Municipality Liable Under Contract for Construction Work

A municipality is liable under a construction contract once awarded, irrespective of whether the municipality decides to terminate before the contract is actually signed. In the case of Xavier Contracting LLC v. the City of Rye the Appellate Division Second Department held the City had liability for the contract awarded to Xavier, despite the fact that the City terminated the project before the contracts were executed because one of six other contractors on the project failed to meet the bonding requirements.

The City had let seven contracts out to bid for a construction project that included general construction, electric, plumbing etc. The City awarded seven contracts including one to Xavier for general construction. The only requirement for moving forward on the project was that each successful bidder had to submit proof of insurance and a bond. One contractor failed to produce a bond. The City decided not to go with the next lowest bidder but rather to rescind all of the contracts. Xavier sued claiming it was entitled to compensation under its contract.

The Supreme Court granted summary judgment on liability. The Appellate Division affirmed, finding that absent an express provision in the bid documents making each of the separate contracts contingent on the others the City “could not unilaterally refuse to perform.” Xavier was represented by Silverberg Zalantis LLP