Wyoming Supreme CourtPosted: December 1, 2013
Last night I had a little time to kill, so I read a Wyoming Supreme Court case that involved people I know.
The case centered around a contractor (a family friends’ company [B & W Glass, Inc.] ) who won a bid to renovate portions of the Wyoming State Capital. In its written bid to the State of Wyoming, the contractor included a subcontractor’s oral bid–made by the subcontractor to the contractor during “discussions”–for materials the subcontractor would supply to the contractor. When the subcontractor failed to supply the materials for the job, the contractor paid more (about $150,000 more) for replacement materials so it could perform the renovation. Then, as often happens, the contractor sued the subcontractor for the difference between the increased price it paid for the materials (about $250,000) and the subcontractor’s original bid for the materials (about $100,000).
And that seems to make sense, right? You tell me you’ll supply materials for work I’ll perform. I rely on your promise and include it in my bid for the work and win a contract. You back out and don’t supply the materials. I procure substitute materials at a higher price. Now I think you should pay me the difference between the higher price and your price. You think you should not pay me because your bid was oral and that we never reduced the agreement to writing, which you argue the law requires for you to be bound to a contract between you and me.
That’s where it becomes more complicated–and where everyone draws their lawyers and shoots.
Lawyers often (and sometimes justifiably) receive criticism for making life overly complicated. However, when $150,000 is on the line, complicated can be necessary–because each side wants to win and has various arguments that seem at first blush to make sense.
Here, the subcontractors in fact argued that the contract was never in writing. A legal doctrine called the Statute of Frauds has been around for hundreds of years, which says that certain contracts must be in writing or that a contract does not exist, regardless of what the parties may have talked about or orally agreed to. The Statute of Frauds originated because people started lying about the existence of oral contracts (when one didn’t really even exist), and the powers that were decided to require that certain contracts must be in writing–or that no contract existed.
Over time, other powers that were decided that exceptions to the Statute of Frauds should occur–often because one party “relied’ on the actual oral promise of another party when that first party promised something to a third party. Getting a little complicated? Yes, but hopefully you can see that the complications arose because the back-and-forth arguments actually had some merit–as though people said, “I can see both sides to this. We need rules to promote fairness.”
Let me stop here for a minute to comment. A friend recently noted–and I tend to agree with him–that rule-makers often unnecessarily complicate life, and the result is that lawyers pocket large legal fees for work that, but for the new rule, shouldn’t really be that complicated. (You sometimes hear people complain about “over-regulation”.)
At the same time, if your $150,000 is at stake, you might prefer a slower process that accounts for the complexities involved.
(That said, my friend, I, and perhaps you have scratched our heads from time to time and thought, “How can it be this hard? And why are the winners always the lawyers?)
My philosophical answer is: I don’t know other than to say that life is complicated, and wisdom is knowing how to hit the sweet spot of being complicated enough without being overly-complicated (or not complicated enough). That is the basis of risk-assessment, and that is hard work. Often, it is best to have people who are “foot-on-the-gas” types and others who are “foot-on-the-brake” types to get to the sweet spot, and when you have people who value each other’s opinions and use all available information and thoughts, you have a powerful and productive combination.
OK, back to the court case and the Statute of Frauds, which you should recall requires that certain contracts be in writing. I previously noted that over time exceptions to the Statute of Frauds developed, and one is called Promissory Estoppel, which I’ll boil down to mean that a party is “estopped” from backing out of a oral contract by arguing that the contract must be in writing (as the Statute of Frauds would otherwise mandate). The Promissory Estoppel doctrine can (not must) trump the Statute of Frauds when another party relies on that promise and then promises something to yet another party.
So who prevailed in Wyoming: My friends or the subcontractor? You can either read the case, or I’ll tell you in the next paragraph.
The Court agreed with my friends’ company’s argument–that Promissory Estoppel can trump the Statute of Frauds in Wyoming. Good for it and bad for the subcontractor.
What’s the takeaway? Knowing various complexities in the world (and/or knowing someone who knows them) can be the difference between $0 and $150,000.
Now that’s real money.