Construction Law

General Contractor’s Failure to Send Subcontractor a Subcontract Which Met the Terms of the Subcontractor’s Quotation, Prevented the General Contractor From Recovering Under Promissory Estoppel

By Brett Hill

The general rule in construction contracts is that if a prime contractor relies upon a subcontractor's bid, and incorporates the subcontractor's quote in its bid to the owner, the subcontractor may not withdraw its bid for a reasonable period of time after the prime contractor's bid has been accepted by the owner.

In a case in Georgia, the general contractor (APAC) incorporated a subcontractor's (Coastal) bid to perform drill shaft foundation work into its bid to the Georgia Department of Transportation (GDOT).

After APAC had signed a prime contract with GDOT, APAC submitted a written subcontract to Coastal that contained terms and conditions different than those in the subcontractor's bid (the general contractor sought to assign the risk of delay and subsurface conditions to the subcontractor).  The subcontractor refused to sign the subcontract.  APAC filed a lawsuit against Coastal alleging "promissory estoppel" asserting Coastal knew it would be expected to enter into an APAC standard subcontract, the terms of which would differ from the Coastal bid terms.

APAC asserted that tendering the subcontract should be considered acceptance, even though the terms of the APAC subcontract were different that the Coastal quote.  Promissory estoppel provides, that a subcontractor who makes a bid to a general contractor by itself to perform according to its promise because the general contractor has relied on that promise in making its own bid.

Promissory estoppel does not however allow the general contractor to reopen bargaining with the subcontractor and at the same time claim a continuing right accept the original offer.  The court found that promissory estoppel was inapplicable here because APAC's tender of a subcontract which was different than the terms of the Coastal bid quote, amounted to a counteroffer, and APAC forfeited its right to hold Coastal's bid open, when it counteroffer with its form subcontract, seeking to transfer the risk of subsurface conditions and delays to the subcontractor.

APAC could have preserved its promissory estoppel right if it had accepted Coastal's bid unconditionally.  It appears that APAC was asleep when it failed to realize that in addition to the scope of work and dollar value information that Coastal had provided at bid time, Coastal had excluded the risk of differing site conditions from its quote.

Full post as published by Construction Law Blog on February 27, 2008 (boomark / email).