Prime contractors are generally aware that by statute, bids submitted on public works projects are, absent narrow circumstances, firm and must be honored. Accordingly, upon being notified that its bid was the lowest bid (and upon being awarded the project), the low bidding contractor must enter into a contract with the municipality for the project. The form of contract is usually included in the bid form documents. So, if the contractor sees something objectionable in the contract, it can simply decline to submit a bid (but not negotiate the terms).
Bids on private jobs, on the other hand, are not necessarily firm. One tool that can be used to make a private bid firm is the quasi-contractual theory of promissory estoppel, which provides that a party who is the recipient of a promise and relies on that promise to its detriment can sue for damages arising out of a breach of that promise. In the recent case of Andrew R. Mancini Associates, Inc. v. Murphy Excavating Corp., an appellate court held that there were questions of fact as to whether a bid submitted to a general contractor by a subcontractor was firm—and whether the subcontractor could be held liable for the difference between its bid and the higher cost actually incurred by the general contractor to retain a different subcontractor after the original subcontractor refused to enter into a contract upon its bid.
In December of 2016, in preparing to submit its own bid to serve as the general contractor on a reconstruction project, Andrew R. Mancini Associates solicited bids from subcontractors to perform, amongst other tasks, the excavation and landscaping scopes of work. Murphy Excavating Corp. submitted a bid to Mancini for such work, and Mancini confirmed both Murphy’s price and the scopes of work to be performed. Murphy was aware that its bid was being incorporated into Mancini’s own bid to the project’s owner.
The following month, Mancini informed Murphy that Mancini had been awarded the project, and both parties began to negotiate the form of the subcontract. Ultimately, these negotiations broke down over what Murphy characterized as “unreasonable” terms in Mancini’s proposed subcontract, and Murphy refused to enter into an agreement with Mancini. In light of Murphy’s refusal, Mancini procured the required services from another subcontractor, but at a higher cost. Mancini sued Murphy on the theory of promissory estoppel to recoup the difference between Murphy’s bid price and the higher price it ultimately paid for the work. Murphy moved for summary judgment, asking the court to dismiss the claim.
The trial court denied Murphy’s motion, and the appellate court affirmed the trial court’s decision. In doing so, the appellate court cited to well established case law holding that a claim for promissory estoppel is stated when a plaintiff alleges that a defendant made a clear and unambiguous promise, that the plaintiff relied upon that promise to its detriment, and that the plaintiff was harmed as a result of the breach of the promise. Relying upon that case law, the appellate court affirmed the trial court’s finding that there were questions of fact as to whether Murphy’s promise was unambiguous, and whether Mancini’s proposed contract was reasonable. The court also cited to case law providing that what occurred during the failed negotiation of the subcontract—which could determine whether the promise was actually breached—is similarly an issue of fact for a jury.
The ramifications of submitting a bid as a prime contractor in the public works context are well known. In the private context, however, the effects are less well settled. Under some circumstances, courts have indicated willingness to use the doctrine of promissory estoppel to make those bids firm. Courts have also indicated that where the circumstances are not clear, such as in Murphy Excavating, the parties will have to proceed through expensive discovery to an (even more) expensive trial. In order to avoid such vagaries, contractors submitting private bids would be well advised to indicate clearly what conditions those bids are subject to, and under what terms and conditions the bid will—or will not—be honored. Better yet, contractors can make the form of the subcontract part of their bid packages so that such an argument over the exact terms of that subcontract can be had before the bid, and not after.