Subcontractors' Attempts to Enforce Their Bids

Washington courts have rejected subcontractors’ contentions that a general contractor’s mere use of their bids constitutes an “acceptance” of the subcontractor’s bid and that the incorporation of the subcontractor’s bid into the prime contractor’s price to the owner constitutes an enforceable contract.  Examining three Washington cases on this subject provides some insights on how the courts might view a general contractor’s listing of a subcontractor in its bid as an act of “acceptance.”

The courts seem less than enamored with the idea that the general contractor is protected by the doctrine of promissory estoppel.  Read more here.  However, subcontractors enjoy no such protection.  Generally, a general contractor’s use of a subcontractor’s bid in its bid does not itself create an enforceable agreement.  As a result, once the general contractor uses the subcontractor’s bid, the subcontractor’s bid is irrevocable for a reasonable period of time, but the general contractor has the choice of reopening negotiations with other subcontractors once the general contractor is awarded the contract.  Nevertheless, three Washington cases make it clear that the courts are teetering on the edge of what indicia over and above incorporation of the subcontractor’s bid is necessary to create an enforceable agreement, not much more is required.

In Plumbing Shop, Inc. v. Pitts, a general contractor used the price quoted by a mechanical subcontractor in its bid to the owner.[i]  The general contractor was awarded the contract by the owner.  Thereafter, the general contractor requested a cost breakdown and various submittals from the subcontractor.  The general contractor then hired another subcontractor to perform the mechanical work.  The original subcontractor sued the general contractor for the profits it had anticipated making on the project, alleging the general contractor breached an implied contract.  The Washington Supreme Court held that, in the absence of an agreement on the essential terms, it was apparent that the general contractor and subcontractor intended to set out in a written contract specific terms, such as bonding, liquidated damages provisions, manner of payment, and work progress completion dates, and others, which was to be executed at a later date.  The Court also disagreed that trade custom could be called upon to fix the terms not previously agreed upon, holding that business practice and custom may be used only in the interpretation of existing contracts.  Here, the alleged contract has merely an agreed upon price.  The Court found that implying the remaining essential terms by way of custom and usage would improperly create a contract for the parties.

In Milone & Tucci, Inc. v. Bona Fide Builders, Inc., a general contractor used a subcontractor’s bid in its proposal, but later discovered the subcontractor had not submitted the lowest bid.[ii]  After being awarded the prime contract, the general contractor awarded the subcontract to another subcontractor.  The trial court ruled in favor of the subcontractor, finding that construction industry usage dictated that an implied contract was created.  The Washington Supreme Court reversed, finding that there had been no acceptance.  The Court found that a mere use of a subcontractor’s bid price by the general contractor in preparing its bid did not constitute an acceptance of the subcontractor’s offer.  With respect to custom and usage in implied contracts, the Court stated:

Usage and custom are admissible in evidence to explain the terms of an express or implied contract once the contract is established.  The fallacy of the trial court’s second theory is that an implied contract cannot arise from proof of usage and custom.  The effect of custom or usage upon contractual obligations is depending upon the existence of an actual contract between the parties.  There is no contract, proof of usage and custom will not make one.

In Industrial Electric-Seattle, Inc. v. Bosko, a general contractor incorporated a subcontractor’s bid and indicated that if awarded the prime contract, he would use the subcontractor.[iii]  The general contractor advised the subcontractor as follows:  “Okay, I will go ahead and bid this job,” and “Okay, I will see; I will let you know how we make out.”  When the general contractor used a different subcontractor, the original subcontractor filed suit.  Although the Washington Supreme Court indicated that the mere use of the subcontractor’s bid was insufficient to create a contract, it found that the general contractor’s communications with the subcontractor, together with the custom of awarding a subcontract to the party whose quotation was used, created a contract.

[i] 67 Wn.2d 514, 408 P.2d 382 (1965).

[ii] 49 Wn.2d 363, 301 P.2d 759 (1956).

[iii] 67 Wn.2d 783, 410 P.2d 10 (1966).

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