SUPREME COURT OF ARIZONA 

En Banc 

 

 

RY-TAN CONSTRUCTION, INC., an ) Arizona Supreme Court 

Arizona corporation, ) No. CV-04-0300-PR 

 ) 

 Plaintiff-Appellee, ) Court of Appeals 

 ) Division One 

 v. ) No. 1 CA-CV 03-0248 

 ) 

WASHINGTON ELEMENTARY SCHOOL ) Maricopa County 

DISTRICT NO. 6, a political ) Superior Court 

subdivision of the State of ) No. CV99-006812 

Arizona; THE GOVERNING BOARD OF ) 

THE WASHINGTON ELEMENTARY SCHOOL ) 

DISTRICT, a Legislative Body of ) O P I N I O N 

Washington Elementary School ) 

District No. 6, ) 

 ) 

 Defendants-Appellants. ) 

 ) 

__________________________________) 

Appeal from the Superior Court of Maricopa County 

Honorable Mark R. Santana, Judge 

REVERSED AND REMANDED 

________________________________________________________________ 

Opinion of the Court of Appeals, Division One 

208 Ariz. 379, 93 P.3d 1095 (App. 2005) 

VACATED 

________________________________________________________________ 

FRANCIS J. SLAVIN, P.C. Phoenix 

By Francis J. Slavin 

 Ellen B. Davis 

Attorneys for Ry-Tan Construction, Inc. 

JENNINGS, STROUSS & SALMON, P.L.C. Phoenix 

By David B. Earl 

 David J. Cantelme 

 Gordon L. Lewis 

Attorneys for Washington Elementary 
2

School District No. 6; The Governing 

Board of the Washington Elementary School 

District No. 6 

HOLM, WRIGHT, HYDE & HAYS, P.L.C. Phoenix 

By Brad Holm 

Attorneys for Amicus Curiae 

City of Phoenix and League of 

Arizona Cities and Towns 

________________________________________________________________ 

M c G R E G O R, Vice Chief Justice 

¶1 We granted review primarily to consider whether a 

school district is contractually bound when it has accepted a 

construction bid but has not yet executed a written contract.1

 

We conclude that a school district is not contractually bound 

prior to the execution of a written contract. We exercise 

jurisdiction pursuant to Article 6, Section 5.3 of the Arizona 

Constitution and Rule 23 of the Arizona Rules of Civil Appellate 

Procedure. 

I. 

¶2 On January 4, 1999, the Washington Elementary School 

District (the District) solicited bids for the construction of 

new classrooms. Ry-Tan Construction, Inc. was the lowest 

bidder. On February 12, 1999, the project architect recommended 

that the contract be awarded to Ry-Tan. 

¶3 Representatives from the District met with Ry-Tan on 

 

1

 We granted review on other issues but, because our 

resolution of this question resolves this controversy, we do not 

reach those issues. 
3

March 1, 1999. At that meeting, the parties discussed problems 

that had arisen during a 1995 construction project that Ry-Tan 

had completed for the District. During that project, Ry-Tan 

began construction prematurely, prior to the completion of 

asbestos removal by an abatement contractor. As a result, the 

District sustained fines and citations. Ry-Tan signed an 

acknowledgment that it would “take all steps necessary to ensure 

that this type of situation does not occur again.”

¶4 On March 11, 1999, the School District’s governing 

board (the Board) voted to accept Ry-Tan’s bid, and the Board’s 

executive director signed a Notice to Proceed. The Board 

scheduled a meeting with Ry-Tan for March 12, 1999, at 3:00 p.m. 

At that meeting, the parties were to formally execute the 

contract documents and Ry-Tan was to receive the Notice to 

Proceed and provide required bonds. 

¶5 On the evening of March 11, 1999, Ry-Tan took 

equipment to the construction site and began work prior to 

execution of the formal contract. Upon learning of Ry-Tan’s 

action, District personnel refused to sign the contract and 

cancelled Ry-Tan’s bid. 

¶6 Ry-Tan denied that District personnel had instructed 

it not to begin work before signing the contract and argued that 

the District lacked authority to cancel or modify the contract. 

Nevertheless, the Board voted to re-bid the project. 
4

¶7 Ry-Tan brought this action, contending that the 

Board’s approval of Ry-Tan’s bid created a binding contract. It 

further argued that signing the contract documents and posting 

the required bonds constituted mere formalities and did not 

serve as a condition precedent to contract formation. After 

hearing argument on cross-motions for summary judgment, the 

trial court held that Ry-Tan could proceed with its action, 

concluding that “there were only ministerial functions left to 

accomplish once the school board awarded the contract . . . .” 

¶8 The jury returned a verdict in favor of Ry-Tan. The 

court of appeals affirmed, holding that “a contract was formed 

between the School District and Ry-Tan as of the date of the 

Board’s vote, when the Board found that Ry-Tan was the lowest 

responsible bidder and made the award.” Ry-Tan Constr., Inc. v. 

Wash. Elementary Sch. Dist., 208 Ariz. 379, 389 ¶ 32, 93 P.3d 

1095, 1105 (App. 2004). 

II. 

¶9 More than fifty years ago, this court addressed the 

issue of contract formation involving public entities in 

Covington v. Basich Brothers Construction Company, 72 Ariz. 280, 

233 P.2d 837 (1951). That case arose after Basich Brothers 

Construction Company (Basich) submitted a bid to the Arizona 

State Highway Commission (the Commission) to build a road. Id. 

at 282, 233 P.2d at 838. As required by the bid specification, 
5

Basich’s “proposal guarantee,” a certified check for $30,000, 

accompanied the bid. The Commission accepted Basich’s bid and 

sent a letter awarding it the contract. Under the terms of 

Basich’s proposal, the company had ten days to execute a 

contract after receiving notice of the award.

¶10 Soon after it sent the letter awarding the contract, 

the Commission adopted a resolution stating that if Basich did 

not execute and return the contract within ten days of the date 

of the award, the award would be revoked and the proposal 

guarantee forfeited. Ten days after making the award, the 

Commission notified Basich that its proposal guarantee had been 

forfeited and the contract had been awarded to the next lowest 

bidder. 

¶11 Basich then brought a mandamus action to recover the 

proposal guarantee. The trial court held that the notice given 

by the Commission of its intention to revoke the award was 

defective and ordered it to return the proposal guarantee. On 

appeal, we upheld the judgment of the trial court. Id. at 288, 

233 P.2d at 842.

¶12 We concluded that mandamus was the proper remedy, in 

part because the “proposal and award were preliminaries looking 

toward the execution of a formal contract . . . .” Id. at 285, 

233 P.2d at 840. We held that the Commission could revoke the 

award because “a contract with a public agency is not binding on 
6

the public agency until a formal contract is executed,” id., and 

that “the commission [had] the right to reject any and all bids 

at any time before a formal contract [was] entered into.” Id. 

at 286, 233 P.2d at 840-41. Because no contract had been 

formed, the parties should be returned to their pre-award 

positions and the deposit returned to Basich. 

¶13 If we apply Covington’s “bright-line” rule to the 

facts of this case, the District must prevail. Covington

established that a public agency that accepts a bid on a public 

contract is not bound until a formal contract exists. Because 

Ry-Tan and the District never executed a formal contract, Ry-Tan 

cannot recover from the District if Covington controls. Ry-Tan 

successfully argued to the court of appeals, and argues here, 

that its situation can be distinguished from that considered in 

Covington. Alternatively, Ry-Tan suggests, we should overrule 

our decision in Covington. 

III. 

A. 

¶14 The court of appeals accepted Ry-Tan’s approach, 

concluding first that it could distinguish Covington on the 

basis of its unusual facts. As the court explained, Covington

was “a mandamus action clearly based in equity.” Ry-Tan 

Constr., 208 Ariz. at 385 ¶ 20, 93 P.3d at 1101. Expounding on 

that fact, the court held that Covington’s “statement regarding 
7

contract formation must be interpreted in that context.” Id. at 

¶ 22. The court then held that Covington “provides no 

indication that [the Arizona Supreme Court] was establishing a 

hard-and-fast rule that would trump different contract terms or 

different circumstances.” Id. 

¶15 Although Covington arose out of a particular set of 

facts, as is true of every judicial decision, and also involved 

a request for mandamus relief, that opinion did establish a 

controlling, bright-line rule that governs contracts entered 

into by public entities after accepting a bid. The opinion 

gives no indication that this court intended to limit it to the 

facts or type of relief involved, and we see no basis for 

distinguishing it on either basis. 

B. 

¶16 The court of appeals also held that Covington does not 

control this action because “the procedures and formalities 

surrounding contract formation and the awarding of public 

contracts in Arizona have changed [since 1951].” Ry-Tan 

Constr., 208 Ariz. at 387 ¶ 25, 93 P.3d at 1103. The court 

noted that, since the Covington decision, “Arizona has adopted § 

27 of the Restatement (Second) of Contracts.” Id. That 

statement is accurate but does little to advance our analysis. 

¶17 Section 27 of the Restatement (Second) of Contracts 

provides that: 
8

Manifestations of assent that are in themselves 

sufficient to conclude a contract will not be 

prevented from so operating by the fact that the 

parties also manifest an intention to prepare and 

adopt a written memorial thereof; but the 

circumstances may show that the agreements are 

preliminary negotiations. 

Restatement (Second) of Contracts § 27 (1981). In support of 

the proposition that Arizona has adopted this section, the court 

refers to three recent decisions of the court of appeals. See 

Tabler v. Indus. Comm’n, 202 Ariz. 518, 521 ¶ 10, 47 P.3d 1156, 

1159 (App. 2002); Johnson Int’l, Inc. v. City of Phoenix, 192 

Ariz. 466, 470-71 ¶ 26, 967 P.2d 607, 611-12 (App. 1998); AROK 

Constr. Co. v. Indian Constr. Servs., 174 Ariz. 291, 297, 848 

P.2d 870, 876 (App. 1993). 

¶18 It is true that, in most contexts, section 27 captures 

a well-established rule of contract law. This rule, however, 

was not unknown to Arizona courts at the time we decided 

Covington. By that time, this court had already essentially 

adopted the Restatement view when it held that if parties 

expressed an intent to be contractually bound, they would be 

deemed so bound, even if the requisite formalities of acceptance 

were not explicitly followed. See Pratt-Gilbert Co. v. Renaud, 

25 Ariz. 79, 86-87, 213 P. 400, 403 (1923) (holding that even 

though explicit contractual method of acceptance was not 

followed, conduct of parties expressed intent to be bound). 

Moreover, the Restatement (First) of Contracts, in effect when 
9

we decided Covington, included a provision almost identical to 

that of section 27 of the Restatement (Second) of Contracts.2

 

The principle embraced by section 27 of the Restatement, 

therefore, was neither new nor unknown when we decided 

Covington.3

 

 

2

 Mutual manifestations of assent that are in themselves 

sufficient to make a contract will not be prevented 

from so operating by the mere fact that the parties 

also manifest an intention to prepare and adopt a 

written memorial thereof; but other facts may show 

that the manifestations are merely preliminary 

expressions as stated in § 25. 

 

Restatement (First) of Contracts § 26 (1932). 

3

 The court of appeals also noted that the Covington court 

relied on Williston’s treatise on contracts, notably this 

passage: 

In the formation of public contracts the formalities 

required by law or by the request for bids, such as a 

written contract, or the furnishing of a bond, often 

indicate that even after acceptance of the bid no 

contract is formed, until the requisite formality has 

been complied with. 

Ry-Tan Constr., 208 Ariz. at 384 ¶ 19, 93 P.3d at 1100 (quoting

Covington, 72 Ariz. at 285, 233 P.2d at 840 (quoting 1 Samuel 

Williston, Williston on Contracts § 31 (1936)). The court of 

appeals quotes extensively from the current version of Williston

and notes that editions “then and now, support[] an approach to 

contract formation based on the applicable facts and 

circumstances.” Ry-Tan Constr., 208 Ariz. at 388 ¶ 28, 93 P.3d 

at 1104. This is undoubtedly so. The fact remains, however, 

that this court adopted our bright-line rule rather than an 
10

C. 

¶19 Ry-Tan also argues that the Arizona School District 

Procurement Code (the Code), Ariz. Admin. Code (A.A.C.) R7-2-

1001 to R7-2-1195, dramatically altered the landscape of school 

procurement contracts and effectively displaced the common law 

rule of Covington. The state board of education adopted the 

Code in 1987 pursuant to legislative authority. A.R.S. § 15-

213.J (Supp. 2004). By its terms, the Code governs the 

“expenditure of public monies” for a school district’s 

procurement of “construction, materials and services.” A.A.C. 

R7-2-1002.A. 

¶20 The legislature, of course, can modify or abrogate the 

common law. To do so, however, it must express its intent 

clearly and, “[a]bsent a clear manifestation of legislative 

intent to abrogate the common law, we interpret statutes with 

every intendment in favor of consistency with the common law.” 

Pleak v. Entrada Prop. Owners’ Ass’n, 207 Ariz. 418, 422 ¶ 12, 

87 P.3d 831, 835 (2004) (citation omitted). This general rule 

carries even greater force when the entity enacting the scheme 

is an administrative agency acting only within the limited 

authority granted by the legislature. See Gunty v. Dep’t of 

Employment Serv., 524 A.2d 1192, 1197 (D.C. 1987) (holding that 

unless an administrative regulation fairly expresses an 

_______________ 

indeterminate, flexible approach. 
11

intention to modify the common law, it should not be interpreted 

to do so). We conclude that the provisions of the Code do not 

modify or abrogate the common law bright-line rule adopted in 

Covington. 

¶21 We note first that the Code explicitly states that the 

common law of contracts, the Uniform Commercial Code, and 

principles of law and equity as they exist in Arizona supplement 

the terms of the Code. A.A.C. R7-2-1002.D. The Covington 

decision, of course, is part of Arizona’s common law of 

contracts and, as such, operates with other common law sources 

to supplement the terms of the Code. Because the Code by its 

terms incorporates Covington, we will, if possible, interpret 

its holding as being consistent with, rather than abrogating, 

the Covington holding. 

¶22 As Ry-Tan argues, some portions of the Code suggest 

that the District could not cancel an award. For example, the 

Code directs that, after receipt and review of proffered bids, a 

“contract shall be awarded to the lowest responsible and 

responsive bidder whose bid conforms in all material respects to 

the requirements and evaluation criteria set forth in the 

invitation for bids.” A.A.C. R7-2-1031.A (emphasis added). 

Other sections of the Code authorize a public entity to reject a 

bid before award, but do not authorize such an action after an 

award. See A.A.C. R7-2-1074 (providing that after receipt of 
12

bids, but before award, the district may cancel a solicitation 

if advantageous, but only before award); A.A.C. R7-2-1076.A. 

(providing that a district may reject nonresponsive or 

nonresponsible bids only before a contract is awarded). Ry-Tan 

asserts that these provisions support the notion that the 

District entered into a contract with Ry-Tan at the time it 

accepted the company’s bid and could not thereafter cancel the 

award. While the Code’s language could be interpreted that 

strictly, nothing in the Code expressly prohibits a public 

entity from withdrawing a bid after acceptance of the bid but 

prior to the award of a contract. 

¶23 Moreover, in other sections, the Code itself 

distinguishes between bid awards and the execution of final 

contracts. For example, A.A.C. R7-2-1111 requires that bid 

security must accompany certain bids.4

 The purpose of bid 

security, or a bid bond, is to “compel[] [a] contractor to enter 

into the contract according to the terms of his bid.” Marshall 

v. Dietrich, 30 Ariz. 54, 62, 243 P. 910, 913 (1926). 

¶24 A separate Code provision, however, requires a bidder 

to post a performance bond upon formal execution of the 

contract. A.A.C. R7-2-1112. “[T]he purpose of a performance 

 

4 Bid security may come in the form of a bond or a certified 

or cashier’s check, A.A.C. R7-2-1111.C.1 & 2, and must be an 

amount equal to at least ten percent of the bid. A.A.C. R7-2-

1111.B. 
13

bond is to insure the proper completion of [a] public works 

project . . . .” Hartford Accident & Indem. Co. v. Ariz. Dep’t 

of Transp., 172 Ariz. 564, 568, 838 P.2d 1325, 1329 (App. 1992). 

The second bond requirement is inconsistent with the notion that 

the bid award results in a final contract. That is, if the 

award of a bid immediately created a binding contract, no bid 

security to assure entry into the already-completed contract 

would be necessary. Instead, the Code presumably would require 

only a performance bond to ensure completion of the project. 

Ry-Tan’s reading of the Code thus renders the bid security 

required by A.A.C. R7-2-1111 superfluous. 

¶25 Additionally, Ry-Tan’s approach creates substantial 

difficulties for bidding entities attempting to comply with 

A.A.C. R7-2-1112.B. That provision states that the 

performance bond and the payment bond shall be 

delivered by the contractor to the school district at 

the time the contract is executed. If a contractor 

fails to deliver the required performance bond or 

payment bond, the contractor’s bid shall be rejected,

its bid security shall be enforced, and award of the 

contract shall be made pursuant to this Title. 

Id. (emphasis added). 

¶26 If we were to accept Ry-Tan’s argument that its 

contract with the District was “executed” at the time the 

District accepted its bid, then the Code required the District 

to reject Ry-Tan’s bid because Ry-Tan did not deliver the 

requisite bonds at the time of execution. Indeed, were we to 
14

interpret the Code as establishing that a contract is executed 

when a bid is accepted, the Code would necessarily require that 

all bidders be present at the time the bids are opened, with the 

requisite bonds in hand. We do not consider that reading of the 

Code appropriate or practical. 

¶27 On the other hand, the provisions above, when read 

together, anticipate an interval between a bid’s award and 

execution of the contract, an interval that allows the 

successful bidder to present the required bonds at execution of 

the contract. That interpretation is fully consistent with, and 

allows us to give full effect to, Covington. Because the Code 

includes no express statement to the contrary, we hold that the 

Code did not change or abrogate the Covington bright-line rule. 

IV. 

¶28 The final question for us is whether public policy 

requires that we overrule our decision in Covington. As noted, 

Arizona’s governmental entities and bidding companies have 

relied on Covington’s bright-line rule for half a century. 

Without compelling reasons, we are reluctant to overturn longstanding precedent. “[P]eople should know what their rights are 

as set out by judicial precedent and having relied on such 

rights in conducting their affairs should not have them done 

away with by judicial fiat.” White v. Bateman, 89 Ariz. 110, 

113, 358 P.2d 712, 713-14 (1961). 
15

¶29 We detect no change in public policy that would lead 

us to set aside Covington’s bright-line rule. In situations 

such as this, public funds are at stake. It is vitally 

important that the elected officials responsible for the 

disbursement of such funds retain the flexibility needed to make 

decisions in the public’s best interest. Allowing a public 

entity an opportunity to reject a bid until execution of a 

formal contract occurs provides additional flexibility to 

respond to conditions that arise after the bid award and before 

execution of the contract, as occurred in this case, and further 

opportunity to consider the public interest. 

V.

¶30 Both parties agree that this matter arises out of 

contract, and both request attorneys’ fees pursuant to A.R.S. § 

12-341.01 (2003). In our discretion we determine that, as the 

prevailing party, the District shall recover those reasonable 

fees incurred on appeal. Wenk v. Horizon Moving & Storage Co., 

131 Ariz. 131, 133, 639 P.2d 321, 323 (1982). We will determine 

the amount of fees in accord with Rule 21 of the Arizona Rules 

of Civil Appellate Procedure. 

VI. 

¶31 For the foregoing reasons, we vacate the opinion of 

the court of appeals and reverse the superior court judgment. 

We remand this matter to the superior court with instructions to 
16

enter judgment for the District. 

____________________________________ 

 Ruth V. McGregor 

 Vice Chief Justice 

CONCURRING: 

__________________________________ 

Charles E. Jones, Chief Justice 

__________________________________ 

Rebecca White Berch, Justice 

__________________________________ 

Michael D. Ryan, Justice 

H U R W I T Z, Justice, dissenting 

¶32 The majority holds that this case is controlled by the 

“bright-line” rule of Covington v. Basich Bros. Construction 

Co., 72 Ariz. 280, 285, 233 P.2d 837, 840 (1951), that “a 

contract with a public agency is not binding on the public 

agency until a formal contract is executed.” See supra ¶ 13. I 

agree with the majority that this case is not factually 

distinguishable from Covington. See supra ¶¶ 14-15. I also 

agree that Covington has not been overruled sub silentio by our 

decisions embracing the principles of § 27 of the Restatement 

(Second) of Contracts. See supra ¶¶ 16-18. 
17

¶33 I part company with the majority, however, on whether 

the Arizona School District Procurement Code (“the Code”), 

Arizona Administrative Code (“A.A.C.”) R7-2-1001 to -1195, 

displaces the Covington common-law rule. I would hold that 

under the Code a contract is formed when a school district 

awards a contract, not at subsequent formal execution of the 

contract. I therefore respectfully dissent. 

I. 

¶34 Arizona Revised Statutes (“A.R.S.”) § 15-213(A)(1) 

(Supp. 2004) requires the State Board of Education to promulgate 

procurement rules “consistent with the procurement practices 

prescribed in” the state procurement code, A.R.S. §§ 41-2501 to 

-2673. The State Board adopted the Code pursuant to that 

statutory directive, and the Code therefore has the force of 

law. See Taylor v. McSwain, 54 Ariz. 295, 311, 95 P.2d 415, 422 

(1939) (“It is the general rule that . . . regulations adopted 

by any commission, under the authority of a statute, have the 

same force and effect, so far as their scope is concerned, as 

law . . . .”). As the majority notes, see supra ¶ 21, the Code 

expressly states that the common law of contracts 

“supplement[s]” its provisions. A.A.C. R7-2-1002(D). But this 

is only if the common law is not “displaced by the particular 

provisions” of the Code. Id. The issue in this case is whether 

the Code has displaced the Covington common-law rule either 
18

expressly or by necessary implication. See Pleak v. Entrada 

Prop. Owners’ Ass’n, 207 Ariz. 418, 422 ¶ 12, 87 P.3d 831, 835 

(2004) (“[I]f the common law is to be changed or abrogated by 

statute, the legislature must do so expressly or by necessary 

implication.”). 

II. 

¶35 The Code sets forth a detailed procedure for the 

solicitation and award of construction contracts. The starting 

point is an invitation for bids (“IFB”). A.A.C. R7-2-1024. The 

IFB must include, among other things, all “contract terms and 

conditions.” A.A.C. R7-2-1024(B)(1)(g). Any amendments by a 

district to the IFB’s proposed contractual terms must occur 

“within a reasonable time before bid opening.” A.A.C. R7-2-

1026(C). Thus, bidders know in advance all terms of the 

contract other than price; nothing is left to negotiation at the 

time of award. 

¶36 The issuance of an IFB, however, does not 

automatically compel the district to complete the solicitation 

and enter into a contract with the low bidder. Rather, “[e]ach 

solicitation . . . shall state that the solicitation may be 

canceled or bids or proposals rejected if it is advantageous to 

the school district.” A.A.C. R7-2-1072. The district can 

cancel the IFB at any time before the receipt of bids if it 

deems such action “advantageous.” A.A.C. R7-2-1073. After 
19

receipt of bids the district may still cancel the solicitation 

if “advantageous,” but only “before award.” A.A.C. R7-2-1074. 

¶37 The Code also allows the district to reject specific 

bids without canceling the solicitation if the bidder is 

determined to be “nonresponsible” or the bid is “nonresponsive.” 

A.A.C. R7-2-1075(A), (B). But once again, the Code requires 

that any such action be taken before an award is made. See

A.A.C. R7-2-1076(A) (“The school district shall make a 

determination that a bidder or offeror is responsible before 

awarding a contract to that bidder or offeror.”). 

¶38 The majority recognizes that these Code provisions can 

be read as limiting a school district’s ability to cancel a 

pending solicitation, but declines to interpret the regulations 

“strictly” because “nothing in the Code expressly prohibits a 

public entity from withdrawing a bid after acceptance of the bid 

but before award of a contract.” See supra ¶ 22.5

 But this 

approach fails to address the real question posed by this case – 

whether a district may unilaterally cancel the solicitation 

after award.6

 There is no dispute in this case that the 

construction contract was awarded to Ry-Tan. At its March 25, 

 

5

 The majority thus seems to assume that “acceptance” occurs 

before “award.” The former term, however, is not used in the 

Code, and the majority does not define it. 

6

 It is common ground that the Code expressly allows a 

district to cancel a solicitation before award. See supra ¶ 36. 
20

1999 meeting, the School District Governing Board voted to 

“Cancel [the] Award,” thus clearly acknowledging that an award 

was made. A similar acknowledgment appears in the District’s 

supplemental brief, which states that the District “cancel[led] 

the award to Ry-Tan”. The District also conceded at oral 

argument that an award was cancelled. 

¶39 The Code expressly provides that the IFB can only be 

cancelled for the advantage of the district “before award.” 

A.A.C. R7-2-1074 (emphasis added). Today’s holding effectively 

amends this rule to provide the district the right to withdraw 

the solicitation at any time before “execution” of the contract.7

 

Had the framers of the Code desired such a result, they surely 

could have said so more directly. 

¶40 The majority’s ultimate holding — that a district is 

free until the execution of a formal contract document 

unilaterally to decide, for any reason or for no reason at all, 

that it will not go forward with the contract — also cannot be 

squared with several other “particular provisions” of the Code. 

For example, the Covington rule is inconsistent with A.A.C. R7-

2-1131(A), which provides that “the contract shall be awarded to 

_______________ 

7

 The majority also incorrectly suggests that Ry-Tan has 

argued that a contract was “executed” at the time of award. See

supra ¶ 26. But Ry-Tan’s argument is not that the contract was 

executed. Rather, Ry-Tan argues that there was an “award,” that 
21

the lowest responsible and responsive bidder.” (Emphasis 

added.) Under the majority’s view, the low bidder is not 

awarded a “contract,” but merely a possible opportunity to enter 

into a contract, an opportunity revocable at the whim of the 

district. 

¶41 The Covington rule is also inconsistent with A.A.C. 

R7-2-1112(B). That regulation provides that a district may 

refuse to go forward after award if a “contractor” fails to 

deliver the required performance bond or payment bond. The Code 

provides no other scenario under which a district can revoke an 

award. The natural implication is that no other permissible 

reason exists. More significantly, because the Code defines a 

“contractor” as “any person who has a contract with a school 

district,” A.A.C. R7-2-1001(16), the reference in R7-2-1112(B) 

to a “contractor” necessarily assumes that the successful bidder 

has a contractual relationship with the school district before 

delivering the performance and payment bonds. Because this 

delivery is to occur “at the time the contract is executed,” 

A.A.C. R7-2-1112(B), the rule thus plainly contemplates that the 

contract is formed before formal contract execution. 

¶42 Ironically, the majority relies on A.A.C. R7-2-1112(B) 

in support of its conclusion that the Code leaves the Covington

_______________ 

the “award” formed the contract, and that formal “execution” was 

not necessary for contract formation. 
22

rule undisturbed. See supra ¶¶ 24-26. But the majority fails 

to address the significance of the word “contractor” in that 

Code provision. The majority’s reading of R7-2-1112(B) is 

flawed in another respect. The majority reads the language in 

subsection B, referring to rejection of a “bid” for failure to 

deliver performance and payment bonds, as suggesting that no 

contract is formed until execution.8 But such a reading leads to 

an anomalous result. Under this interpretation of the Code, 

even if the contractor delivers the required bonds, the district 

is nonetheless free to decide, for whatever reason, not to 

execute the contract. The award thus would create only 

unilateral obligations: under R7-2-1112(B), the contractor 

would be required to deliver the bonds and thereafter to sign 

the formal contract at the risk of losing its bid security, but 

the district would have no obligation to accept the tendered 

bonds or enter the contract. 

¶43 A more sensible reading of R7-2-1112(B) is that 

delivery of the performance and payment bonds and execution of 

the contract are not prerequisites to contract formation, but 

rather are conditions precedent to the district’s duty to 

 

8

 The reference in R7-2-1112(A) to “execution of the 

contract” provides no support to the notion that a contract is 

not formed at award. As the majority notes in discussing § 27 

of the Restatement (Second) of Contracts, our decisions have 

long recognized that contract formation can occur before formal 

execution. See supra ¶¶ 17-18. 
23

perform its obligations under the contract that was formed at 

award. See Restatement (Second) of Contracts § 224 (1981) (“A 

condition is an event, not certain to occur, which must occur, 

unless its non-occurrence is excused, before performance under a 

contract becomes due.”); id., introductory note to ch. 9, topic 

5 (“Conditions and Similar Events” (§§ 224–30)) (“An obligor may 

. . . make an event a condition of his duty in order to induce 

the obligee to cause the event to occur.”). 

¶44 This interpretation of the Code does not, as the 

majority suggests, render the requirement of bid security 

superfluous. See supra ¶ 24. The performance and payment bonds 

are security for the contractor’s eventual performance of the 

contract and payment of subcontractors. The bid security has a 

different purpose: it serves as a liquidated penalty for any 

failure on the part of the successful bidder to deliver the 

performance and payment bonds, and may be forfeited if the 

contractor fails to do so. 

¶45 In short, in my view, the proper reading of the Code 

is that the district requests offers to enter into a contract by 

issuance of the IFB. At the time of award, the district accepts 

the offer of the bidder to enter into the advertised contract at 

the price specified in the bid. The award is thus the point at 

which both sides – the bidder and the district — have a meeting 

of the minds. The district has at that point made the 
24

determination that it was not in its best interests to cancel 

the solicitation and that the bidder is a responsible entity 

which is willing to enter the contract at the lowest price. The 

district may take its time before award to carefully consider 

whether it is in its best interests to cancel the solicitation 

and may carefully review the qualifications of the low bidder, 

but once an award is made a contract is formed. 

III. 

¶46 The District cancelled the solicitation here because 

Ry-Tan, after the award but before formal execution of the 

contract, prematurely delivered equipment to the site and began 

work. But, as I have noted above, the District’s unilateral 

ability to cancel the solicitation ended at the time of the 

award. A.A.C. R7-2-1074. Nor could the district have found RyTan a “nonresponsible” bidder at that point, because the Code 

expressly requires a determination of responsibility before 

award. A.A.C. R7-2-1076(A). 

¶47 What the District is really claiming in this case is 

that Ry-Tan, having been awarded a contract, breached that 

contract by commencing work prematurely. However, that argument 

has already been rejected by the jury, which concluded that RyTan did not commit a material breach of the contract. This 

finding was upheld on appeal. Ry-Tan Constr., Inc. v. 

Washington Elementary Sch. Dist., 208 Ariz. 379, 396-401 ¶¶ 65-
25

72, 93 P.3d 1095, 1112-17 (App. 2004). The District did not 

seek our review of that issue and thus cannot now claim that RyTan breached the contract. 

IV. 

¶48 For the reasons above, I would hold that a contract 

was formed when the District awarded the contract to Ry-Tan and 

that the District breached that contract when it refused to 

accept the performance and payment bonds, execute the formal 

contract document, and accept Ry-Tan’s contractual performance. 

Because the majority concludes otherwise, I respectfully 

dissent. 

__________________________________ 

Andrew D. Hurwitz, Justice