As a general contractor, you hate to hear that your subcontractor will not honor its bid. But, there are remedies. You may even be entitled to expectation damages – the difference between what you thought you were going to pay the old subcontractor and what you paid the new subcontractor.
When a subcontractor submits a bid on which the general contractor relies in bidding a project, the general contractor may sue the subcontractor for its damages under a theory of promissory estoppel. Under this theory, a court could enforce the subcontractor’s promise to do the work for a certain price if injustice can be avoided only by enforcement of the promise.
In this scenario, the general contractor may sue the subcontractor for the increased amount it had to pay the new subcontractor it had to hire to perform the work. These damages are often referred to as expectation damages. These damages attempt to put the injured party, the general contractor, in the position it would have been had the subcontractor kept its promise.
Know that the original subcontractor may raise some defenses to this claim. One could be that the project substantially changed from the time the bid was submitted. Another could be that the general contractor should have known that the subcontractor’s bid was well off the mark and should not have been relied upon. Ultimately, while there may be an opportunity to recover damages, a general contractor should closely review the entire situation before suing the subcontractor.