View Biography Jennifer A. Forbes

On October 4, 2005, the Minnesota Court of Appeals decided a case which should make every subcontractor think twice about the language used in its construction bids. The Court affirmed that Beaver Masonry (a masonry business owned by Craig Shuck from Spicer, Minnesota) must pay $78,522 to Riley Brothers Construction (a construction company located in Morris Minnesota). What did Craig Shuck and Beaver Masonry do to justify this judgment? They provided a bid for road construction to Riley Brothers Construction which turned out to be too low by $78,522.

The Facts:

In the spring of 2002, the City of Wahpeton, North Dakota, sought bids for road construction. Craig Shuck learned that Riley Brothers Construction was preparing a bid as general contractor and contacted the company to obtain bid specifications. Based on the specifications, Beaver Masonry submitted the lowest bid. In turn, Riley Brothers submitted a bid to the City of Wahpeton (incorporating Beaver Masonry's bid) and won the contract.

On May 22, 2002, Mr. Shuck attended a construction meeting for the Wahpeton Job. At the meeting, Mr. Shuck reviewed the blue prints and determined that his company's bid failed to take into consideration several of the job's specifications. The blueprints called for three foot slabs, reinforced concrete and required compliance with the “Davis-Bacon Act” none of which were contemplated by the bid. The evidence shows that rather than disclose the error during that meeting, Mr. Shuck waited until June 11th to inform Riley Brothers Construction that he would require an additional $80,000 plus additional costs to complete the project. Rather than negotiate with Mr. Shuck, Riley Brothers Construction hired the next lowest bidder, completed the project and then sued Mr. Shuck and Beaver Masonry based on theories of breach of contract and promissory estoppel. Beaver Masonry's defense was that its bid did not constitute a binding contract, as everyone in the construction industry knows that there is no “contract” until a formal construction contract is signed.

The Court's Decision:

Unfortunately for Beaver Masonry, the court agreed with Riley Brothers Construction and held that there was a binding contract which had been breached by Beaver Masonry. The court found that the bid was an offer which was accepted by Riley Brothers on May 21st when it asked Mr. Shuck to attend the construction meeting. The court also found that even if there wasn't a contract, Riley Brothers had relied to its determent on Beaver Masonry's bid resulting in a claim for promissory estoppel.

Practice Points:

• Both Contractors and Subcontractors should be clear on specifications for bids. Neither party wins when bids don't reflect the true cost of construction.
• If you make a mistake in the bidding process, bring it to the other party's attention as soon as possible. Mr. Shuck's failure to communicate the problems with the bid once he knew of them may have factored into the court's ruling.
• If a bid is not intended to be an offer, include a disclaimer such as the following: This bid is based on the specifications provided by the General Contractor. Changes in the specifications or additional requirements not disclosed in the specifications may impact the cost of construction and this bid. This bid is not binding on Subcontractor except to the extent the bid is incorporated into and part of a final construction contract signed by both Subcontractor and General Contractor.

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