By: Robert J. O’Brien and Robert G. Ruggieri
In a matter of first impression in Pennsylvania, the Commonwealth Court in Ribarchak v. Municipal Authority of the City of Monongahela recently addressed the issue of whether the use of a subcontractor’s bid as part of a general contractor’s bid proposal creates a contract between the subcontractor and the general contractor, particularly when the general contractor’s bid proposal is ultimately accepted by the owner.
In Ribarchak, the Municipal Authority of the City of Monongahela solicited bids from general contractors for the renovation of a sewage treatment plant. Galway Bay Corporation submitted a bid that included Fisher Associates as a subcontractor. The Municipal Authority ultimately accepted Galway’s bid. Several months later, Galway decided to substitute another subcontractor in place of Fisher, and Fisher filed suit, alleging breach of contract.
Fisher contended that Galway’s inclusion of Fisher’s bid in Galway’s bid to the Municipal Authority created a binding contract between Galway and Fisher. The Commonwealth Court, however, disagreed with Fisher’s argument. Looking to case law from other states, the Court adopted the general rule that:
“A subcontractor bidder merely makes an offer that is converted into a contract by a regularly communicated acceptance conveyed to him by the general contractor. No contractual relationship is created between the subcontractor and the general contractor even though the bid is used as part of the general over-all bid by the general contractor and accepted by the awarding authority.”
As a result of this decision, in Pennsylvania, a general contractor’s use of a subcontractor’s bid as part of the general contractor’s bid proposal does not create a binding agreement between the general contractor and the subcontractor.
Notably, the Court did suggest that its conclusion may have been different if there were other evidence that the general contractor had accepted the subcontractor’s bid. Although Ribarchak sends a message to contractors and subcontractors that express acceptance of an offer is necessary to form a legally-binding contract, Pennsylvania courts have yet to address precisely what is required for acceptance.
This area of the law continues to present novel and interesting questions that can lead to problems for general contractors and subcontractors alike. General contractors wondering how to protect their rights or subcontractors concerned about the enforceability of a contractual arrangement should contact their attorney for more information.
Robert O’Brien is an Associate with Cohen Seglias Pallas Greenhall & Furman PC and is a member of the Construction Group.
Robert Ruggieri is a Senior Associate at Cohen Seglias Pallas Greenhall & Furman PC and practices in the area of complex construction litigation.