Subcontractor Bound By Scope Of Prime Contract When Bid Proposal Is Not Attached To Subcontract
April, 2011
In a case that underlines the importance of making sure a contract spells out exactly the scope of a party’s duties, a subcontractor was found to owe over $200,000 to a general contractor for failing to install a product it never intended to provide. John T. Jones Construction Company v. Hoot General Construction Co., 613 F.3d 778 (8th Cir. 2010). Failure to attach a bid proposal to a subcontract was the subcontractor’s downfall.
Facts
The Des Moines Metropolitan Wastewater Reclamation Authority (“WRA”) planned to update its wastewater treatment facilities and hired Black & Veatch (“B&V”) as the engineers on the project. B&V created a set of specifications requiring the use of a particular liner system created by a company called Linabond for the wastewater storage tanks. Though WRA revised the specification to include the words “or equal” after the specified liner system, it gave Black & Veatch the discretion to determine what constituted an “equal” liner system.
The general contractor on the project, Jones Construction, sought bids for the installation of the protective liner in the wastewater storage tanks. Hoot Construction, who only installed liner systems made by Linabond’s main competitor, Ameron, submitted a bid proposal after being informed by Jones that the “or equal” basis applied to the project and being assured by Ameron that its systems had never been rejected as being less than “equal.”
The subcontract required Hoot to perform the work as described in the main contract and incorporated the main contract as an exhibit. Hoot’s company policy was to incorporate original bids into any subcontract as a means of limiting the scope of its duties to the work outlined in the bid proposal. However, on this project, the bid proposal, which was to be Exhibit B to the subcontract, was not part of the signed contract. When Hoot made its submittal for the liner based on the Ameron system, it was rejected by B&V. Hoot attempted to rely on the bid proposal for its scope of work. Jones replied that the subcontract required the liner to be installed in accord with specifications under the main contract. Hoot then sent a letter terminating the subcontract. Jones considered the termination a default and retained a different subcontractor for installation of the Linabond system. Prevailing in its breach of contract lawsuit, Jones was awarded $241,181 in damages against Hoot.
On appeal, Hoot argued that there was no contract between the parties since there was never an agreement that the Linabond system would be installed as Hoot only intended to install the Ameron system as set forth in its bid proposal. Alternatively, if there was a contract, it necessarily incorporated the bid proposal or Exhibit B, and under the scope of the contract as defined by the bid proposal, Hoot did not have to install the Linabond system. The court rejected Hoot’s argument that it never intended to be bound by a subcontract that required it to install anything but an Ameron liner. Rather, the court pointed out that the signed subcontract called for installation of a liner in accordance with the requirements in the main contract. The fact that Jones continued to transmit submittals after execution of a contract was evidence that a contract was in place, and that Hoot intended to be bound by it.
Learning Point
This case highlights the importance of parties carefully checking any contract they execute to make sure it expresses the intent of the parties and includes all exhibits and addenda. Often parties are anxious to have a contract in place. However, it is important that the contract reflect what each party intended, including the scope of any work to be performed.
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