Dancing With The Subcontractor You Brought: Undercutting Will Not Be Tolerated

A. Dynasty Roofing (Windsor) Ltd. v. Marathon Construction Services (1991) Inc.

In the case of A. Dynasty Roofing (Windsor) Ltd. v. Marathon Construction Services (1991) Inc. a decision of the Ontario Superior Court released March 11, 2002, the Court was asked to determine whether the bidding process resulted in a contract which obligated the contractor to offer the subcontract to the lowest bidder at the subcontractor's bid price absent any other reasonable cause to reject the subcontractor.

The facts in the case are as follows:

The defendant, Marathon Construction Services ("Marathon"), a general contractor, bid on a contract for the construction of an industrial building in January 1999. The plaintiff, A. Dynasty Roofing (Windsor) Ltd. ("Dynasty"), a roofing subcontractor, in response to the defendant's request prepared and submitted a bid for the roofing component of the industrial building.

Marathon's bid was successful and it was awarded the contract. The approximate cost of the building contract was $16,000,000 and the lowest subcontractor bid for the roofing component was $198,500 by Dynasty. Smith Peat Roofing's ("Smith Peat") bid for the same component was $208,840.

In its successful bid, Marathon named both Dynasty and Smith Peat as roofing contractors it would use if its bid was successful. Marathon allocated $195,000 in its bid for the roofing work. Marathon's practice was to reduce the lowest subcontractor bid in order to attain a bidding advantage over the other general contractors.

After Marathon was awarded the contract, they contacted Dynasty and offered them the roofing contract at a price of $195,000. Dynasty refused to do the work for any amount less than their bid price of $198,500. Marathon then offered the roofing contract to Smith Peat at a cost of $195,000 and Smith Peat accepted.

Marathon argued that there was no contract with Dynasty as its solicitation to roofing contractors was a request for prices and not a bid competition.

The issue before the court was whether the bidding process resulted in a contract which obligated Marathon to offer the roofing contract to Dynasty at Dynasty's bid price absent any other reasonable cause to reject Dynasty as a subcontractor.

The court determined that the facts did not support Marathon's argument and found that the evidence pointed to the creation of a contract. Both roofing companies took steps to qualify themselves as subcontractors with the owner as required by the...