Subcontractor Relieved from Bid Due to Onerous Contract Terms

Kegler Brown Construction Newsletter

As a general principle, subcontractors are bound by their bids to a general contractor when they are relied upon by the general, even if a mistake has been made by the sub under the theories of promissory estoppel or breach of contract. However, a recent Nebraska case has carved out an important exception to this general principle. Hawkins Constr. Co. v. Reiman Corp., 245 Neb. 131, 511 N.W.2d 113 (1994).

In that case, the general contractor relied upon the subcontractor's bid price and was the successful bidder. The general then sent an onerous subcontract to the subcontractor, who objected to many of its terms. When no agreement on contract language could be reached, the general hired another sub at a higher price and sued the original sub for the difference. The Supreme Court of Nebraska ruled that because of the nonstandard and onerous terms in the subcontract, there was no contract because there was no "meeting of the minds" and the contractor's reliance upon the sub's bid or promise was not reasonable and denied any recovery to the contractor.

The ruling in this case suggests that subcontractors should consider qualifying their bids and general contractors should consider qualifying their solicitation for bids on a particular contract form so that there is no occasion to disagree about the contract terms after the price is relied upon in the general contractor's bid. If this is not done, subcontractors may not be held to their bids and may be able to extract concessions or walk away from the job if the general contractor submits a one-sided subcontract form.