Suppose a subcontractor quotes a price to a general contractor who is putting together a general bid, and that general bidder is later awarded the prime contract. Can the general contractor compel the subcontractor to perform work at its quoted price? And conversely, does the subcontractor have a right to insist the general contractor award it the subcontract at the quoted price? These questions turn into disputes where either (a) the contractor wants to take advantage of a low subcontract quotation and the subcontractor no longer wants to do the work at that price or (b) the subcontractor wants the subcontract but the general contractor bid shops its price and gives the job to another subcontractor.
The Court treats a subcontractor’s prebid quotation as an offer available for acceptance by the general contractor. A subcontractor’s quotation is available for acceptance for a reasonable time after it is made or until it is revoked by the subcontractor. Where accepted, the quotation becomes a contract. And where it becomes a contract, it is enforceable by both the general contractor and the subcontractor.
The traditional method of acceptance is by notification. If the general contractor calls up the subcontractor and accepts the quotation as submitted while it is still available, there is a contract. But there is another method of acceptance recognized by the Courts. If a contractor relies on a subcontractor’s quotation in formulating its successful general bid price, that act of reliance constitutes a sufficient acceptance to turn the subcontractor’s quotation into a subcontract obligation the moment the general is awarded the prime contract. That is the result even if the subcontractor notifies the contractor it is revoking its quotation before the contractor provides notice of acceptance. The legal rationale is clear enough. A general bidder ought to be able to rely on prices quoted by subcontractors who must anticipate the general bidder may use those quoted prices in committing itself to perform the general contract work.
The only exception to this acceptance by reliance is where the subcontractor’s quotation is so low in relation to other prices that the general bidder should have known the quoted price was a mistake. Courts will not allow a general bidder to take advantage of an obvious mistake in a subcontractor’s quotation. In short, a contractor may not rely on a quotation which the contractor knew or should have known was a mistake. Without reasonable reliance, there can be no acceptance or contract.
Acceptance by reliance benefits a general contractor by making it more difficult for a subcontractor to back away from a quotation which the contractor was counting on. But it is not a one way street. Where a successful general bidder accepts a subcontractor’s quotation, that acceptance enables a subcontractor to insist on a subcontract at the price quoted.
A general contractor who accepts one subcontractor’s quotation by relying on it in its bid, and who then bid shops that quotation to obtain a lower price from a second subcontractor, has exposed itself to a breach of contract action by the first subcontractor. That general contractor may well end up paying two subcontractors — one to do the work and the other to make up for profits lost.
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