ABC Construction Co

question 36

Essay

ABC Construction Co. was building a large condominium complex in two phases. Phase 1 was to commence immediately, and construction of Phase 2 would get under way once a minimum of 50% of the Phase 1 units had been presold. ABC had asked for bids for certain aspects of the construction project. Company X had bid on the stucco work and Company Y on the drywall. Both bids were accepted by ABC and the respective contracts awarded. Moreover, ABC used the bids to prepare its budgeting for the project and to acquire its financing.
Shortly after commencement of Phase 1, Company X ran into financial difficulties and was forced to withdraw from the project. ABC then approached Company Y with a request for a bid on the work which Company X could no longer complete. ABC emphasized the urgency to move on with Phase 1, which was falling behind schedule, and requested Company Y's bid as quickly as possible. Company Y believed from the conversations it had with various representatives of ABC that it was to quote only on Phase 1. ABC accepted Company Y's bid as it was very close to the prior bid of Company X.
Sometime later it became apparent that ABC expected Company Y to do all of the stucco work on both phases of the project for the bid price. The president of Company Y contacted the president of Company X to inquire what X had understood the bid terms to be. X's president replied that he had been unclear at the time just what he was bidding on but that he had submitted a bid for one phase only. In fact, he mentioned to Y's president that if ABC had taken even a brief look at his bid, it would have realized that the bid would have been substantially below cost if it were for both phases. After this conversation, Company Y undertook the further work on Phase 2 but insisted on additional payment.
ABC contended that the bid was to be for both phases and brought legal action for breach of contract against Company Y. Company Y countered with a claim for the money owing for Phase 2. Discuss the legal issues which arise as a result of these facts and the principles of law each party will rely on.