By Matthew J. DeVries
Reprinted from Best Practices Construction Law
If a subcontractor’s quote does not contain a deadline by which it must be accepted, how late can the contractor accept the quote to be valid? And when there is a dispute, who has the burden of proving that the contractor accepted the quote in a timely manner?
The court addressed these issues in Piland Corporation v. Rea Construction Co., 672 F.Supp. 244 (E.D. Va. 1987), a Virginia case involving a contractor’s bid to perform work at a government facility. The contractor solicited a quote from a subcontractor to perform certain paving work on the project. The subcontractor phoned in its quote to the contractor, and it also gave the same quote to other bidders. When the subcontractor learned that the contractor was the low bidder and had been awarded the contract, it phoned the contractor to see if it had been awarded the subcontract.
The subcontractor called a second time after waiting a week to pass without hearing from the contractor. Four more weeks … no response from the contractor. Understandably, the subcontractor assumed that it did not receive the award for the paving work and closed its files. Several months later, the contractor sent an agreement to the subcontractor to sign. When the subcontractor refused to sign the agreement to perform the work at the earlier quoted price, the contractor filed a lawsuit for breach of contract.
At trial, the court focused on whether the contractor had notified the subcontractor in a timely manner about the subcontract award. The court looked to local industry practices, which dictated that it was customary for prime contractors to notify selected subcontractors within 30 days after notice of acceptance of its bid. The court also determined that telephone notification was an acceptable industry standard.
Ultimately, the court concluded that the contractor was unable to show by a preponderance of evidence that it timely notified the subcontractor of its acceptance of the quote. Much of the decision was based upon credibility findings, where the court found the contractor’s evidence to be weak and unconvincing. The contractor’s estimator could not remember details of the all and had one minor notation about notice to the subcontractor that read: “Called 2-2-84, bid okay.”
On the other hand, the subcontractor’s estimator was so positive in his testimony that he received absolutely no notice of acceptance and he closed out the file. The court concluded that there was no acceptance of the bid and, therefore, there could be no breach of contract without a binding contract in place.
This case outlines the problems contractors may encounter when they fail to document all their actions. The contractor should have given written confirmation of notice of the award and acceptance of the subcontractor’s bid. Even if notice is given by telephone, it should be properly documented as well. Finally, as to what constitutes a “reasonable time” to accept a bid, the parties should include the time for acceptance in the written offer to avoid a determination by industry practice. Read More.