New York Court Holds General Contractor Who Delays Acceptance or Seeks to Negotiate Better Deal May Not Recover From a Subcontractor Who Fails to Perform Work On a Project for Which it Had Submitted a Bid

Lahr Construction Corp. (doing business as LeCesse Construction Co.) v. J. Kozel & Son, Inc.,
640 N.Y.S.2d 957 (Misc 1996).

This is an action brought by a general contractor against a subcontractor for damages where the subcontractor moved for summary judgment saying that the general contractor could not recover damages under the theories of breach of contract and promissory estoppel. 

The general contractor, LeCesse, prepared a bid in September 1992 and requested a number of subcontractors to bid for various parts of the job. The subcontractor, Kozel, submitted a written bid to LeCesse who incorporated these figures into its final bid for the general contract and was subsequently awarded it. Shortly after this, LeCesse informed Kozel that LeCesse had been awarded the contract and that they would like to meet with Kozel to discuss a possible “deal”. Kozel told LeCesse that it would not perform the work under the terms of this new “deal”. LeCesse eventually had to hire another subcontractor at a higher price and brought action to recover the difference.

The court concluded that the first cause of action, breach of contract, was invalid because there was no agreement under traditional principles of contract law.

The second cause of action, promissory estoppel, which is not dependent on the existence of a contract was then examined. A promissory estoppel action arises out of a breached promise in circumstances under which it is fair to hold the promisor to the terms of his promise.

The court noted the leading cases which have applied this doctrine; one rejecting it as a basis for subcontractor liability to the general in the bidding context, and the other case saying the doctrine can be used to bind the subcontractor. In analyzing the applicable case law and theories applying promissory estoppel in subcontractor bid cases, it appears that there exists substantial doubt whether the doctrine provides a basis for recovery.

There is undisputed evidence of a clear and unambiguous promise or bid by Kozel. There also was evidence, of reasonable and foreseeable reliance upon the bid by LeCesse when it tendered its bid for the prime contract. But the evidence of reliance, from LeCesse’s own account at Lanni’s deposition, also showed that, by the time LeCesse notified Kozel of the award of the prime contract, LeCesse no longer was relying on Kozel’s bid. LeCesse wanted another contract with different terms at a more favorable price.

The cases which support the application of promissory estoppel uniformly deny relief in circumstances where the general contractor “delays acceptance after he has been awarded the general contract in the hope of getting a better price”. “Nor can he reopen bargaining with the subcontractor and at the same time claim a continuing right to accept the original offer”. This shows evidence of a lack of reliance.

The court decided that the defendant’s motion for summary judgment dismissing the complaint should be granted.

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