Subcontract Bidder Must Honor its Bid to GC (Promissory Estoppel)

Posted on: May 9, 2017 by Professional Underwriters Agency

Where a general contractor (GC), Weitz Company , LLC, was awarded a contract to construct a nursing home and had based the heating, ventilation, air conditioning (HVAC) portion of its bid on a subcontract bid from an (HVAC) subcontractor, (H&S Plumbing and Heating), the sub reneged on its bid. The GC substituted a different subcontractor to perform the HVAC work and subsequently sued H&S, on theories of breach of contract and promissory estoppel, to recover the increased costs of having the second HVAC sub perform the work. The trial court granted judgment based on promissory estoppel based on the conclusion that H&S’s bid was a promise to perform on which reliance by the GC was foreseeable, and the GC in fact relied to its detriment on the subcontract bid.

On appeal, H&S argued that GC reliance was unreasonable because subcontractor bidders were not required to leave their bids open for any set period of time. The court rejected that argument. H&S argued reliance was unreasonable because the GC could have pulled its own bid from the owner. The court rejected that argument, saying H&S could not expect the GC to abandon the project merely because H&S decided not to honor its subcontract bid.

H&S also argued that because the GC had a track record of asking subcontract bidders to agree to subcontract terms and conditions materially differing from those offered in the subcontract bid, a subcontractor could withdraw its bid. The court rejected this argument and stated, it was a mere hypothetical in this case, but that as rule, “A general contractor can reasonably rely on a sub’s bid even if the GC and sub contemplate signing a formal subcontract with additional standard terms after the bidding process. But a GC cannot demand that a sub agree to unusual and onerous terms awhile still holding the subcontractor to its original bid.” Weitz Company, LLC v. Hands, Inc., 294 Neb. 2015, 882 N.W. 2d 659 (2016).

Comment: This decision is particularly interesting in the context of the other article in this newsletter that allowed a subcontract bidder to refuse a subcontract because the terms and conditions of the subcontract form differed so materially from those submitted with the subcontract proposal. The court here would not necessarily have disagreed with that other decision. Under the facts of the current situation, however, the issue never came down to one concerning the terms and conditions of the contract. The subcontractor attempted to withdraw its bid before it ever received any proposed terms and conditions. Perhaps it would have fared better if it had waited to receive the subcontract form, which it said previous experience contracting with the GC, differed from its subcontract proposal.

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 18, No. 8 (January 2017). constructionrisk.com/2017/01/subcontract-bidder-must-honor-bid-gc-promissory-estoppel/

Copyright 2017, ConstructionRisk, LLC

Posted in: Architect Professional Liability