Saliba-Kringlen Corp. v. Allen Engineering Co. (1971)

4. Lack of agreement on content of the subcontract.

It is undisputed that the customary practice in the construction industry is for the general contractor who is awarded a contract to enter into a written contract with the subcontractor, which written contract embraces far more than the price which the subcontractor has bid by telephone. The additional matters would include such things as whether the subcontractor would furnish a bond, who would provide for insurance, how payments would be made and many other matters. Although the provisions other than price are not identical in all subcontracts generally or in electrical subcontracts particularly, price is the principal item as is evident from the fact (as shown by the evidence) that seldom does a general contractor fail to reach an agreement with the subcontractor whose bid is low. Defendant asserts that it should not be held to its bid price because the general contractor could not have known that the general contractor and defendant would have reached an agreement on the terms of the subcontract.

While a prospective subcontractor could submit a bid by way of a written proposed subcontract including not only the price but all other details, we are not aware that this is ever done. The customary bid is made, as it was here, by a brief telephone call in which only the price is stated. If defendant’s position is correct, there would never be an occasion to invoke section 90 of the Restatement of Contracts by a general contractor against a prospective subcontractor. fn. 4 Even a subcontractor who did not make a mistake in his bid price but who desired to avoid doing the work because of increased costs, other commitments or any other reason could claim that his bid is not binding because it is incomplete. But California has not taken that position. In Drennan the bid was one of price only and it is obvious that the general contractor would have entered into a written subcontract with the prospective subcontractor containing terms other than price. The Supreme Court nevertheless held that the subcontractor’s bid was binding. The same rule must be applied here.

It should be noted that here the lack of an electrical subcontract between the general contractor and defendant was not due to the failure of the parties negotiating in good faith to arrive at the terms other than price. We do not intimate what our conclusion would be had that been the case. Here, as in Drennan, the parties did not get around to discussing contract provisions because defendant made it clear that it would not do the work at the price bid regardless of the other contractual provisions.

In: justia