Corbin-Dykes Electric Company v. Burr

Court of Appeals of Arizona
18 Ariz. App. 101, 1972 Ariz. App. LEXIS 789, 500 P.2d 632 (1972)

ELI5:

Rule of Law:

A general contractor's use of a subcontractor's bid in its own prime bid does not constitute acceptance of the subcontractor's offer. Evidence of industry custom or usage cannot be used to establish mutual assent or acceptance where no express agreement exists.

Facts:

General Motors Corporation solicited bids from general contractors for the construction of an air-conditioning plant.
Corbin-Dykes Electric Company, a subcontractor, submitted an electrical work bid to Walter Burr, a general contractor.
Burr incorporated Corbin-Dykes's low bid into his general contract bid and submitted it to General Motors.
General Motors rejected all initial bids as too high and requested a second round of bidding.
In the second round, Burr again used Corbin-Dykes's bid in his submission, but he had also received a matching bid from Sands Electric Company that included a potential $4,000 reduction.
General Motors awarded the general contract to Burr.
After being awarded the contract, Burr accepted the bid from Sands Electric Company for the electrical subcontract, not the one from Corbin-Dykes.

Procedural Posture:

Corbin-Dykes Electric Company sued Walter Burr for breach of contract in the trial court.
Burr denied the existence of a subcontract in his answer.
Burr filed a motion for summary judgment.
The trial court granted summary judgment in favor of Burr.
Corbin-Dykes, as appellant, appealed the summary judgment to this intermediate appellate court.

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Issue:

Does a general contractor's use of a subcontractor's bid in its own successful prime bid, combined with an alleged industry custom, constitute a legally binding acceptance of the subcontractor's offer?

Opinions:

Majority - Eubank, J.

No. A general contractor's use of a subcontractor's bid does not constitute a legally binding acceptance, and evidence of industry custom cannot be used to prove the existence of a contract. A subcontractor's bid is merely an offer that does not ripen into a contract until it is voluntarily and explicitly accepted by the general contractor. The court reasoned that contract formation requires a manifestation of mutual assent. Here, Burr never communicated acceptance to Corbin-Dykes. Evidence of custom and usage is only admissible to interpret the terms of an ambiguous, existing agreement, not to establish a fundamental element of contract formation like acceptance. Since there was no other evidence of acceptance by Burr, no contract was formed.

Analysis:

This decision reinforces the traditional common law framework of offer and acceptance in the context of construction bidding. It clarifies that the relationship between a general contractor and a subcontractor remains one-sided until express acceptance; the subcontractor is often bound to its bid under promissory estoppel, but the general contractor is not bound simply by using the bid. The ruling firmly limits the role of 'custom and usage' evidence, preventing it from creating a contract where no mutual assent has been manifested. This gives general contractors the flexibility to engage in 'bid shopping' after being awarded a prime contract, a practice the court acknowledges but does not legally prohibit.

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