When Bids Go Bad: Enforcing Subcontractor Commitments In A Volatile Market

You're a general contractor (GC) submitting a competitive bid to an owner. A subcontractor (sub) submits a fixed bid for $2 million in electrical work. You factor that number into your prime bid, submit it to the owner, and win. The next morning, the sub calls and tells you that there's been "an error." The sub is now demanding $2.5 million for the work, or they walk. The owner is breathing down your neck. Your margin has taken a big hit. Can you force the sub to honor its initial price or collect damages if they do not?

Now reverse the scenario: You're the sub. You locked in material prices based on a letter of intent from the GC. Days later, after you've incurred costs, the GC decides to shop your bid elsewhere or renegotiate. Can you force the GC to give you the work for the price you offered or collect damages if they do not?

Not theory — disputes are real

These disputes are not hypothetical or academic. In fact, given today's market volatility, these types of disputes are real. Tariffs on imported materials, volatile lumber prices over the past year, and supply chain chaos mean bids can be considered moving targets with a short shelf life. Subs are increasingly asking if they can walk away from their bids. GCs are aggressively trying to buy-down bids. Both sides think they have legal protection that they may not actually have.

Courts increasingly recognize that market volatility affects the reasonableness of reliance. In stable markets, a sub might successfully argue that their bid was conditional or time-limited. But in volatile markets, GCs may have stronger arguments that immediate reliance was necessary given market conditions.

The law in this space is murkier than most contractors realize — and it varies dramatically by state.

Two legal doctrines collide: promissory estoppel and breach of contract

When a subcontractor's bid dispute reaches court, two legal doctrines typically collide: promissory estoppel and breach of contract. Understanding the difference is critical.

First, promissory estoppel is a legal doctrine that relies on "fairness" to enforce a promise even without a formal contract if three elements align:

1. A clear promise (the bid itself)
2. Reasonable reliance on that promise (using it in the prime bid)
3. Detriment flowing from reliance (the loss when the sub walks)

The landmark case is still Drennan v. Star Paving Co., 51 Cal. 2d 409 (1958), where the California Supreme Court held that a party who has detrimentally relied on an offer that is revoked prior to acceptance may assert promissory estoppel to recover damages. In Drennan, a GC incorporated a paving sub's bid into his own proposal for a school project, won the job, and then sub the refused to perform — claiming a calculation error. Relying on promissory estoppel and the GC's detrimental reliance on the sub's bid, the sub was forced to pay the difference between the original bid and the replacement contractor's higher cost.

The simplicity of Drennan is that it does not require a signed subcontract or any other formal written contract. The bid itself, when relied upon by the GC in a way the sub should have anticipated, becomes binding through promissory estoppel.

Notably, if the tables were turned, the sub likely could not use promissory estoppel to force the GC to use its bid under Drennan, even if the GC used the sub's bid to win the work. Why? Because legally, there likely is no detrimental reliance.

In other words, and this is key, it is difficult for the sub to prove a promise from the GC that the sub relied on to its detriment. While it may have wanted the work, courts have held that there was no realistic expectation that the GC would get the work.

The second legal theory implicated in these types of cases is breach of contract. These claims require proving an actual contract exists (example: a signed subcontract). Without a signed subcontract, this means that you, as the party advancing the argument, have to prove there was in fact a "meeting of the minds" on all essential terms: scope, price, schedule, and critical conditions.

This is harder than it sounds, especially in volatile markets where conditions remain fluid and shifting.

How do these legal doctrines hold up with market volatility?

Different states have taken different approaches. Recent cases addressing this issue show that the courts are still grappling with this issue, particularly in this market of high volatility.

Connecticut: pro-GC in volatile times

In International Building Supply, LLC v. Hudson Meridian Construction Group, LLC (D. Conn. 2025), a sub attempted to use promissory estoppel to force the GC to honor its alleged commitment to use the sub's pricing. The GC rescinded letters of intent after the sub locked in material prices in reliance, incurring costs. The court allowed promissory estoppel and breach claims to proceed, finding genuine disputes over binding intent and the extent of detriment.

This case signals that Connecticut courts recognize market volatility as strengthening reliance arguments — especially when a sub has taken affirmative steps (like locking in prices) based on a GC's signal. This is a good — albeit rare — example of how a sub was able to use detrimental reliance to escape a summary judgment motion that may have effectively ended the subs efforts to force the GC to use the sub's bid.

Again, this turned on the sub's ability to prove that it relied on the GC's "promise" to use the sub's bid if the CG won the work, which it did. While the ultimate outcome remains uncertain, this case signals that Connecticut courts may recognize market volatility as strengthening reliance arguments.

South Dakota: detriment must be substantial

In JED Spectrum, Inc. v. Stoakes (S.D. 2025), the South Dakota Supreme Court affirmed the denial of a promissory estoppel claim, concluding that the party claiming estoppel did not suffer substantial economic detriment. The case involved an oral promise for shared infrastructure.

Here a property owner asserted a promissory estoppel claim against a contractor regarding the enforcement of what he believed was an oral promise for well ownership. Even though reliance was shown (like in International), the court refused damages without proof of real, quantifiable harm.

This reflects South Dakota's equity-based approach: promissory estoppel exists to prevent injustice, not to enforce casual business discussions.

Survey of other jurisdictions

Although many jurisdictions have not dealt with this issue recently, a survey of key cases across jurisdictions illustrates a generally GC-favorable trend in applying promissory estoppel to bind subs to bids upon detrimental reliance, though outcomes vary based on proof of substantial harm and market context.

For example, Nevada's Dynalectric Co. v. Clark & Sullivan Constructors, Inc., 255 P.3d 286 (Nev. 2011) built on the California Drennan ruling noted above by permitting flexible, expectation-based damages to fully compensate the GC, remaining unchanged amid volatility.

Meanwhile, Alabama's Mazer v. Jackson Ins. Agency, 340 So. 2d 770 (Ala. 1976) recognizes promissory estoppel to avoid injustice from induced reliance, typically favoring GCs over subs lacking detriment, with no new developments.

Kansas also adopted the Drennan rule in PKG Contracting, Inc. v. Smith & Loveless, Inc., 20-CV-2646-JAR-KGG, 2022 WL 1026889 (D. Kan. Apr. 6, 2022), denying summary judgment where genuine disputes existed on reliance in bidding.

Again, courts in many jurisdictions, citing to promissory estoppel, generally allow the GC to force a sub to honor its bid, but not the opposite.

This asymmetry of outcomes exists because GCs rarely make explicit promises to use a sub's bid before winning the prime contract, whereas subs make clear price commitments that GCs demonstrably rely upon when submitting prime bids.

The takeaway for construction executives

The law is evolving in real-time, and current volatile market conditions make this issue even more important. Smart contractors are shifting from litigation strategies to risk allocation strategies. This includes bid validity periods, material price escalation clauses, and force majeure provisions that explicitly address supply chain disruptions.

Here's what you need to know

If you're a general contractor:

• Document reliance immediately. The moment you receive a bid, record it, show how you incorporated it into your prime proposal, and log when you submitted your bid. Courts want evidence of the thinking process.
• Consider including escalation clauses in your prime bids that reference material volatility. This signals to subs (and judges) that you anticipated market swings.
• Consider bid bonds or letters of intent that specify revocation periods and lock-in dates. Ambiguity works against you.
• Know your jurisdiction. Connecticut courts are more receptive to reliance claims in volatile markets; South Dakota demands tougher proof of harm.

If you're a subcontractor:

• Clarify the revocation period in every bid. Don't leave it open-ended.
• Seek a letter of intent that spells out what you've committed to and when. If you're locking in prices or ordering materials, get that in writing as part of a binding preliminary agreement.
• Distinguish between a casual inquiry and a real bid request. Respond differently to each.
• If you discover a material error in your bid, notify the GC immediately. The earlier you correct the record, the weaker a reliance claim becomes.

The bottom line

In today's volatile environment, contractors are more apt to protect margins even more than normally. And courts are increasingly treating bids as meaningful commitments, especially when GCs can show they relied on them to win prime contracts. But reliance alone doesn't guarantee recovery — the extent of detriment, the clarity of the promise, and the foreseeability of market swings all matter.

The winning strategy is not to litigate these disputes, but to prevent them through clear written commitments, escalation clauses, and realistic pricing that reflects market conditions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.