{"id":890614,"date":"2016-08-08T15:46:24","date_gmt":"2016-08-08T21:46:24","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=890614"},"modified":"2016-08-08T15:46:24","modified_gmt":"2016-08-08T21:46:24","slug":"california-court-limits-recovery-for-general-contractors-relying-on-subcontractor-bids","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-limits-recovery-for-general-contractors-relying-on-subcontractor-bids\/","title":{"rendered":"California Court Limits Recovery for General Contractors Relying on Subcontractor Bids"},"content":{"rendered":"

Marion T. Hack | Pepper Hamilton LLP<\/a> | August 1, 2016<\/p>\n

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The court\u2019s decision allows subcontractors to place unforgiving terms in their bids and gives them an ultimate out if general contractors do not agree to those terms.<\/strong><\/p>\n<\/div>\n

General contractors should pay attention to a recent decision from the California Court of Appeals regarding damages due to reliance on a subcontractor bid<\/a>. A general contractor can usually recover damages if a subcontractor does not honor its bid price and the general contractor has relied on that price in submitting its bid to the owner. Now, the Court of Appeals has set forth significant limitations on a general contractor\u2019s recovery for damages usually founded under the theory of promissory estoppel.<\/p>\n

Background<\/strong><\/p>\n

In Flintco Pacific, Inc. v. TEC Management Consultants, Inc.<\/em>, No. B258353 (Cal. Ct. App. June 21, 2016), subcontractor TEC submitted a bid to general contractor Flintco to perform work on a public project. TEC\u2019s bid contained a deposit term that was located prominently under the bid price as well as other nonmonetary terms. Flintco submitted its bid to the public entity using TEC\u2019s price as a basis for its bid. Flintco was awarded the contract and, in turn, sent a subcontract to TEC that did not include the deposit or other terms that were on TEC\u2019s bid. TEC ultimately withdrew its bid because Flintco would not honor the deposit term in its proposal, and Flintco sued for reliance damages under the theory of promissory estoppel. The trial court ruled in favor of TEC, and the Court of Appeals affirmed that decision.<\/p>\n

The court claimed that the deposit term should have raised a \u201cred flag\u201d to Flintco as it was prominently located in the bid itself. The court stated that Flintco\u2019s reliance on the bid price, while ignoring the other terms in TEC\u2019s proposal, was unreasonable and thus Flintco could not recover damages for reliance on TEC\u2019s bid.<\/p>\n

Analysis<\/strong><\/p>\n

This is an unfortunate case for general contractors who have to rely on subcontractor proposals<\/a>, which often are submitted at the last second, for bidding purposes. The court\u2019s decision allows subcontractors to place unforgiving terms in their bids and gives them an ultimate out if general contractors do not agree to those terms. Bidding personnel from general contractors should note the following:<\/p>\n