Let the Sub-Contractor Beware

A recent decision of Franklin County Court of Appeals (10th District) should give sub-contractors fair warning that giving estimates without proper restrictions could result in general contractor’s making use of the sub’s time and energy without compensation.

In the case of Complete General Construction Co. v. Kard Welding, Inc., 182 Ohio App.3d 119, Complete submitted an estimate to Kard for supplying steel highway ramp components. Kard used these estimates when it submitted its bid to the Ohio Department of Transportation. Kard won the bid, but used another supplier to supply the components.

In trial Complete argued that by using the estimate, Kard is estopped from using another supplier and the court should impose a contract upon Kard and award damages to Complete for breach of contract. The trial court ruled in favor of Kard saying there was no contract and, therefore, no breach. The evidence presented at the time of trial included testimony that certain terms of Complete’s bid were not acceptable and the covenants required by Complete were subject to renegotiation. Consequently, the court found that there was no acceptance of the offer by Kard.

Complete appealed the court’s decision and the appellate court sustained the lower court’s findings. In summary, the court stated:

“A subcontractor who makes a "bid" or "quote" which constitutes an offer to a general contractor, who submits a bid in reliance upon such offer, is bound to perform in accordance with the terms of that offer when the general contractor (1) is awarded the contract and (2) within a reasonable time thereafter notifies the subcontractor that the offer is accepted. Under such circumstances the subcontractor is liable in damages to the general contractor for failure to perform.”

“A general contractor's mere use of a subcontractor's quote in formulating a bid for a general contract does not constitute acceptance of the subcontractor's offer.”

Apparently, the court was looking for some memorandum or other documentation between the parties implying an acceptance of the offer by Kard given the disputed terms. The court obviously concluded that an element of contract was not met - a meeting of the minds - and, therefore, there could be no breach from which damages would arise.

The jurisdiction of this court of appeals is only Franklin County (Columbus area) but I would warn those reading this blog that the 10th Appellate Court is very influential and other courts tend to follow their opinions.

So what does one do to protect its work product? First, know whom you are dealing with. If this is the first time you are submitting a bid seek out the contractor’s reputation for “bid-shopping.” Second, work with your attorney to determine language in the bid that protects you from this type of contractor. Finally, be sure you have, in writing from the contractor, some memorandum of understanding that in the event its bid is accepted using your estimate, that your estimate is deemed a consummated contract for the purpose of performing the work or supplying the material set forth in your estimate.