Cal Wadsworth Const. v. City of St. George

• Decision Date: 15 June 1995
• Docket Number: No. 940091,940091
• Citation: 898 P.2d 1372
• Parties: CAL WADSWORTH CONSTRUCTION, a Utah corporation, Plaintiff and Petitioner, v. CITY OF ST. GEORGE, a municipality, Defendant and Respondent.
• Court: Utah Supreme Court

Page 1372

898 P.2d 1372

CAL WADSWORTH CONSTRUCTION, a Utah corporation, Plaintiff and Petitioner, v. CITY OF ST. GEORGE, a municipality, Defendant and Respondent.

No. 940091.

Supreme Court of Utah.

June 15, 1995.

Wilford A. Beesley, Stanford P. Fitts, Salt Lake City, for plaintiff.

Gary G. Kuhlmann, Jonathan L. Wright, St. George, for defendant.

HOWE, Justice:

We granted certiorari to review the court of appeals' decision affirming the district court's judgment that the City of St. George did not award Cal Wadsworth Construction ("Wadsworth") a contract to construct improvements to a municipal airport terminal building. Cal Wadsworth Constr. v. City of St. George, 865 P.2d 1373 (Utah Ct.App.1993), cert. granted, 878 P.2d 1154 (Utah 1994).

On December 27, 1990, the City opened the bidding for a project to expand the municipal airport terminal. Wadsworth submitted the lowest responsive bid, and the City Council met on January 10, 1991, to review the bid. Council members found that the bid exceeded the budget for the project and discussed the possibility of negotiating a bid reduction. During the discussion, the city manager informed Council members that Cal Wadsworth, principal shareholder of Wadsworth, had already objected to further negotiations until the City formally awarded Wadsworth the contract. His position was that the City should award the contract in the amount of the original bid and afterward negotiate reductions in the scope of the work and the contract price by submitting "work change orders," as authorized by the contract. After further discussion, the Council concluded that it would award the contract to Wadsworth on the condition that the parties negotiate the work and price to bring it within the City's budget. The Council added that if Wadsworth would not participate in these negotiations, it would rebid the project.

Nothing further transpired until January 29, 1991, when Mr. Wadsworth met in St. George with the project engineer, the architect, and Larry H. Bulloch, the city public works director. They informed him that he needed to cut $100,000 from the Wadsworth bid to bring it within the project budget. They suggested that this reduction could be accomplished by eliminating a canopy, a skylight, the sewer, or some combination of the three. Mr. Wadsworth stated that he was confident the reduction could be made but wanted to have additional information faxed to him from his office in Salt Lake City to confirm the cost reduction. By the next day, January 30, Mr. Wadsworth had received copies of his bid worksheets and he met again with Mr. Bulloch. As will be more fully discussed later in this opinion, the testimony of the two men differs as to what was said between them. Briefly stated, Mr. Wadsworth testified that he agreed to reduce the price by $100,000 by eliminating the canopy and the skylight. Mr. Bulloch testified that Mr. Wadsworth expressed only "that he was confident" the price could be reduced by that amount by eliminating those two improvements through change orders once a formal written contract was signed.

The City had no further contact with Wadsworth and, on February 7, 1991, announced that it would reject all bids as over-budget and rebid the project. Soon after, Wadsworth filed this action against the City, seeking damages in the amount of the profit it would have made on the contract. The district court ruled in favor of the City, holding that the City intended to accept Wadsworth's bid only on condition that Wadsworth reduce it to conform to the project's budget and Wadsworth failed to meet this condition. Wadsworth appealed to the court of appeals, which affirmed the trial court's judgment. Id. at 1377. We granted certiorari to review the court of appeals' decision. 878 P.2d 1154.

Wadsworth assails the court of appeals' decision that a contract did not come into existence and presents three main issues for review. The first issue is whether Wadsworth formed a binding contract with the City by either submitting the lowest bid, relying on the actions of the City Council, or accepting the City's counteroffer. The second issue is whether the district court erred in refusing to admit two items into evidence: (1) an article in a trade publication announcing that the City had awarded the project contract to Wadsworth, and (2) a worksheet faxed to Mr. Wadsworth from Salt Lake City confirming that cancellation of the skylight and canopy would reduce the bid by $100,000. The final issue is whether Wadsworth is entitled to recover lost profits for breach of contract.

CONTRACT FORMATION

A. Submission of the Lowest Bid

We begin by addressing the issue of whether a contract was formed between Wadsworth and the City when Wadsworth submitted the lowest responsive bid. Wadsworth contends that case law which holds that advertisements for bids are not offers and cannot be "accepted" by submitting the lowest bid does not preclude this court from finding a contract. The City, Wadsworth asserts, went beyond simply soliciting for offers by requiring the bids to remain open for forty-five days and by requiring the bidder to furnish a bid bond.

A municipality's advertisement for bids is a solicitation for offers, and the responsive bids are offers which the city may then accept. Rapp v. Salt Lake City, 527 P.2d 651, 654 (Utah 1974). In deciding which bid to accept, the city may consider a variety of factors other than the amount of the bid, including the experience, skill, ability, and honesty of the bidders. Schulte v. Salt Lake City, 79 Utah 292, 300, 10 P.2d 625, 628 (1932). Thus, a municipality is not bound to accept a bid simply because it is the lowest. This is true even when the advertisement indicates that the municipality will contract with the lowest bidder. Thatcher Chem. Co. v. Salt Lake City Corp., 21 Utah 2d 355, 358, 445 P.2d 769, 771 (1968). Because the local decision makers are in the best position to decide which bid is best for the municipality, courts will not interfere with their judgment unless fraud, dishonesty, collusion, or lack of good faith is involved. Clayton v. Salt Lake City, 15 Utah 2d 57, 59, 387 P.2d 93, 94 (1963); Schulte, 10 P.2d at 628.

In light of these principles, we cannot find that the City's advertisement rose to the level of an offer. Although the City required the bidders to leave their bids open for forty-five days and furnish a bond, these requirements are common to municipal bid solicitations and do not constitute an offer. See, e.g., Concrete Prods. Co. v. Salt Lake County, 734 P.2d 910, 911 (Utah 1987); Breitling Bros. Constr., Inc. v. Utah Golden Spikers, Inc., 597 P.2d 869, 871 (Utah 1979); Jaye Smith Constr. Co. v. Board of Educ., 560 P.2d 320, 321-22 (Utah 1977). In addition, as the City points out, its advertisement specifically reserved the right to reject any and all bids. When an advertisement reserves this right, no bidder may claim any contractual rights until the municipality awards him or her the contract. John J. Brennan Constr. Corp. v. City of Shelton, 187 Conn. 695, 702, 448 A.2d 180, 184 (1982); see Clayton, 387 P.2d at 94.

Wadsworth also argues that St. George City ordinance 9-5-4(5), which required the City to award contracts to the lowest responsive bidder, placed a mandatory duty on the City Council to award it the contract. It maintains that this duty was also implicit in ordinance 9-5-4(3), which allowed the City to reject a bid only if the bid exceeded the available funds by five percent or otherwise defeated the public interest. Wadsworth notes that the total budget for the project was $896,582 and its bid of $910,980 was less than five percent over this budget.

These city ordinances do not aid Wadsworth's position. Even when a city is governed by state or municipal laws that require it to award contracts to the lowest responsible bidders, the city has broad discretion to reject any or all bids. Utah Code Ann. § 10-7-20(2) (1992) ("The governing body has the right to reject any or all bids presented...."); Clayton, 387 P.2d at 94; Schulte, 10 P.2d at 628. Additionally, Wadsworth misinterprets ordinance 9-5-4(3), which gives the City Council "authority to reject all bids [or] parts of all bids ... when the lowest responsible bid exceeds available funds ... by more than 5%, or when the public interest will be served thereby and when permitted by law to do so." Although the ordinance specifies two circumstances under which the City Council may reject bids, section 10-7-20 reserves the City's power to evaluate the bids unilaterally. This reservation prevented a contract from forming when any bid, including the lowest bid, was received, because there was no mutuality of consideration. Cf. Resource Management Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028, 1037 (Utah 1985) (holding that reservation of an absolute and unconditional power to terminate an executory contract renders the contract unenforceable for lack of mutual consideration).

B. The City Council's Vote to Conditionally Award the Contract

Wadsworth's second contention is that the City awarded it the contract when the City Council voted to conditionally accept its bid at the meeting on January 10, 1991. Wadsworth asserts that its representatives reasonably believed that the City had awarded it the contract when the Council voted, the city architect informed Wadsworth of the award, and the city attorney requested subcontractor information "normally only requested after an award."

An acceptance is a manifestation of assent to an offer, such that an objective, reasonable person is justified in understanding that a fully enforceable contract has been made. See Engineering Assocs., Inc. v. Irving Place Assocs., Inc., 622 P.2d 784, 787 (Utah 1980). At its January 10 meeting, the City Council clearly and unambiguously imposed a condition of price reduction on its acceptance of Wadsworth's bid. A Wadsworth representative attended the meeting and...