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Bid Acceptance Not a Contract,
Court Rules
The state Supreme Court vacates the Court
of Appeals’ Ry-Tan decision
The September 2004 Construction Advisor
reported on an Arizona Court of Appeals
decision, in Ry-Tan Construction, Inc. v.
Washington Elementary School District No. 6,
in which the Court ruled that formal
contract execution may not be required to
bind the parties in the awarding of a
contract.
That decision was vacated in May 2005 by the
state Supreme Court, which also reversed the
trial court’s ruling for Ry-Tan
Construction. The Supreme Court found that
the Washington Elementary School District
board was free to withdraw its acceptance of
Ry-Tan’s bid prior to the signing of the
contract, even though Ry-Tan, relying on the
award, had begun work on the district’s
project.
Background. Ry-Tan was the lowest
qualified bidder on a public school project.
The school board voted to award the contract
to Ry-Tan, and a letter documenting the
award and a notice to proceed were prepared
for delivery to Ry-Tan.
Before the contract documents were formally
executed, Ry-Tan moved equipment onto the
jobsite and began construction. Ry-Tan was
familiar with the jobsite and the location
of utility lines and, thus, did not request
a “blue stake” inspection of utility lines
at the project site before beginning work.
When the school board became aware that
Ry-Tan began work without a blue stake
inspection, it refused to sign the contract
that it had awarded to Ry-Tan and ultimately
voted to re-bid the project.
Ry-Tan sued for breach of contract, won in
Superior Court, and won again in the Court
of Appeals.
Supreme Court findings. In its
ruling, the state Supreme Court relied on
its 1951 Covington decision, which
held that a public agency that accepts a bid
on a public contract is not bound until a
formal contract exists. Attorneys for Ry-Tan
argued, unsuccessfully, that Covington
did not apply to this case and,
alternatively, whether it applied or not, it
was a bad decision and should be overturned.
Ry-Tan also contended that, since the
Arizona School District Procurement Code
required the district to award the contract
to “the lowest responsible and responsive
bidder whose bid conforms to … the
invitation for bids,” the district had no
choice but to contract with Ry-Tan and,
thus, the signing of the contract was a mere
formality. The Court acknowledged that
requirement but noted that “nothing in the
Code expressly prohibits a public entity
from withdrawing a bid after acceptance of
the bid but prior to the award of the
project.”
Conclusion. The moral of the story
should come as no surprise: The written
contract is not a formality, and a vote to
award a contract is not binding until the
document is actually signed.
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