Case Studies

Enforcing a Broken Promise: Getting a bid honored

By September 4, 2019February 13th, 2020No Comments
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Summary

As part of the bid process for a public works project, a general contract collects subcontractor bids to include in the project bid. After being awarded the project, one of the subcontractors refuses to honor its bid, costing the general $420,000. The general contractor hires the Lanak Hanna team to recover to enforce the bid and recover the additional cost from the subcontractor.

Situation

A Subcontractor Won’t Honor a Bid, Costing the General $420,000

A general contractor retained L&H to enforce a subcontractor’s bid on a public works project. The project was the rehabilitation of a 1.8 million gallon water tank in Solano County. The subcontractor submitted a bid to the general contractor to perform the painting/coating work on the project, per the project plans and specs. The general contractor used the subcontractor’s bid in its bid to the public entity, was ultimately determined to be the low bidder, and was awarded the project.

A month after the prime contract with the public entity was executed, the general contractor provided a subcontract to the subcontractor for execution. At the preconstruction site-walk, however, the subcontractor saw the size of the water tank and realized that it had made an error in its bid. Instead of a 1.8 million gallon water tank (per the project plans), the subcontractor had priced a 500,000 gallon water tank. The subcontractor refused to execute the subcontract for its original bid price.

The general contractor, who was in contract with the public entity, was forced to retain another subcontractor to perform the work, at an additional cost of nearly $420,000.

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Approach

Subcontractor Offers Nuisance Value, but L&H Presses for Full Amount

L&H brought suit and proceeded to trial after the subcontractor offered only a nuisance value in settlement.  At trial, the subcontractor made numerous arguments to avoid enforcement of the broken promise, including:

  • The bid was expressly only good for a period of 30 days
  • The 17- page proposed subcontract agreement was a counteroffer to the 2-page bid
  • The lawsuit was filed before the general contractor incurred any damages

In response to the subcontractor’s statements, L&H’s construction attorneys argued the bid became irrevocable once the general contractor used it in its bid to the public entity (on the very same date it received the bid).

Favorable Resolution

Sub Pays General Full Damages

After L&H argued the case, the trial court agreed with L&H that

  • The bid became irrevocable once the general contractor used it in its bid to the public entity
  • The terms and conditions of the proposed agreement did not materially differ from the bid.
  • Although the lawsuit was filed just days after the subcontractor refused to execute the subcontract, the general contractor’s damages were reasonably certain to occur at the time of the filing of the lawsuit – and in fact were fully established at the time of trial.

The trial court accordingly entered judgment in favor of the general contractor for the full amount the damages sought, approximately $420,000.

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Learn more about this resolution or construction law Contact Chad M. Wilson

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