Prime Contractor that Relied on Subcontract Bid Can Recover Damages Based on Promissory Estoppel
Subcontract bidder is found liable to a prime contractor that relied upon its subcontract bid when preparing the successful prime contract bid. The presumptive measure of damages applicable to promissory estoppel for the general contractor that relies upon a subcontractor’s unfulfilled promise is the difference between the nonperforming subcontractor’s original bid and the cost of the replacement subcontractor’s performance. The dispute arose when subcontract bidder “repudiated its obligations to [prime contractor] and refused to negotiate with [Prime Contractor].” The contractor thereafter contracted with three replacement subcontractors to complete the electrical work for the project and then brought suit against the subcontract bidder on the theories of breach of contract, promissory estoppel, and breach of the covenant of good faith and fair dealing. The trail court granted judgment to the prime contractor under the promissory estoppel cause of action – specifically awarding “expectation” damages which is, according to the Restatement of Contracts, an “attempt to place the plaintiff in the position that he or she would have occupied if the contract had been performed or if the promise had been kept.” The appellate court held that the trial correctly decided that the appropriate measure of damages was the difference between the nonperforming subcontractor’s bid and the bid of the substituted subcontractors that completed the work. Dynalectric Company of Nevada v. Clark & Sullivan Constructors, Inc., 255 P.3d 286 (NV 2011).
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at [email protected] or by calling 703-623-1932.
This article is published in ConstructionRisk.com Report, Vol. 14, No. 6 (June 2012). Copyright 2012, ConstructionRisk.com, LLC
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