CMC provided its bid, Barnhart provided CMC a letter of intent to accept the bid with modified terms, which CMC rejected. Barnhart hired another subcontractor at an increased price but then sued CMC for the $66,100 difference, asserting causes of action for breach of contract (on the bid) and promissory estoppel. At trial, CMC succeeded in proving the bid was not an enforceable contract, but lost to Barnhart on the estoppel claim. The trial court denied CMC’s motion for attorneys’ fees of over $150,000.
The Court of Appeal overturned the trial court’s order. In proving no contract existed, CMC was “the prevailing party on the contract” under Civil Code section 1717. The Court rejected Barnhart’s contention that because it won its promissory estoppel claim, it was a “prevailing party.” According to the Court of Appeal, a promissory estoppel action is not “on the contract” under section 1717 because it “does not ‘involve’ an agreement” with mutual consent and consideration, and is mutually exclusive with a contract cause of action. The Court remanded the matter for a fee award consistent with its opinion.
Barnhart is a prime example of why contractors should proceed carefully in contract lawsuits involving prevailing party attorneys’ fees provisions. Barnhart takes the prime example one step further by showing a losing party in a contract case may have to pay attorneys’ fees to an opposing party even if no contract was formed.
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