Holman Erection Co. v. Orville E. Madsen & Sons, Inc.

Citation. 330 N.W.2d 693 (1983)

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Citation330 N.W.2d 693 (1983)

Brief Fact Summary.

Plaintiff sued Defendant, alleging that Defendant had accepted Plaintiff’s bid and that in awarding the subcontract to another company had breached a binding contract. Plaintiff appealed from a grant of summary judgment to Defendant.

Synopsis of Rule of Law.

The conduct of a party does not manifest assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.

Points of Law - Legal Principles in this Case for Law Students.

No contractual relationship is created between the subcontractor and the general contractor even though the bid is used as part of the general overall bid by the general contractor and accepted by the awarding authority.

View Full Point of Law

A city solicited bids for the construction of a water treatment facility. Orville E. Madsen & Sons (Defendant) decided to bid on the general contract, so he solicited bids for the necessary steel erection. Holman Erection Co. (Plaintiff) prepared a bid and, in conformance with an industry practice designed to prevent bid-shopping, submitted its bid to Defendant by telephone shortly before the general bid was due. Defendant used Plaintiff’s bid in preparing its own bid for the general contract and, as the city required general contractors to list all potential subcontractors, listed Plaintiff as its subcontractor on its bid. Defendant was awarded the general contract and awarded the steel subcontract to Van Knight, partially on the basis that Van Knight was a minority business, and the general contract required that an effort be made to have a portion of the work done by minority businesses. Van Knight also agreed to provide substantial labor and materials that Plaintiff had not. When Plaintiff learned the subcontract had gone to Van Knight, Plaintiff sued Defendant, alleging that Defendant had accepted its bid and that in awarding the subcontract to another company had breached a binding contract. Plaintiff appealed from a grant of summary judgment to Defendant.

Issue.

Whether a contract is formed between a general contractor and a subcontractor when the general submits a bid on a public construction project and lists the subcontractor as the proposed subcontractor for one aspect of the project as required by the awarding authority and the general subsequently wins the contract and awards the subcontract to a different subcontractor.

Held.

No. The trial court’s ruling is affirmed. The conduct of a party does not manifest assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.

Discussion.

To constitute an acceptance, Defendant's acts must have objectively manifested assent. Plaintiff argued that Defendant listing Plaintiff on the bid constituted acceptance because there was no other reasonable interpretation of the act and because it would have been unfair to bind Plaintiff to the bid without binding Defendant to use it. Although Plaintiff’s position was clearly contrary to precedent on contractors and subcontractors, Defendantcould potentially be held liable under promissory estoppel. Defendant had little time to prepare its bid because of industry practice to prevent bid shopping, and Defendant relied on the bid in calculating its own bid on the general contract. Furthermore, Defendant could have lost the general contract had it failed to conform to the contract requirements of utilizing minority businesses. Plaintiff suffered no reliance losses as a result of Defendant utilizing its bid, and the flexibility necessarily for contractors preparing bids for general contractors justifies the rule holding subcontractors to bids but not requiring general contractors to hire subcontractors simply because the general contractor uses the subcontractor’s bid in its bid for the general contract.