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Construction Contractor Recovery When Sub-Bids are withdrawn

On Behalf of | Apr 24, 2014 | Business Construction Law

Things can change in an instant in the construction business. For example, a contractor may make a bid relying on a bid proposal from a subcontractor. Any number of circumstances can then cause that subcontractor to withdraw after the contractor won the project bid. What is that contractor left to do?

If the contractor is forced to hire a more expensive subcontractor, who makes up the difference when the job runs at a loss? Thankfully, as is the case with disruption costs, there are a few ways a contractor could recover in these circumstances.

No matter what stage of the job you’re in, you should contact a construction law attorney if you’re in fear of footing the bill for a suddenly unprofitable project.

If a subcontractor withdraws a bid proposal, causing you to accept a more expensive bid, you may be able to recover the difference in price under a breach of contract theory. For example, imagine a subcontractor’s proposal states the bid is “good for 30 days.” If you ultimately win your bid relying on that proposal, you should be entitled to recovery if the subcontractor withdraws during that 30-day period. Paramount to this recovery is proof that both parties intended to be bound by the proposal. Of course, durational terms such as “good for 30 days” are themselves indicative of that intent.

Alternatively, a contractor in this position may be able to recover under the theory of promissory estoppel. Even where a subcontractor’s bid does not contain durational language like the “30 days” described above, such language can sometimes be presumed. The idea is, it is presumed a subcontractor submits its bid for the purpose of having that bid accepted. In making the sub-bid, the subcontractor realizes that its bid may be the lowest, and is therefore estopped from claiming it was not open for acceptance.

Of course, these cases rarely play out so simply. Careful consideration of the surrounding circumstances such as the timeliness of acceptance, the ambiguousness of the sub-bid, and whether the sub-bid contained a material mistake will have to be considered before recovery can be guaranteed. You should contact a construction law attorney who can help evaluate your specific potential for recovery.