Use of Subcontractor’s Bid in GC’s Bid Does Not Create A Contract in Pennsylvania
6/7/2012 | Construction Blog
On May 21, 2012, the Pennsylvania Commonwealth Court addressed an issue which comes up often but has not been addressed by Pennsylvania appellate courts. The issue: Does a general contractor’s use of a subcontractor’s bid in the general contractor’s bid constitute an acceptance of the subcontractor’s bid?
In Ribarchak d/b/a Fisher Associates v. Municipal Authority of the City of Monongahela, Fisher, a subcontractor, submitted a bid to general contractor, Galway, for work at the Municipal Authority’s sewage treatment plant. Galway then submitted its bid, which included Fisher’s bid, to the Municipal Authority. After the Municipal Authority accepted Galway’s bid, Galway substituted Kiski Valley Systems as its subcontractor in place of Fisher. The Municipal Authority accepted the substitution although the substitution was made after the thirty day period allowed in the contract between Galway and the Municipal Authority.
Fisher sued Galway and the Municipal Authority for breach of contract. The Commonwealth Court rejected Fisher’s breach of contract claims against both entities. The Court found that Fisher could not assert a breach of contract claim against Galway because there was no contract between Fisher and Galway. Importantly, the Court stated that the use of a subcontractor’s bid in a general contractor’s bid does not create a contract between the general contractor and the subcontractor, even when the general contractor’s bid is accepted by the owner. Rather, in order to form a contract, the general contractor must expressly accept the subcontractor’s bid proposal.
The Commonwealth Court also rejected Fisher’s breach of contract claim against the Municipal Authority. The Court found that Fisher did not have the ability to challenge or enforce the terms of the Galway-Municipal Authority contract because Fisher was not a third party beneficiary of the contract. The Court based its decision on the fact that the contract was not made for Fisher’s benefit, Fisher was not a party to the contract, and Fisher was not mentioned in the contract.
Contractors and subcontractors should take heed. Use of a subcontractor’s bid in a general contractor’s bid is not acceptance of the subcontractor’s bid proposal. The subcontractor’s bid proposal must be expressly accepted by the general contractor in order to form a legally binding contract.