SAMOA DEVELOPMENT, INC., Plaintiff,
AMERICAN SAMOA POWER AUTHORITY,
FRED PELE, and DOES I-XX, Defendants.
Court of American Samoa
 A party may
rescind a contract award where no contractual rights have vested.
 A public
agency’s invitation for bids is regarded as a request for offers and no
contractual rights arise prior to its acceptance by the agency.
 In public
contracts, the bid is the offer, and a contract comes into being upon
acceptance by the governmental agency.
 Courts will
respect statutory language requiring formal execution of a contract in order
for contract rights and obligations to vest.
arbitrary action or fraudulent intent to injure a complaining party is
indicated, courts may interfere with an agency’s power to rescind its award.
circumstances indicated that backroom negotiations had taken place between government
agency and second-lowest bidder that was awarded contract after award
rescinded, court would not honor clause shielding agency from liability as it
had clearly employed clause arbitrarily and acted in bad faith.
 Where public agency granted contractor an extension for filing its
bond, but did not clearly specify the length of such extension, court would
consider agency’s custom of flexibility in determining the limits of the
 Where the objective language used by the parties indicates their
intent to be bound by the contract, the court will give that language effect.
 Where court found cancellation of contract award was arbitrary and in
bad faith, but nonetheless concluded that no formal contract had been formed,
it could not award expectation damages as are normally appropriate in breach of
 Where defendants arbitrarily and in bad faith canceled contract
award, court could properly award damages incurred by winning bidder in
reliance upon award.
 The doctrine of promissory estoppel prevents a party from denying
its implied promise to execute a contract with another once the other has
relied in good faith upon the first party’s representation.
court determined that public utility and its manager had arbitrarily and in bad
faith canceled contract award, punitive damages in the amount of $5,000.00 were
proper to deter the defendants from wantonly, arbitrarily, and abusively
wielding their public procurement power in the future.
 The general rule is that a party cannot recover attorney’s fees
incurred in enforcing a claim against another.
 The court can and does award attorney’s fees where required by
statute, or where an opposing party has acted wantonly, oppressively, or in bad
 Where defendants arbitrarily, and in bad faith, rescinded contract,
plaintiff was entitled to reliance damages, attorney’s fees and punitive
Before RICHMOND, Associate Justice, and LOGOAI, Chief Judge.
Plaintiff, Charles V. Ala`ilima
For Defendants, Roy J.D. Hall, Jr.
OPINION AND ORDER
Plaintiff Samoa Development Inc. (“Samoa Development”) brings this suit for
damages against defendants American Samoa Power Authority (“ASPA”) and Fred
Pele (“Pele”) for wrongfully cancelling an award of procurement. ASPA and Pele contend their act was justified
by the explicit terms governing the award, specifically those applicable to
contractors’ bonds. The case proceeded
to trial on November 28, 2000. Both
counsel were present.
On June 8, 1995, the Office of Procurement of the American Samoa
Government issued an Invitation for Bids for Project #AS-NH-001(29), regarding
striping, signing and delineation of portions of the Territorial Route 1
highway of American Samoa (“the striping project”). ASPA was, at the time, engaged in public
highway construction and maintenance. ASPA’s Executive Director Abe Malae
(“Malae”) was, as ASPA’s chief procurement officer, ultimately responsible for
the selection of outside contractors procured for highway projects. Pele, the general manager of ASPA’s
Civil/Highway Division, had been delegated authority for administration of the
performance of contracts for such projects, including the contract in
question. He also had at least apparent
authority to conduct the procurement process for the striping project.
The specifications governing the striping project, made available to all
bidders, incorporated the Hawaii Standard Specifications for Road and Bridge
Construction and explicitly substituted terms.
Haw. Dep’t of Transp., Highways
Div., Haw. Standard Specifications.
Three provisions, in particular, are relevant in this case. Section
103.04 of the specifications governs cancellation of the award, and reserves
for the ASG’s Department of Public Works “the right to cancel the award of any
contract at any time before the execution of said contract by all
parties without any liability to the awarded and to any other bidder.” Id. at § 103.04 (emphasis added). Section 103.06 requires contractor’s bonds.
It states, specifically, “[a]t the time of the execution of the contract, the
successful bidder shall file a ‘Performance Bond’ and a ‘Payment Bond.’” Id. at § 103.06. Finally, Section 103.08 provides that failure
to execute the contract and file acceptable bonds within 10 days after the
award of the contract, or within such further time as the Director may allow,
shall be cause for the cancellation of the award.” Id. at § 103.08. Such specifications are authorized by
A.S.C.A. § 15.0102 (12).
On July 11, 1995, the Source Evaluation Board (“SEB”) for this
procurement met, opened the bids, and found Samoa Development to be, at $182,951.00,
the lowest responsive bidder. In second place was Island Builders, Inc.
(“Island Builders”), at $193,034.69. The
U.S. Department of Transportation, Federal Highway Administration (“FHWA”),
which provided funding for the striping project, was notified of the SEB’s
findings by ASPA’s letter of July 21, 1995, signed by Pele. FHWA concurred in
the award to Samoa Development on August 1, 1995. A notice of award was issued to Samoa
Development on August 9, 1995, in a letter from ASPA, signed by Malae and Pele,
and addressed to Samoa Development’s president Falema`o Pili (“Pili”). The letter requests that Samoa Development
“provide originals of the Performance Bond for 100% of the contract amount,
Labor and Material Payment Bond for 100% of the contract amount and proof of
insurance coverage” within 14 days upon receipt of the notice. The notice was marked received on August 11,
On August 23, 1995, two days before the deadline to acquire the bonds,
Samoa Development sent a letter, signed by Pili, to ASPA acknowledging the
“conditional awarding” of the striping contract to it, and asking for an
extension of 15 days to acquire the bonds.
ASPA granted to Samoa Development an extension within which to provide
performance and payment bonds. There is,
however, no express evidence as to the actual number of days given in the
extension itself, ASPA’s notice to Samoa Development of its withdrawal of the
striping project award, dated September 13, 1995, signed by Pele for Malae and
ASPA, confirms an extension of 19 days.
The relevant portion states, “You have been extended nineteen (19) more
calendar days, in addition to the addition to the original fourteen (14)
calendar days to post the bonds but to no avail.” However, a ASPA’s later letter of October 6,
1995, again signed by Pele for Malae and ASPA, written with the purpose of
asking Samoa Development to pick up the original bonds, states: “It is very
unfortunate that your company had failed to submit all necessary bonds in time
even after extending the period for further [sic] 14 days. ASPA has been
awaiting [sic] 5 days more than the deadline to inform you the withdrawal [sic]
of this project.”
We find that an extension of 14 days was given. However, we also find that ASPA and Pele
unofficially postponed termination of the contract award for another five days
and thus afforded Samoa Development further time to provide the required
bonds. This action was consistent with
ASPA’s customary practice. In 1995, ASPA
was flexible in its deadlines regarding the accepting and filing of bonds as a
matter of practical necessity in the procurement of local contractors to
perform public construction projects that required bonding. As small businesses, local contracting firms
were unaccustomed to bonding requirements for federally-funded projects and
often encountered financial and logistical problems in routinely acquiring
Samoa Development did, in good faith, acquire the
appropriate bonds. On September 8, 1995, ASPA received from Kalilimoku Hunt, a
general agent of the American National Insurance Co., a letter stating that
“all of the requirements to consummate the bond” for the striping project were
received by the Hunt/Linden Agency, and were then submitted to the National
Casualty Insurance Co. It further
stated: “[w]e have indications from the Insurance Company that the bond should
be issued by Wednesday 13, 1995 [sic].”
Samoa Development received further confirmation of the processing of its
bond on September 11, 1995, in a letter from Robert Style, Regional Director of
Broker’s Network, stating, “we are in the process of procuring bond(s) in the
On September 12, 1995, Samoa Development received a hand-scrawled
fax from an “Anita” at Specialty Bonds and Insurance, Co. to a “Kauli,” with
the subject line “Re: Samoa Development,” the body of which states:
WE HAVE APPROVAL TO ISSUE
BOND FOR CAPTIONED. PLZ [sic] HAVE 61A EXECUTED AND FAX’D [sic] BACK. RATE WILL
BE 390, SO WE WILL NEED FAX’D [sic] COPY OF CHECK IN AMOUNT OF $5,489.00. THX!
Development apprised Pele of the authorization that day, and on September 13,
1995, sent to ASPA what Pili described in a cover letter to be “the documents
which indicates [sic] the issuing of our Bond. The Underwriter is sending our
Bond in the overnight pouch on Friday’s flight.”
Despite these communications, in a letter dated and faxed on September
13, 1995, signed by Pele only, without a signature above the signature line for
Malae, ASPA withdrew the contract from Samoa Development “because of failure to
post the required performance and the payment bonds.” Pili immediately responded with a letter
asking for reconsideration “on the grounds that a letter of intent was included
to ensure the forthcoming issuance of the Bond.
Moreover, the fax included from the underwriter further firms [sic] the
Impending Bond which was about to be issued.”
On September 14, 1995, a letter from Anita Love of Specialty Bonds and
Insurance, Inc., was faxed to ASPA confirming that approval had been given to
issue performance and payment bonds in the amount of $182,951.00 for the
striping project. She also faxed a copy
of the bonds to ASPA, and on September 15, 1995, mailed the originals via
express mail. These arrived in due
course, as confirmed by ASPA’s letter of October 6, 1995, signed by Pale for
Malae and ASPA, requesting that Pili pick up the originals of the bonds.
Island Builders, the second lowest bidder, was awarded the contract,
which was eventually executed without the original payment bond or insurance
documentation. It had secured a bond
from surety United Pacific Insurance Company on September 1, 1995, according to
the dates on the face of the bond. The
contract date is listed as August 28, 1995. However, Island Builders still had
not supplied either the original payment bond or insurance documentation when
ASPA held a preconstruction meeting on October 17, 1995. Further, due to lack of appropriate equipment,
Island Builders caused delay of the striping until at least December 1, 1995.
I. Termination of the Contract
 Samoa Development complains that it was wronged by
ASPA’s and Pele’s termination of the award of the striping project. However, courts have upheld the right to
rescind a contract award where no contractual rights have vested. McRae v. Farguhar & Aibright Co.,
269 S.W. 375, 377 (Ark. 1925). The
issue is thus whether or not contractual rights vested in ASPA’s award of the
striping project to Samoa Development.
[2-3] A public agency’s invitation for
bids is regarded as a request for offers; no contractual rights arise prior to
its acceptance by the agency. State v.
Johnson, 779 P.2d 778, 780 (Alaska 1989). The bid is the offer, and a contract comes
into being upon acceptance by the agency.
Id. However, in this particular case, there are two provisions in
the bidding specifications which would function, if the facts are compliant, to
restrain the vesting of contractual rights until after an award has been made.
These provisions are examined below in light of their interpretation by common
law, and application to the relevant facts of this case.
Section 103.04 of the specifications provides that ASPA, in awarding a
bid, maintains “the right to cancel the award of any contract at any time
before the execution of said contract . . . without any liability to the
awardee.” ASPA and Pele contend that because
no contract was executed, this provision shields them from liability for
terminating the award to Samoa Development.
 Courts will respect statutory language requiring
formal execution of a contract in order for contract rights and obligations to
vest. McRae, 269 S.W. at 382; see
generally Annotation, Revocation, Prior to Execution of Formal Written
Contract, of Vote or Decision of Public Body Awarding Contract to Bidder,
3 A.L.R.3d 864 (1965); 64 Am. Jur. 2d
Public Works and Contracts §§ 63-81 (1972). Such language manifests parties’ intentions
to treat a procurement award as a purely preliminary and tentative negotiation
event, subject to the signing of a formal contract. Id.
To do otherwise would be to presume an intention by parties to form
a contract prior to formal execution in clear contradiction to open, known,
statutory terms. Id.
 Clearly, no formal contract had been executed by
September 13, 1995, when ASPA terminated the award, and so it would seem that
ASPA has avoided liability. However,
where arbitrary action or fraudulent intent to injure a complaining party is
indicated, courts may interfere with an agency’s power to reconsider and
rescind its award. Schull Constr. Co. v. Bd. Regents of Ed., 113
N.W.2d 663, 665 (S.D. 1962).
There is evidence here of arbitrariness in ASPA’s action, coupled with an
intent to injure Samoa Development, either of which causes us pause in allowing
ASPA’s exercise of rescission power.
Specifically, backroom negotiations appear to have occurred between Pele
and Island Builders, the second-lowest bidder which was awarded the contract
after Samoa Development’s award was rescinded.
The bond procured by Island Builders lists September 1, 1995, as the
bond execution date, and August 28, 1995, as the contract date, despite the
fact that Samoa Development’s award was not rescinded until September 13, 1995.
 Further, it appears that ASPA and Pele arbitrarily
terminated the award for Samoa Development.
Pele cancelled Samoa Development’s contract despite knowing that the
bonds had been approved and were about to be issued. Pele then formalized the contract with Island
Builders on October 5, 1995, despite its inability to obtain proper striping
equipment until December 1, 1995, and more importantly, despite its having
neglected to submit an original payment bond or any insurance documentation. We
will not honor a clause shielding a government agency from liability that is
employed arbitrarily, as a loophole for discrimination against particular
private contractors. ASPA may not
protect itself from liability due to the cancellation clause in this case. While ASPA may have been within its strict
rights to cancel the award to Samoa Development, it did so arbitrarily and is
answerable in consequential damages.
B. The Bond
ASPA further argues that Samoa
Development failed to fulfill the bond requirement contained in the bid
specifications, and thus provided good cause for ASPA’s termination of its
award. The requirement for filing bonds
is imposed upon Samoa Development by Sections 103.06 and 103.08 of the
specifications. Haw. Dep’t of Transp.,
Highways Div., Haw. Standard Specifications §§ 103.06, 103.08. Section 103.06 mandates that the successful
bidder file a performance and payment bond “[a]t the time of the execution of the contract.” Id. (emphasis added). Section 103.08 sets an explicit deadline for
these conjoint acts, namely “within 10 days after the award of the contract, or
within such further time as the Director may allow.” Id. The penalty for failure to execute the
contract and file acceptable bonds is that such failure “shall be cause for
cancellation of the award.” Read
together, these two sections impose upon the parties the requirement of (1)
bond filing simultaneous with execution of the contract, and (2) a deadline for
doing so of either 10 days after the award, or within a time specified by the
Director of ASPA.
After stating an initial 14-day time period in which Samoa Development
was to file the bonds, ASPA granted an extension for bond filing, but did not
clearly specify how long it would be. By
the time ASPA terminated its award, on September 13, 1995, it had received,
specifically: (1) a September 8, 1995, letter from the insurance company
confirming Samoa Development’s submission of bond requirements, (2) a September
11, 1995, letter from Broker’s Network confirming that the bonds were being
processed, and finally, (3) a fax from Specialty Bonds Insurance Co. indicating
approval to issue the bond, and asking for a copy of a $5,489.00 check.
 It appears, however, that ASPA had
an unwritten customary policy of flexibility in accepting contractors’ bonds
for public contracts where such bonds are proven to be reasonably
forthcoming. This appears to be due to
the difficulties and time-lags inherent in acquiring such bonds from acceptable
off-island sureties when local contractors were still not readily able to
obtain bonds. We find it necessary to
consider such a custom in this particular, peculiar case, where no written or
otherwise obvious manifestation of ASPA’s and Pele’s intent regarding the
timeline for bond filing has been presented beyond Samoa Development’s request
for a 15-day extension, and ASPA’s retroactive, contradictory statements of
either 14 or 19 days. See generally 21
Am. Jur. 2d Customs and Usages (1998).
 ASPA’s custom in 1995 was
to be flexible in accepting contractors’ bonds for public contracts, so long as
they were reasonably forthcoming. Indeed, ASPA eventually executed a contract
with Island Builders without the required original payment bond. Samoa Development’s bonds were more than
forthcoming; they were imminent, predicated only upon the surety’s receipt of a
check from Samoa Development, and filed the very day after ASPA’s arbitrary cancellation
of its award. ASPA and Pele had been notified, and were
fully aware of this fact. Indeed, on
September 14, 1995, the day after termination of the contract award, ASPA
received a confirmation letter from the surety along with faxed copies of the
completed, executed bonds. Had Pele
acted for ASPA in a manner less arbitrarily disposed towards Island Builders
and more in line with industry custom, he would have received the bonds from
Samoa Development and proceeded with execution of the contract with it. We hold that Samoa Development fulfilled the
specified requirements for filing bonds, and that ASPA terminated the contract
award without good cause.
Samoa Development presented evidence of special damages of $95,288,
covering $88,299 as estimated lost profits expected from execution of the
bid-upon contract with ASPA, and $6,989 in expenses related to obtaining the
contractor’s bonds. The issue is whether Samoa Development is entitled to these
 We have ruled that
ASPA and Pele cannot escape liability for arbitrary cancellation of a contract
award through the cancellation clause contained in the specifications. This does not, however, mean that a contract
was indeed formed, and was indeed breached.
As we discussed above, no formal contract had been executed by September
13, 1995, when ASPA terminated the contract award; since such formalization was
required by the specifications, no contractual rights and obligations actually
vested. We cannot, therefore, award
expectation damages, i.e., the estimated lost profits, as would be appropriate
in cases involving an actual loss from an actual breach of an actual contract. Restatement
of Contracts 2d § 347, cmt. a (1981); Miller v. Robertson, 266
U.S. 243, 258 (1924). Samoa Development
is thus not entitled to the $88,299 in lost profits.
[10-11] We can, however,
award Samoa Development reliance damages to avoid injustice in this case, based
on the doctrine of promissory estoppel.
This doctrine estops ASPA from denying its implied promise to execute a
contract with Samoa Development, once Samoa Development has relied in good faith
upon ASPA’s representation. Restatement of Contracts 2d § 90
(1981). The confirmed expenditures by
Samoa Development, made in reliance upon ASPA’s promise, are the $5,489 spent
on premiums for the contractor’s bonds and the $1,500 expended on accounting
fees and communications related to acquisition of the bonds. We thus award $6,989 as damages related to
the cost of the contractor’s bonds, expended in reliance upon ASPA’s implied
promise to execute a contract for the striping project.
B. Punitive Damages
We have awarded
punitive damages to punish defendants and to deter others from committing
similar wrongs where we have found that the elements of fraud, malice, gross
negligence, or oppression mingle in the controversy. Fiaui v. Faumuina, 27 A.S.R.2d 36, 42
(Trial Div. 1994); Letuli v. Le`i, 22 A.S.R.2d 77, 85-86 (Land &
Titles Div. 1992).
 To deter ASPA and Pele
from wantonly, arbitrarily, and abusively wielding its public procurement power
in the future, we award Samoa Development punitive damages of $5,000.00.
C. Attorney’s Fees
[13-14] The general rule is against recovery of attorney’s fees by a
party which incurs them in enforcing a claim against another. Interocean Ships v. Samoa Gases, 26
A.S.R.2d 28, 41 (Trial Div. 1994). We
have, however, awarded attorney’s fees where required by statute, or where an
opposing party has acted wantonly, oppressively, or in bad faith. Fiaui, 27 A.S.R.2d at 42; Samoa
v. Gibbens, 3 A.S.R.2d 121, 123 (Trial Div. 1986).
 ASPA and
Pele acted arbitrarily and in bad faith.
Their rescission in spite of Samoa Development’s efforts to procure
contractor’s bonds, of which efforts they were made fully aware, was against
courtesy and custom. We thereby award
Samoa Development $1,500 in attorney’s fees.
ASPA and Pele are jointly and severally
liable to Samoa Development for:
1. $6,989 in reliance damages,
2. $5,000 in punitive damages, and
3. $1,500 in attorney’s fees.
ASPA and Pele shall forthwith remit
to the Clerk of the Court a total $13,489 for disbursement to Samoa Development.
It is so ordered.
 Former Chief Associate Judge Tuaolo M.E. Fruean sat at
the trial of this case, but resigned from the bench to take his seat in the
Senate of the Legislature of American Samoa before the court completed
deliberations and issued this decision.
 A.S.C.A. § 15.0102(12) enables ASPA to:
[C]ontract for the procurement of supplies, equipment,
materials, personal services other than by employees, and construction with any
public or private entity upon terms and conditions as it finds necessary to the
full and convenient exercise of its purposes and powers, subject to all
applicable laws and rules of American Samoa.
 Implicitly at least, the SEB must also have found that
all three bidders were responsible and reasonable, as well as responsive, as
required by A.S.C.A. § 12.0211(g).
 Copies of the bonds would have been binding between
the surety and contractor. Courts must
give effect to a contractor’s bond of the ordinary type as a simple contract
expressing the intention of the parties.
Hosp. for Women of Md. v. U.S. Fid. and Guar. Co., 11 A.2d
457, 459 (Md. 1940) (superseded by statute on another matter as stated in Atl.
Sea-Con., Ltd. v. Robert Darin Co., 560 A.2d 592, 597 (Md. Ct. App.
1987). Where the objective language used
by the parties indicates their intent to be bound by the contract, or by the
bond in this case, we will give that language effect. See, e.g., Record Club of Am., Inc.
v. United Artist Records, Inc., 890 F.2d 1264 (2d Cir. 1989); Hunt Ltd.
v. Lifschultz Fast Freight, Inc., 889 F.2d 1274 (2d Cir. 1989).