Opinion ID: 1351655
Heading Depth: 1
Heading Rank: 4

Heading: The Law Generally Regarding Public Bidding.

Text: Ordinarily, a municipality's advertisement for bids is a solicitation for offers, and does not itself constitute an offer. A bid generally constitutes an offer, and does not in itself constitute a contract. An acceptance by the city after the bids are made is therefore generally necessary; and it is always necessary where the city in its proposals reserves the right to reject any and all bids.... Where the municipality reserves the right to reject any and all bids, a bidder cannot claim contractual rights until the municipality awards the bidder the contract. 64 C.J.S. Municipal Corporations § 926, at 127 (1999). Once a municipality accepts a valid bid, such acceptance results in a binding contract, even though there may have been defective compliance with certain legal formalities. Id. Thus, the bidder has a right of action for breach of contract. See 64 Am.Jur.2d Public Works and Contracts § 78, at 713 (2001) (The state has no greater right than individuals to refuse performance of its contract.); 10 Eugene McQuillin, The Law of Municipal Corporations § 29.80, at 528 (3d ed. 1999) (It is a contract theory on which an action for damages for refusing to execute a contract with the accepted bidder is usually based.) [hereinafter McQuillin]. When a statute relating to a public contract has language expressly requiring the subsequent execution of a formal written contract or implying that such a contract be executed, the question arises whether the public body can rescind or revoke the award of a contract before the parties have executed the formal contract. See J.D. Emerich, Annotation, Revocation, Prior to Execution of Formal Written Contract, of Vote or Decision of Public Body Awarding Contract to Bidder, 3 A.L.R.3d 864, 868 (1965) [hereinafter Emerich]. There are two views on this issue. Some courts take the view that under the statutory language involved and the particular facts appearing, the making of the award is merely a preliminary step, and that until the formal contract has been executed in accordance with the statutory requirements the agency which made the award has the power to revoke it. Id.; see also McRae v. Farquhar & Albright Co., 168 Ark. 38, 269 S.W. 375, 377 (Ark. 1925) (statute required contracts to be prepared by attorney general and executed in triplicate and required bidder to execute bond to be approved by government agency); E.H. Oftedal & Sons, Inc. v. State ex rel. Montana Transp. Comm'n, 308 Mont. 50, 40 P.3d 349, 357 (Mont.2002) (specifications reserving right to cancel award prior to execution of contract and statute requiring formal contract following award of contract); Pfaff Constr. Co. v. Leonard, 40 Ohio App. 246, 178 N.E. 328, 329 (Ohio Ct.App.1931) (statute provided that [I]f the bid is accepted, a contract will be entered into and the performance of it properly secured); Wayne Crouse, Inc. v. School Dist., 341 Pa. 497, 19 A.2d 843, 844 (Pa.1941) (statute required formal execution of written contract; court held that the award was merely a preliminary declaration of intention to enter into a formal contract, which ... did not in any way limit the [political subdivision's] freedom of future action); 1 Richard A. Lord, Williston on Contracts § 4:10, at 343-44 (4th ed. 1990) (In the case of public contracts, certain additional formalities are often required by statute or by the request for bids under such statutes, such as the execution of a written contract, or the requirement that a satisfactory bond be furnished. In such cases, even after acceptance of the bid has occurred, no contract is formed until the requisite formality has been complied with.); 64 Am.Jur.2d Public Works and Contracts § 78, at 711. Other courts take the view that at least under the statutory language involved and the particular facts appearing, a binding contract is created when the award is made and communicated to the successful bidder, and that no power remains in the awarding agency to revoke the award, even before a formal contract is executed according to the provisions of the controlling statute. Emerich, at 871; see also United States v. Purcell Envelope Co., 249 U.S. 313, 319, 39 S.Ct. 300, 302, 63 L.Ed. 620, 624 (1919) (bidder executed written contract but government agency refused to sign and revoked its acceptance of the bidder's bid; Court said: It makes no difference that the contract was not formally signed or the bond formally approved,... as [required by] the terms of the contract and by a statute of the United States.... Their formal execution, as we have seen, was not essential to the consummation of the contract.); City of Susanville v. Lee C. Hess Co., 45 Cal.2d 684, 290 P.2d 520, 526 (Cal.1955) (statute required formal written contract be executed and appropriate bond furnished for faithful performance of the work); Johnson v. City of Jordan, 352 N.W.2d 500, 503 (Minn.Ct. App.1984) (ordinance provided that all contracts to which the city is a party must be signed by the mayor and the city administrator on behalf of the city, and shall be executed in the name of the city); 64 Am.Jur.2d Public Works and Contracts § 78, at 712. A statutory requirement that municipal contracts be in writing does not require a single integrated document; a series of documents, the totality of which contain all material terms of the agreement, will suffice. 10 McQuillin § 29.22, at 346; see also Hubbell, Roth & Clark, Inc. v. Gallipolis, 660 F.2d 201, 207 (6th Cir.1981). In Hubbell, a city charter provision provided that expenditures in excess of five hundred dollars shall first be authorized and directed by ordinance or resolution of the City Commission, and when so authorized and directed, the City Manager shall make a written contract with the lowest and best bidder. Hubbell, 660 F.2d at 205-06. The appellate court rejected the city's contention that the absence of a formal, written contract signed by both sides was fatal to any recovery under the city charter. In doing so, the court reasoned: The district court was dissuaded by the fact that there was no single, integrated, four-corners document entitled contract signed and executed by the parties. We find no such requirement in [the city charter]. The Charter does not speak as to the form of the contract. It has no requirement of signature, seal, structure or any other technical requirement.... All material terms and specifications were in writing as were the various Ordinances and authorizations to proceed sent by the successive City managers to the [plaintiff-bidder].... We find that the several documents detailed above suffice to meet the Charter's general requirement of a written contract and therefore the district court erred in ruling that this particular formal requirement was not met. Id. at 207 (footnote omitted). The same is true here. Section 314.1 does not speak as to the form of the contract and has no requirement of signature, seal, structure or other technical requirement. There was a written bid and a written approval of that bid. Therefore, the requirement in section 314.1 that [a]ll contracts shall be in writing is satisfied if the bid and the Board's approval constitute an otherwise binding agreement. That brings us to the critical issue of whether the bid and the Board's approval constituted a binding contract.