• Your Bid Was “Accepted” - But Do You Have a Contract?
  • May 27, 2011 | Author: Jeffrey S. Ammon
  • Law Firm: Miller Johnson - Grand Rapids Office
  • Suppose you are the winning low bidder on a project. And that you agreed in your bid to sign the form of construction contract contained in the bid package. Suppose also that the owner, a local governmental airport authority, adopts a resolution accepting your bid. That resolution authorizes the airport CEO to sign the contract. You receive a copy of this resolution.

    Then, something goes wrong. The airport CEO doesn’t sign the contract. One month later, the airport board rescinds its acceptance of your bid.

    Did you have a contract for the work? Or was the job contingent on signing the specified construction contract? This was the situation that the Court of Appeals addressed recently. The court ruled for the contractor, finding that the airport board created an enforceable contract by adopting its resolution “accepting” the bid and communicating that acceptance to the contractor. It made no difference to the court that neither party signed a contract.

    What is the effect of the owner’s “acceptance” of your winning low bid? This question should have been easy to answer, but it wasn’t in this case. How can owners and contractors avoid this ambiguity? Consider the following:

    • Scrutinize the bid package to determine whether it answers these questions. If it doesn’t, ask the owner for written clarification.
    • Owners should consider what significance its resolution “accepting” a bid should have. Is a resolution of acceptance even necessary, if the parties intend to be bound only when the contract is signed? Does the owner expect to negotiate contract terms after it picks the winning bidder?
    • Contractors should determine whether they are offering to enter into a contract by submitting a bid. Does the contractor expect to be bound upon the owner’s resolution, or only after a contract is signed? Will the contractor have any opportunity to negotiate construction contract terms? That may be significant, depending on what terms were already specified in the bid package.
    • Can a contractor protect itself with language in its bid? Perhaps, but will the bid be rejected as non-responsive? Pay careful attention to the bid requirements—including any opportunity for submitting alternative bids.

    Competitively bid projects are common in this market. Be sure you understand how the process works to go from winning bid to starting work with an enforceable contract.