Holman Erect. Co. v. Orville E. Madsen & Sons, C2-82-926.
| Decision Date | 04 March 1983 |
| Docket Number | No. C2-82-926.,C2-82-926. |
| Citation | 330 NW 2d 693 |
| Parties | HOLMAN ERECTION COMPANY, Appellant, v. ORVILLE E. MADSEN & SONS, INC., Respondent. |
| Court | Minnesota Supreme Court |
Dosland, Dosland & Nordhougen, Moorhead, for appellant.
Briggs & Morgan, Steven Halverson, St. Paul, for respondent.
Considered and decided by the court en banc without oral argument.
Plaintiff-appellant Holman Erection Company (Holman) commenced an action against Orville Madsen & Sons, Inc., (Madsen), alleging that Madsen had breached a construction contract. Holman claims that Madsen accepted Holman's bid on a subcontract, and thereby formed a contract, by listing Holman as a proposed subcontractor in a general contract bid Madsen submitted to the City of Moorhead. Holman sought the profits it argued it had lost when Madsen awarded the subcontract to a different construction company.
The Clay County District Court granted Madsen's motion for summary judgment. Holman appeals from the order and judgment dismissing Holman's claim. We affirm.
The facts of this case are undisputed. The City of Moorhead, Minnesota, advertised for bids to build a wastewater treatment facility. Bids from general contractors were to be opened at a public meeting of the governing body on January 22, 1981, pursuant to Minn.Stat. § 471.705 (1982). Madsen decided to bid on the general contract for the project. It sent bid invitations to potential subcontractors, including Holman. Shortly before the general contract bids were due to the City of Moorhead, Madsen received a bid from Holman. The bid was taken over the telephone. It is normal practice in the construction industry for subcontractors to submit bids shortly before the general bid is due, as was done here. This procedure is intended to prevent the general contractor from "bid shopping," a practice whereby the general takes a subcontractor's bid and uses it as leverage to obtain lower bids from other potential subcontractors. See Closen & Weiland, The Construction Industry Bidding Cases: Application of Traditional Contract, Promissory Estoppel, and Other Theories to the Relations Between General Contractors and Subcontractors, 13 J.Mar.L.Rev. 565, 574-77 (1980).
When Holman phoned in its bid, information on the total price and work included in the bid was written down on a note pad by someone at Madsen's office in Hudson, Wisconsin, and relayed to Madsen's representatives in Moorhead. The bid was received 2-3 hours before the general bid was due to the city. Holman also submitted bids to six other general contractors that were bidding on the same project. The identical bid was made to each general. The work and expense involved in developing a bid is not segregated by subcontractors to individual general contractors.
Madsen utilized Holman's bid, as well as past experience, in preparing its bid for the general contract. The city required general contractors to list all proposed subcontractors on their prime bids to the city. Holman was listed on Madsen's bid as the subcontractor for the steel erection portion of the project. This portion accounted for 2% of the total project. Other than taking Holman's bid over the telephone, no one at Madsen ever spoke to Holman about the bid, any potential contract or the project in general until Holman called Madsen after the subcontracts had already been awarded.
The bids of all the general contractors were opened by the city on January 22, 1981. On February 2, 1981, Madsen was awarded the prime contract.
Following award of the contract, Madsen began entering into subcontracts with various subcontractors. At this stage of the process, limited negotiation takes place with the subcontractors. Items are clarified and written contracts are executed. Instead of contacting Holman to finalize arrangements for steel erection, Madsen discussed this aspect of the contract with Van Knight Steel Erection, Inc. (Van Knight), a different steel erection subcontract bidder. Madsen sent Van Knight a letter, stating that Van Knight's bid was being reviewed. Madsen requested information on Van Knight's status and qualification as a minority business. The contract with the City of Moorhead required that an effort be made to have a portion of the work done by minority business enterprises, pursuant to federal regulations.
Madsen eventually awarded the steel erection subcontract to Van Knight. Van Knight also agreed to supply a substantial amount of materials and some labor not included in Holman's bid.
Holman learned from one of the other general contract bidders that Madsen had been the low general bidder and that Holman had been the low sub-bidder for steel erection. When Holman also discovered that it had been listed as a proposed subcontractor in Madsen's bid, it called Madsen and was told that the subcontract was going to a different company. Madsen at no time indicated to Holman that Holman was to get the contract. Other than the two phone conversations — the first when Holman called in its bid; the second after Holman's discovery — no other communication, written or oral, occurred between Holman and Madsen.
Holman brought suit against Madsen, alleging that Madsen had accepted Holman's sub-bid on the wastewater treatment project and had thus formed a binding contract which it breached by awarding the subcontract to a different company.
The Clay County District Court found that no contract had been created between the parties and granted summary judgment.
The two issues on appeal are:
Appellant Holman argues that a binding contractual relationship was created between it and Madsen when Madsen utilized Holman's sub-bid in its general bid for the waste treatment plant project and listed Holman as a proposed subcontractor for steel erection work. Does the act of listing Holman in the general bid constitute an acceptance of Holman's offer to do the work when no other communication occurred after the offer and prior to the substitution of a different subcontractor? We think not.
To constitute an acceptance, Madsen's acts must be deemed a manifestation of assent when evaluated under an objective standard. See Capitol Warehouse Co. v. McGill-Warner-Farnham Co., 276 Minn. 108, 114, 149 N.W.2d 31, 35 (1967). The form of the assent, whether it be written, oral, or by conduct, is not relevant as long as objective standards are applied and the essential finding of mutual assent is made. See Bergstedt, Wahlberg, Berquist Associates, Inc. v. Rothchild, 302 Minn. 476, 479, 225 N.W.2d 261, 263 (1975). The Restatement (Second) of Contracts § 19 (1979) provides:
Comment c to section 19 provides:
Even though the intentional conduct of a party creates an appearance of assent on his part, he is not responsible for that appearance unless he knows or has reason to know that his conduct may cause the other party to understand that he assents.
Holman argues that listing Holman as a subcontractor, as required by the awarding authority, constitutes an acceptance because: 1) there is no other reasonable explanation for the act; 2) it is unfair to bind Holman to its bid without binding Madsen to use it; and 3) Madsen knew the general bid was public record pursuant to statutes. Since Madsen knew Holman could discover that Holman had been listed in the general bid, Holman argues that the inference can be drawn that Madsen intended to accept Holman's offer and communicated the assent by listing Holman in the general bid.
Appellant's argument flies in the face of a large body of precedent holding that no contract is formed by the listing of a subcontractor in a general contractor's bid. There is no case in Minnesota that deals precisely with the issue presented. This court has held, however, that the subcontractor may be bound to his bid as submitted to the general contractor by operation of promissory estoppel. See Constructors Supply Co. v. Bostrom Sheet Metal Works, Inc., 291 Minn. 113, 190 N.W.2d 71 (1971).
In Mitchell v. Siqueiros, 99 Idaho 396, 582 P.2d 1074 (1978), the general contractor had listed the subcontractor in its bid for construction of a school. The listing of proposed subcontractors was required by statute. After winning the contract, the general tendered a written contract to the subcontractor. It was then discovered that the subcontractor had not procured a required license. The general then hired a different, more costly, subcontractor and sued the original subcontractor to recover the increased costs. The court discussed the existing case law at some length and concluded:
It is a settled common law contract principle that utilizing a subcontractor\'s bid in submitting the prime or general contract bid does not, without more, constitute an acceptance of the subcontractor\'s offer conditioned upon being awarded the general contract by the awarding authority. * * * Unless the facts otherwise disclose, utilizing respondent\'s bid was not by itself an acceptance of the subcontract bid offer.
Id. at 399, 582 P.2d at 1077 (citations omitted).
The Idaho court also specifically addressed the statutorily mandated listing of proposed subcontractors and concluded that the statute did...
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