Sub Who Is Asked to Sign an Onerous Subcontract Is Released from His Bid
Kegler Brown Construction Newsletter March 1, 2003
Generally subcontractors whose bids are relied upon by the general contractor to obtain the prime contract are stuck with their bid whether they make a mistake or not. This often leads to problems when a general contractor submits a one-sided subcontract to the subcontractor for signing, particularly if the subcontractor has not conditioned his bid upon certain reasonable subcontract language such as the AIA A401 Subcontract.
When this situation occurs, the subcontractor often finds himself on the horns of a legal dilemma where if he refuses to sign the general contractor's one sided subcontract then the general contractor can hire another subcontractor to perform the work and seek the excess cost from the low bid subcontractor.
However, a recent Court of Appeals case out of Cincinnati has held that if the general contractor proposes a subcontract which contains unreasonable terms, the subcontractor need not stand behind his bid. In that case, the subcontractor was permitted to withdraw his bid because the subcontract contained a "time of the essence" clause which required the masonry work to be performed under a strict time schedule. Lichtenberg Construction & Development, Inc. v. Paul W. Wilson, Inc., 2001 Ohio App. LEXIS 4372 (Ohio App., 1st Dist. Sept. 28, 2001).
In view of this decision, subcontractors may be able to use one-sided subcontract language as a basis for avoiding honoring their bids. Contractors who want subcontractors to stand behind their bids are cautioned to submit reasonable and customary subcontract language to such subcontractors.