LAW: The Contractor's Side

By: Cordell Parvin

In Piland, the contractor bid on a contract to do construction work at a U. S. Navy facility and solicited a quote from a subcontractor to perform certain paving work on the project. The subcontractor phoned in its quote. It also gave the same quote to other bidders. When the subcontractor learned that the contractor was the low bidder and had been awarded the contract, it phoned the contractor to see if it had been awarded the subcontract.

When a week passed without hearing from the contractor, the subcontractor called a second time, but was unable to reach the contractor's estimator. After waiting about three or four more weeks with no reply from the contractor, the subcontractor assumed it had not received the paving sub-
contract and closed the bid-paperwork file.

Several months later, the subcontractor received a sub-contract agreement to sign from the contractor. When the subcontractor refused to enter into a subcontract to perform the work at the earlier quoted price, the contractor filed a lawsuit for breach of contract.

At trial, the court observed that the issue revolved around whether the contractor had notified the subcontractor in a timely manner about the subcontract award. The court looked to local industry practices and found that, in eastern Virginia, it is customary for prime contractors to notify selected subcontractors within 30 days after the contractor is advised that its own bid has been accepted. After determining that the notification procedure applied to the case before it-and further determining that telephone notification was an acceptable industry standard-the court examined the testimony to determine whether the contractor had accepted the subcontractor's bid.

The contractor argued that, after it had been notified of the contract award, it telephoned the subcontractor with notification that its subcontract quote had been accepted. The contractor contended that it had communicated this acceptance to the subcontractor within the 30-day customary time frame for notification. But the subcontractor maintained that the contractor had not contacted it for any reason regarding the job.

The court observed that where acceptance of an offer or a bid is by telephone, the burden rests upon the person asserting it to prove that the bidder did in fact accept the quote and that the acceptance was in accordance with the quote or offer. In this case, the contractor failed to carry the burden: It was unable to show a preponderance of evidence that it timely notified the subcontractor that it was accepting the quote.

In resolving the dispute in favor of the subcontractor, the court observed that the contractor's evidence was weak and unconvincing. An estimator who worked for the contractor testified that he could not remember the exact date or with which of the subcontractor's estimators he had spoken. The only written evidence he could produce was a note that simply stated, "Called 2-2-84, bid okay." This notation lacked the substance of the telephone conversation and did not indicate that any acceptance had been made.

By contrast, the subcontractor's estimator was so positive that he had not spoken with the contractor's estimator about the job in the weeks following the quote that he placed the bid-related documents in a "closed" file for unsuccessful bids. Based on these facts, the court concluded the contractor did not provide enough evidence to determine that acceptance was ever made. As far as the court was concerned, there had been no acceptance. And because there was no contract between the parties, there could be no breach.

This case outlines the problems contractors may encounter when they fail to document all their actions. Had the contractor written an acceptance letter instead of merely telephoning the subcontractor, it would have had proof of its acceptance of the subcontractor's quote. Furthermore, if the contractor's estimator had made more detailed notes of the telephone conversation with the subcontractor, the contractor might have convinced the court that the subcontractor had agreed to perform the work at the quoted price. Even then, the contractor's acceptance should have been relayed to the subcontractor within a "reasonable time."

Finally, it should be noted that subcontractors can control what is considered a "reasonable time." In this case, the court held that, unless a different time frame was specified in the quote, 30 days was reasonable in eastern Virginia. By specifying a time frame for the acceptance and the manner of acceptance (in writing), subcontractors might be able to avoid the uncertainty created by the facts in this case.

Parvin is a shareholder in the law firm of Leonard, Hurt & Parvin, P.C., which has offices in Washington, D.C.; Dallas; Houston; Austin, Texas; and Richmond, Va. Leonard, Hurt & Parvin provides services for the construction industry, including claim preparation and analysis, negotiation, environmental law, alternative-dispute resolution, privatization financing, labor law and litigation. You may write him in care of the editor.