General contractors and subcontractors that routinely bid for construction work are aware that, in most situations, an invitation to bid on a project is merely an invitation to submit an offer. The bid itself is the offer to perform the work. The soliciting party—usually the general contractor, but sometimes subcontractors and suppliers—must accept the offer in order to form a contract. Acceptance is paramount; without it, there can be no contract. The “bid-as-an-offer” concept is simple enough, but it often leads to one very important question: when has the general contractor actually accepted the proposal and entered into a binding agreement with a subcontractor? The answer to this question is not always clear-cut.
Mere Use of a Bid Does Not Create a Contract
A general principle of contract law is that a party’s silence upon receiving an offer cannot be inferred as acceptance of the offer. Acceptance typically requires some affirmative writing, statement, or action establishing a party’s intent to be bound. In the context of competitive bidding for construction work, courts generally have held that a general contractor’s mere use of a subcontractor’s bid is akin to silence—by itself, that does not rise to the level of acceptance. No contract is formed when a subcontractor submits a proposal in response to an invitation to bid, even if the general contractor uses the proposal in its bid package.
Instead, acceptance occurs when a general contractor takes some action, which is consistent with a contract award to the subcontractor. Absent circumstances where a conditional award is made, most general contractors do not award subcontracts until after it is awarded a contract by the owner. The lag between the submission of bids and the award of subcontracts is problematic for subcontractors engaged in competitive bidding because it opens the door for the general contractor to engage in bid shopping—that is, disclosing a subcontractor’s bid to competitors in order to obtain a lower price. Subcontractors do not want general contractors to undercut their bids, so they have an interest in employing tactics that will lessen its effects or prevent general contractors from engaging in that practice. For example, a subcontractor might include a cushion in its bid in anticipation of bid shopping and price reduction. Subcontractor associations may lobby owners, especially public owners, to require subcontractor bid listing in the general contractor’s proposal and preclude a subcontractor substitution without the owner’s prior approval. A creative subcontractor may even go as far as to try to change the general offer and acceptance rule to its advantage so that a general contractor’s mere use of the subcontractor’s bid creates a binding contract. This is exactly what one Florida subcontractor tried to do in West Construction, Inc. v. Florida Blacktop, Inc., 88 So. 3d 301 (Fla. 4th Dist. Ct. App. 2012).
Florida Blacktop’s Creative Bid Condition
West Construction involved a lawsuit filed by an asphalt paving subcontractor, Florida Blacktop (“Blacktop”), against a general contractor, West Construction (“West”). West was competing for a public construction project and invited subcontractors to submit bids and take part in the competitive bidding process. Blacktop submitted a proposal for the asphalt work. West integrated Blacktop’s bid into its own proposal. West submitted its bid to the owner and was awarded the prime contract. West also furnished the owner with a list of proposed subcontractors and suppliers that identified Blacktop as the asphalt paving subcontractor. Nonetheless, West hired a different company to do the paving work. Thereafter, Blacktop filed suit against West, alleging that West accepted Blacktop’s proposal when West used Blacktop’s bid in its bid for the prime contract and listed Blacktop as the paving subcontractor.
The predominant issue addressed by the court was whether Blacktop had an enforceable contract with West at the time West contracted with the other paving subcontractor. The court reiterated the basic rule that a proposal is just an offer and determined that West’s use of Blacktop’s bid, without more, did not constitute acceptance. Blacktop, however, argued that it did have something more that made its situation different than the usual construction bid scenario.
Like many subcontractors, Blacktop wanted to avoid supplying bids to general contractors that engaged in bid shopping. In an attempt to prevent West from engaging in bid shopping, and to obtain the paving subcontract, Blacktop’s proposal contained the following clause:
[I]n the event the “buyer” in any way uses Florida Blacktop, Inc.’s bid … such action(s) shall in all instances constitute acceptance of Florida Blacktop, Inc.’s bid and shall create a binding contract between the parties consistent with the bid documents.
Blacktop argued that West was bound by this “acceptance-by-use” provision in the proposal. The provision clearly stated that West’s use of Blacktop’s bid constituted acceptance, and there was no question that West incorporated Blacktop’s bid into its proposal. From Blacktop’s point of view, West clearly accepted Blacktop’s bid and was obligated to honor the terms of their agreement. The court, however, thought otherwise.
The Unenforceable “Silence-as-Acceptance” Provision
Despite West Construction’s creative proposal-based solution, the court found that the acceptance-by-use provision in Blacktop’s proposal was simply unenforceable under basic offer and acceptance tenets of contract law. The court explained that, by default, the offeree in all cases has the right to not reply to an offer. The offeree’s silence cannot be interpreted as acceptance unless the offeree agrees in advance. In other words, the offeror cannot unilaterally prescribe the conditions of rejection in the offer so as to turn silence into acceptance.
In the court’s opinion, that is exactly what Blacktop attempted to do with the acceptance-by-use language in its offer. Even though West solicited Blacktop’s bid, Blacktop’s proposal was a unilateral proposal. West never signed the proposal or agreed to any of its terms before Blacktop submitted it to West. Therefore, Blacktop could not rely on its unilateral offer to bind West to the very terms of the proposal. In this court’s opinion, this would turn contract law on its head and deviate from the rule that silence is not acceptance. To avoid this outcome, the court found Blacktop’s acceptance-by-use provision unenforceable and held that Blacktop did not have an enforceable contract with West.
The Silver Lining of West Construction
The outcome of West Construction makes it more difficult for subcontractors and suppliers to prevent bid shopping, but everyone that competes for construction work should consider the basic principle underlying the court’s decision. Imagine if the opposite were true and an offeror could state in the offer itself that the offeree’s silence would serve as acceptance rather than rejection of the offer. In this bizarre world of contract law, a party could submit proposals with language stating that silence by the receiving party constituted acceptance of the terms and conditions. A party (owner, contractor, subcontractor) that ignored the proposal, chose not to respond, or simply forgot to turn down the offer would nonetheless be contractually bound by those provisions! Moreover, before any subcontractor or supplier was able take advantage of the silence-as-acceptance provision in its own proposals, it would be bombarded with similar provisions in the bids it received from its own lower-tier subcontractors and suppliers. This scenario would be untenable for owners, general contractors, subcontractors, and suppliers alike, and certainly a situation that, if true, would elicit the old adage: “Be careful what you wish for.”