Bidding Private Projects - Withdrawal vs. Enforcement of Bids
Statutory restrictions governing bids on public projects were addressed in the Spring 1999 issue of Construction Law Comments. But what about non public projects? What rules govern the right to withdraw or enforce bids on a private job?
Unlike public projects, there are no statutory requirements governing the solicitation or acceptance of bids on private projects. However, private bid documents may impose restrictions which are equally enforceable. The difference, of course, is that rules established by statute apply uniformly to public projects, while rules governing bids on private projects vary from job to job, depending upon the provisions inserted in the Instruction to Bidders.
Many private bid documents require that bids remain open for a specified period to allow the owner a reasonable time to review all bids. If so, early withdrawal may be possible only where a mistake in the bid is so obvious that acceptance of that bid would be unreasonable and therefore unenforceable.
Where private bid documents do not require that bids remain open and available for a specified period, a bidder may withdraw its bid without penalty at any time before that bid is accepted.
Normally, acceptance of an open general bid is legally effective when the owner notifies the contractor it accepts. Notice of acceptance is sufficient to create a binding contract except where the bid documents, or the parties' conduct, demonstrate neither intends to be bound until they negotiate all terms and execute a formal written contract. In that circumstance, there is no enforceable agreement until the contract is signed. Absent final agreement on all terms, the contractor may walk away, and the owner is free to recommence negotiations with other bidders.
Open sub-bids may also be turned into enforceable agreements by a general contractor notifying the sub-bidder it accepts the sub-bidder's proposal without reservation. If the general contractor seeks different terms by, for example, demanding a lower price or a subcontract form filled with new terms and conditions, the law regards that as a counteroffer. The subcontractor is then free to accept or reject that counteroffer, or to attempt to negotiate different terms.
A general contractor may also accept a sub-bid by relying on and using that sub-bid price in preparing its general bid. If that general bidder is awarded the prime contract, the subcontractor is legally obligated to sign a subcontract at its sub-bid price based on the terms of its sub-bid proposal and the bid documents. This right of enforcement by the successful general contractor, however, is not a one way street. Having accepted the sub-bid by relying on it, the successful general contractor is legally obligated to subcontract the work to that sub-bidder at the sub-bid price, just as if he had communicated that acceptance directly to the sub-bidder. That means the general contractor has no right to shop the sub-bid price, and the sub-bidder has the same legal right to enforce a subcontract as does the general contractor. The trick, of course, for the sub-bidder is to determine whether the general contractor used its sub-bid price in its successful general bid.
This
newsletter is intended to provide general information of interest to the
construction industry. It is not intended to provide specific legal advice or
to address fact specific issues. For that you should consult your legal
counsel. Corwin & Corwin LLP assumes no liability in connection with the
use of this newsletter. The Supreme Judicial Court may consider this material
advertising.
©1992-2000 Corwin & Corwin LLP. All rights reserved