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LAW: The Contractor's Side

Timely acceptance of subcontract quote BIDS / ARTICLE/ BY CORDELL PARVINDECEMBER 28, 2000

If a subcontractor does not specify a time within which its quote must be
accepted, when must the contractor accept the quote in order to bind the
sub? And when there is a dispute, who has the burden of proving that the
contractor accepted the quote in a timely manner? The Federal District Court
in Virginia addressed these issues in Piland Corporation v. Rea Construction
Co., 672 F.Supp. 244 (E.D. Va. 1987).

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.

Explanation / Answer

LAW: The Contractor's Side

The Federal District Court

in Virginia addressed these issues in Piland Corporation v. Rea Construction

Co., 672 F.Supp. 244 (E.D. Va. 1987).

Subject: Timely acceptance of subcontract quote BIDS / ARTICLE/ BY CORDELL PARVINDECEMBER 28, 2000

Issues:

accepted, then when must the contractor accept the quote in order to bind the

sub-contractor

     B)   When there is a dispute, who has the burden of proving that the

contractor accepted the quote in a timely manner?

Sequence of Events

1. In Piland, the contractor bid on a contract to do construction work at a

U. S. Navy facility and sought a quote from a subcontractor to perform

certain paving work on the project.

2. 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.

3. When no reply was received from from the contractor, the subcontractor assumed it had not received the paving sub-contract and closed the bid-paperwork file.

4. Several months later, the subcontractor received a sub-contract agreement

to sign from the contractor.

5. 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.

6. The contractor argued that,

a) after notification of the contract award,

it telephoned the subcontractor with notification that its subcontract quote

had been accepted.

b) Also contended that it had communicated this

acceptance to the subcontractor within the 30-day customary time frame for

notification.

c) But the subcontractor maintained that the contractor had not

contacted it for any reason regarding the job.

7. The court observed :

a) 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.

b) that the contractor's evidence was weak and unconvincing. The only written evidence which contractor could produce was a note that simply stated, "Called
2-2-84, bid okay." This lacked the substance of the telephone
conversation and did not indicate that any acceptance had been made.

c) that 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.

d) Based on above facts, the court was led to conclude that

contractor did not provide enough evidence to determine that acceptance

was ever made and so there had been no acceptance, so no contract and therefore no breach of contract.

Lessons learnt

within a "reasonable time."

4. Sub-contractors should specify validity of their quote by specifying a time frame for the acceptance and the manner of acceptance (in writing),

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