The General Contractor submitted a bid for construction of a facility. The GC solicited proposals from potential subcontractors for the roofing portion of the project and received a bid of...

  1.      The General Contractor submitted a bid for construction of a facility. The GC solicited proposals from potential subcontractors for the roofing portion of the project and received a bid of $190,000 from City Roofing.  City had sent GC an unsolicited bid based upon copies of plans it had received from another subcontractor.  City later claimed that the plans it had received were at half scale and they did not realize it at the time it submitted its bids.  GC also received a second bid of $280,000 from Jottan.  The GC president testified that he realized “somebody has got to be right and somebody has got to be wrong” and he telephone City to inform them that their bid was “rather low” and asked if City was comfortable with the bid.  City, realizing that the call must mean that they were the low bidder, confirmed their bid.  After the GC was awarded the overall job, City faxed a letter to the GC rescinding its bid.  Discuss the applicable legal rules in detail and how they (it) would be applied in this instance.

Asked on by tsekiteri

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Stephen Holliday | College Teacher | (Level 1) Distinguished Educator

Posted on

Your question can be answered with with common law principles, but you may need to look at the location of the contractor and subcontractor.  Although general contract law can apply to the situation you have proposed, many jurisdictions across the country--at both the city, county and state levels--have specific statutes governing contracts executed within those jurisdictions.

Under Restatement (Second) of Contracts, Section 90, the doctrine of promissory estoppel (which I'll define below) applies to the scenario you have described.  When the subcontractor submitted its unsolicited contract with its low bid, the contractor had a right to believe that the subcontractor had performed its due diligence on the requirements of the bid, including understanding the scale of the plans it reviewed, and that the bid was firm.  More important in this scenario, the call made by the contractor to the low-bidding subcontractor provided an opportunity for the low bidder to review its bid, which the subcontractor failed to do.

Once the general contractor accepted the low-bidding subcontractor's bid and relied on that bid in making its own bid for the project, under the doctrine of promissory estoppel, the subcontractor lost its right to rescind the bid.  Promissory estoppel governs situations in which a promise is made (the subcontractor's confirming its low bid at the time of the contractor's call, and the subcontract itself, with the low bid) to the contractor (the promissee).  When the contractor relies on the subcontractor's bid to make its own bid, and wins the contract, the subcontractor's bid cannot be rescinded without harming the contractor who relied on it.  Because a rescinding of the bid would harm the contractor, and there is no other remedy for the situation, the doctrine of promissory estoppel prevents the subcontractor from rescinding the bid, which means, in effect, that the subcontractor is forced to honor its low bid.

To put this in other words: because the low bid induced the contractor to make his bid, which won the contract, the low bid became a promise that cannot be taken back without harming the contractor who relied on the subcontractor's promise.  And there is no remedy that would make the contractor and his contract whole because the other low bid was almost $100,000 higher.  In short, even in contract law, a promise is a promise.

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