THE GARRISON COMPANY V BISHOP INTERNATIONAL AIRPORT AUTHORITY
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STATE OF MICHIGAN
COURT OF APPEALS
THE GARRISON COMPANY,
UNPUBLISHED
November 18, 2010
Plaintiff-Appellant,
v
No. 293415
Genesee Circuit Court
LC No. 08-088216-CK
BISHOP INTERNATIONAL AIRPORT
AUTHORITY,
Defendant-Appellee.
Before: MURPHY, C.J., and METER and SHAPIRO, JJ.
PER CURIAM.
Plaintiff appeals as of right an order granting defendant’s motion for summary disposition
under MCR 2.116(C)(10) in this dispute regarding whether a contract existed between the parties
with respect to the construction of an air freight handling facility referred to as the Intermodal
Center. We find that the trial court erred in granting defendant’s motion for summary
disposition, and we agree with plaintiff that a contract was formed as a matter of law.
Accordingly, we reverse and remand for further proceedings.
“This Court reviews de novo a trial court’s decision on a motion for summary
disposition.” Allen v Bloomfield Hills School Dist, 281 Mich App 49, 52; 760 NW2d 811
(2008). The question of whether a contract existed or was formed is an issue of law that is also
reviewed de novo on appeal. Bandit Industries, Inc v Hobbs Int’l, Inc (After Remand), 463 Mich
504, 511; 620 NW2d 531 (2001); Kloian v Domino’s Pizza, LLC, 273 Mich App 449, 452; 733
NW2d 766 (2006).
MCR 2.116(C)(10) provides for summary disposition where there is no genuine issue
regarding any material fact, and the moving party is entitled to judgment or partial judgment as a
matter of law. A motion brought pursuant to MCR 2.116(C)(10) tests the factual support for a
party’s cause of action. Skinner v Square D Co, 445 Mich 153, 161; 516 NW2d 475 (1994). A
trial court may grant a motion for summary disposition under MCR 2.116(C)(10) if the
pleadings, affidavits, and other documentary evidence, when viewed in a light most favorable to
the nonmovant, show that there is no genuine issue with respect to any material fact. Quinto v
Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996), citing MCR 2.116(G)(5). "A
genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to
the opposing party, leaves open an issue upon which reasonable minds might differ." West v
Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). A court may only consider
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substantively admissible evidence actually proffered relative to a motion for summary
disposition under MCR 2.116(C)(10). Maiden v Rozwood, 461 Mich 109, 121; 597 NW2d 817
(1999). The trial court may not weigh the evidence, assess credibility, or determine facts for
purposes of a summary disposition motion. Skinner, 445 Mich at 161.
Here, the project manual included or incorporated all of the documents associated with
constructing the facility and with bidding on the construction project, which we shall refer to
collectively as the bid documents or bid package. The bid package was comprised of over 1,000
pages in materials. The bid documents included an American Institute of Architects (AIA)
owner-contractor agreement, referred to as AIA-A101, and a contract of general conditions
governing the construction project, referred to as AIA-A201. A “bid form” was also included in
the bid package. The bid form provided:
The undersigned, having become thoroughly familiar with the terms and
conditions of the proposed [bid documents] and with local conditions affecting
the performance and costs of the work at the place where the work is to be
completed, and having fully inspected the site in all particulars, hereby proposes
and agrees to fully perform the work within the time stated and in strict
accordance with the proposed [bid documents], including furnishing any and all
labor and materials, specified allowances, and to do all of the work required to
construct and complete said work in accordance with the [bid documents], for the
following sum of money:
By submitting a bid, plaintiff was effectively agreeing to abide by all of the bid
documents, including contracts AIA-A101 and AIA-A201 (hereinafter “construction contracts”),
should its bid be accepted. The bid form further provided that upon acceptance of a bid and
communication of the acceptance to the winning contractor, the contractor agreed to execute and
deliver the bid documents, and thus the included construction contracts, to defendant in
accordance with the bid as accepted, along with various bonds and proof of insurance. There can
be no doubt that a contractor would be contractually obligated to perform on acceptance of a bid
and communication of the acceptance, which performance would include the formality of
executing the construction contracts. The contractor could not opt to walk away from the project
without liability.
Plaintiff submitted a bid in the amount of $6,650,000, along with the necessary bid
documents. Defendant’s governing board subsequently passed a unanimous resolution accepting
plaintiff’s bid on the project. The resolution indicated that the board had entered into an
engineering contract with an architectural firm for design services, that the firm prepared the bid
documents, that the firm reviewed the bids it found to be acceptable in general, and that the
architectural firm recommended that the board accept plaintiff’s bid, which was the low bid. The
resolution further provided that the board’s staff, after consultation with the operations
committee, recommended accepting plaintiff’s bid and awarding the project to plaintiff.
According to the resolution, funding for the project was available. Based on the information
provided to the board, the board voted “to accept the bid” from plaintiff to construct the facility.
Finally, the resolution authorized the airport director, who is defendant’s chief executive officer
(CEO) according to defendant, to execute the necessary construction contracts to carry out and
complete the project. The board’s decision was communicated and delivered to plaintiff.
Numerous emails between one of plaintiff’s employees and an architect employed by the
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architectural firm that planned the project suggest that the parties were proceeding as if a
contractual relationship existed and that execution of the construction contracts was a mere
formality. Defendant’s CEO did not execute the construction contracts, nor were they executed
by any other of defendant’s agents. And approximately one month after the bid was accepted by
the board, the board rescinded its acceptance.
Plaintiff filed suit, alleging that the parties had formed a binding contract, that defendant
rescinded the contract absent a factual basis or legal authority, and that AIA-A201, although
allowing defendant to terminate the contract for purposes of convenience, entitled plaintiff to
recover the amount of expenses incurred by plaintiff for any completed work together with a
reasonable amount for overhead and lost profits. Plaintiff asserted that AIA-A201 required
arbitration of the dispute but defendant refused to participate, claiming that there was no
enforceable contract. Plaintiff sought an order compelling arbitration or, in the alternative, a
judgment for damages in the amount of $600,000. Defendant’s position was and is that no
contract was ever formed. After first denying cross-motions for summary disposition on the
basis that an issue of fact existed in regard to contract formation and that discovery had just
commenced, the trial court subsequently granted defendant’s motion for summary disposition.
The court ruled, as a matter of law, that the documentary evidence reflected that the parties did
not intend to be contractually bound until the construction contracts themselves were actually
executed by both sides, which never occurred.
This case boils down to whether there was acceptance by defendant of plaintiff’s offer to
perform the construction project for $6,650,000 in accordance with the bid documents, such that
a contract was legally recognizable and enforceable. In order to form a contract, there must be
mutual assent or a meeting of the minds on all material or essential terms. Kloian, 273 Mich
App at 453. If the promises and performances to be rendered by the parties are set forth with
reasonable certainty, encompassing the essentials, missing details will not militate against a
conclusion that there was a meeting of the minds. Nichols v Seaks, 296 Mich 154, 159-160; 295
NW 596 (1941). “Destruction of contracts because of indefiniteness is not favored.” Id. at 159.
The question whether there was a meeting of minds is judged by an objective standard,
examining the parties’ express words and visible acts and not their subjective states of mind. Id.
at 454. A contract requires an offer and an unambiguous acceptance in strict conformance with
the offer. Id. at 452. Discussions, negotiations, and unaccepted offers do not suffice to create a
contract. Kamalnath v Mercy Mem Hosp Corp, 194 Mich App 543, 549; 487 NW2d 499 (1992).
An acceptance sufficient to create a contract arises when the person or entity to whom an offer is
extended manifests an intent to be bound by the offer through voluntarily undertaking some
unequivocal act that reflects such an intent. Kloian, 273 Mich App at 453-454. Additionally, we
note that a contract to enter into or execute a subsequent contract may be just as valid as any
other contract if the essential terms are in place. Opdyke Investment Co v Norris Grain Co, 413
Mich 354, 359; 320 NW2d 836 (1982).
We find that upon the board’s passage of the unanimous resolution accepting plaintiff’s
bid on the project and communication of the acceptance to plaintiff, there was objective evidence
of a meeting of minds on the essential terms of a contract; the resolution constituted a voluntary
and unequivocal act reflecting a manifestation of intent to be bound by the offer. There were
absolutely no conditions or condition precedents set forth in the resolution, nor were further
pertinent negotiations envisioned; the bid and all of the bid documents were accepted. We
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initially note the inherent conflict in defendant’s position, where it claims that it did not become
contractually bound on acceptance of plaintiff’s bid and communication thereof, but where the
bid documents themselves clearly indicated that the contractor submitting a bid that is accepted
is contractually bound. We find a lack of relevant support for the trial court’s position that the
parties did not intend to be contractually bound until the construction contracts themselves were
fully executed. We have no doubt that had plaintiff, after submission and acceptance of its bid
and communication of acceptance, attempted to renege, defendant would have claimed breach of
a formed contract. Once plaintiff’s offer was made and the board resolved to accept the offer
and communicated the acceptance, all of the requisite elements of a valid contract were present,
i.e., parties competent to contract, a proper subject matter, legal consideration, mutuality of
agreement or assent, and mutuality of obligation. Hess v Cannon Twp, 265 Mich App 582, 592;
696 NW2d 742 (2005). While there were some minor details that needed addressing, the
essential terms of a contract were in place; therefore, the trial court’s focus on non-essential
terms as a basis to find a lack of intent to be contractually bound was misplaced. The act of
formally executing the construction contracts was not a step that had to be completed before a
valid contractual relationship arose, given that plaintiff had already agreed to these contracts as
part of the bidding process and that defendant had necessarily agreed to these contracts by
making them available to bidding contractors and mandating that they be part of the bid
documents. Furthermore, the resolution accepting plaintiff’s bid and communication of
acceptance can also be viewed as forming a contract to enter into or execute the construction
contracts, with all of the essential terms being in place, and a failure to execute the construction
contracts would constitute a breach.
Defendant argued that the AIA-A201 required execution of the construction contracts by
the parties before a contractual relationship could be recognized. However, the cited provision,
while stating that the construction contracts shall be signed, goes on to merely provide that, if
unsigned, the architect shall identify the unsigned documents, not that there is no binding
contractual relationship. Indeed, the provision supports a conclusion that execution was a
formality, finalizing an already existent contractual relationship. Further, as indicated above,
there was a preexisting obligation to execute the construction contracts predicated on acceptance
of the bid.
Defendant argues that there was no acceptance of plaintiff’s offer because the board
lacked the authority to enter into a contract on its own behalf where only defendant’s CEO had
the authority to enter into a contract, and he never accepted plaintiff’s offer, nor executed any
contract. This argument is predicated on § 114(4) and (5) of the Public Airport Authority Act
(PAAA), 259.108 et seq., and results in the parties digressing into the law of agency relative to
the actions of an architect and his relationship with the CEO.
It is wholly unnecessary to discuss agency principles because defendant’s interpretation
of the PAAA is incorrect and ignores relevant provisions of the PAAA. We note that, if one
takes defendant’s argument to its logical end, a CEO could completely ignore a board’s
acceptance or rejection of a bid on a construction project or make an independent decision, as the
board, according to defendant, lacks authority to contract and only the CEO can enter into a
contract. This reasoning turns the PAAA on its head. To the extent that defendant is arguing
that a board’s decision on a matter is not contractually binding until the CEO actually executes a
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document reflecting the board’s decision, the argument is inconsistent with the PAAA and
subjects persons and entities dealing with the board to the whims of a CEO.
Under the PAAA, the “authority,” here defendant, “means a public airport authority
created by or pursuant to section 110 and governed by a board.” MCL 259.109(d) (emphasis
added). A board is defined as “the governing body of an authority . . . .” MCL 259.109(e).
Thus, defendant operates through the actions of its board. The board appoints the CEO, the
board prescribes his or her duties and responsibilities that are in addition to PAAA duties and
responsibilities, and the CEO serves at the pleasure of the board. MCL 259.114(4). The CEO
“shall supervise, and be responsible for, . . . [t]he negotiation, supervision, and enforcement of
contracts entered into by the authority . . . .” MCL 259.114(4)(e) (emphasis added). Contrary to
defendant’s argument, this subsection does not provide that only the CEO can enter into a
contract and that the board lacks authority to do so. Rather, it clearly indicates that, while the
CEO is responsible for negotiating a contract, it is the authority that ultimately enters into the
contract. And the authority operates through its governing board; therefore, it is the board that
enters into contracts. With respect to MCL 259.114(5), also relied on by defendant, it provides
that a CEO “shall have the power and authority to execute and deliver, and to delegate signatory
power for, contracts, leases, obligations, and other instruments approved by the board or for
which power to approve has been delegated to the [CEO] of the authority.” (Emphasis added.)
This language simply indicates that the CEO has the authority to execute contracts approved by
the board. In other words, it is the board that enters into contractual relationships, with the CEO
engaging in the formality of signing or executing the document reflecting the contractual
relationship, unless the board delegates approval power to the CEO himself or herself. There is
generally no independent discretion for the CEO to ignore instruments approved by the board.
And while approval power can be delegated to a CEO, there is nothing here in the resolution or
the bid documents indicating that the CEO had been delegated this power or that the CEO would
need to make an independent assessment of the bid and bidder before a contractual relationship
would be recognized regardless of the board’s acceptance. We do not find that the language in
MCL 259.114(5) supports a conclusion that there was no binding contract here unless or until the
CEO formalized the construction contracts by executing them.
MCL 259.114(6)(a) provides that the authority, and thus the board, shall establish
contracting policies and procedures providing for competitive bidding in regard to the
construction of airport facilities. “[A] contract shall not be awarded by an authority or the
[CEO] for the construction . . . of an airport facility unless the contract is let pursuant to a
procedure that requires a competitive bidding.” (Emphasis added.) This language directly
contradicts defendant’s argument in that it expressly contemplates an authority’s board awarding
a contract after completion of a competitive bidding process, and it does not indicate that the
CEO must join in on making the award. Although MCL 259.114(6)(a) indicates that the CEO
can also award a contract after competitive bidding, this does not mean that the CEO is free to
ignore a decision by the board to award a contract when the bidding matter was presented to the
board for resolution, nor that a contract cannot be formed and recognized as between a board and
a winning bidder.
In the context of the PAAA, and given the nature of the board’s fairly dominant
relationship over the CEO, the CEO generally has no discretion in whether to execute a contract
formally approved by the board, otherwise the board would be ineffective and subservient to the
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CEO. Of course, if the board granted a CEO this discretion, matters might be different, but
again, neither the resolution nor the bid documents recognized such to be the case here.
Further, the authority, and thus its governing board, has the power to extend, construct,
improve, and enlarge an airport and airport facilities. MCL 259.116(1)(c). Additionally, the
authority, through its governing board, “may make and enter into all contracts and agreements
necessary or incidental to the performance of its duties and execution of its powers under this
chapter with any department or agency of the United States, with any state or local governmental
agency, or with any other person, public or private, upon those terms and conditions acceptable
to the authority . . . .” MCL 259.116(1)(f). This language not only evidences the board’s
authority to enter into contracts, it establishes that the contract does not need to be acceptable to
the CEO. This provision could certainly encompass a board’s action to engage in the bidding
process on an improvement project and to enter into a contract with the contractor who submitted
the winning bid. Further, the authority, and thus the board, “is responsible for developing all
aspects of the airport and airport facilities, including, but not limited to, . . . [t]he location of
terminals, hangars, aids to air navigation, parking lots and structures, cargo facilities, and all
other facilities and services necessary to serve passengers and other customers of the airport.”
MCL 259.116(i)(i). Section 116(1)(n) and (o) provide:
(n) An authority may enter into exclusive or nonexclusive contracts . . .
with any person or persons for terms not exceeding 50 years, for granting the
privilege of . . . improving . . . any portions of the airport or the authority's airport
facilities, for commercial airline-related purposes consistent with its obligations
under applicable federal law, regulations, and assurances associated with
accepting grants from the FAA or any other agency of the United States or this
state.
(o) An authority may enter into exclusive or nonexclusive contracts . . .
not described in subdivision (n) for commercially reasonable terms consistent
with its obligations under applicable federal law, regulations, and assurances
associated with accepting grants from the FAA or any other agency of the United
States or this state.
Accordingly, the PAAA provided the board with authority to enter into a contract with
plaintiff with respect to the construction of the Intermodal Center. And the board did so when it
accepted plaintiff’s bid and communicated the acceptance. The execution of the construction
contracts by the CEO was but a formality, and the CEO was obligated, under contract principles
considered in conjunction with the PAAA, to execute the construction contracts that reflected the
agreement of the board, which agreement was established by the board’s resolution to accept
plaintiff’s bid. Under the circumstances in this case, the CEO did not have the authority or right
to make his own decision on the matter after the board’s act of acceptance.
Defendant spends several pages speaking of a due diligence period that runs from the
date after the board’s resolution accepting a bid to, in this case, the date of rescission, which
period in other cases would run from the date of bid acceptance to the date of contract execution
by the CEO. According to defendant, during this due diligence period, the CEO “researches
issues involving the contractor and the project itself before deciding whether to enter into and
sign a contract.” Defendant maintains that the CEO has been directed by the board to
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communicate problems, questions, or concerns discovered by the CEO during the due diligence
period and to not sign contracts if issues arise. Defendant argues that a due diligence period
makes sense, citing as an example the case at bar in which plaintiff was an unknown entity to
defendant.
First, defendant cites no legal authority acknowledging such a due diligence period.
Next, if any due diligence is to be conducted, logic dictates that it generally be done before
acceptance of a bid. Indeed, the resolution itself indicates that the hired architectural firm and
the board’s staff, in conjunction with the operations committee, examined and investigated the
prospective contractors. Finally, the PAAA does empower the board to dictate the actions of a
CEO, which conceivably allows it to create a due diligence period and give the CEO the due
diligence powers being claimed. However, this does not mean that the PAAA provides a
mechanism by which a board can circumvent an unconditional acceptance of a bid that makes no
reference to a due diligence period and wriggle itself out of a contractual obligation. The bid
documents also made no reference to a due diligence period. Under defendant’s theory, the CEO
could, for an undefined duration of time, exercise so-called due diligence by checking into a
contractor whose bid has already been accepted without conditions and then go to the board and
recommend rescission. And thereafter, under defendant’s theory, the board can rescind the
acceptance with impunity, despite never calling a due diligence period to the attention of the
contractor. This is not a theory of contract law of which we are familiar. Defendant essentially
seeks the benefit of a contractor being contractually obligated to follow through after acceptance
of a bid absent a corresponding obligation on the part of the board. We refuse to endorse this
approach.
Next, contrary to defendant’s argument, our ruling is also consistent with Central
Bitulithic Paving Co v Village of Highland Park, 164 Mich 223; 129 NW 46 (1910). In that
case, the Michigan Supreme Court stated:
It is the general rule that where the specification of a public improvement
fully describes the work to be done, and a bid in writing is made to do such work
and is accepted and entered of record, sufficient evidence of a contract exists to
satisfy the statute of frauds. And if, in such a case, the execution of a written
contract is provided for, in terms, in the charter of a city, is not executed, and the
materials are furnished and used, the neglect to execute the contract will not
prevent the recovery of the reasonable value of whatever is furnished. We assume
that if the street had been paved in accordance with the specification and bid, the
mere fact that the contract was not signed by the president and clerk of the village
would not support the contention, if it was made, that there was no contract. But a
contract is not made so long as, in the contemplation of both parties thereto,
something remains to be done to establish contract relations. The law does not
make a contract when the parties intend none, nor does it regard an arrangement
as completed which the parties thereto regard as incomplete. [Id. at 228 (citations
omitted).]
Here, the bid documents fully described the work to be done, a bid in writing was made
to do such work, and defendant accepted the bid as entered into the record by way of resolution.
Although the execution of written construction contracts was contemplated, they were not
executed. However, under the circumstances of this case, the contracts had already been
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incorporated into the bidding and selection process, covering essential terms and reflecting
acceptance of those terms. Nothing more needed to be done to establish contract relations after
acceptance of the bid and communication of the acceptance; events thereafter concerned
formalities relative to non-essential terms and execution.
We also note our Supreme Court’s decision in Kutsche v Ford, 222 Mich 442; 192 NW
714 (1923). The Court stated that “‘[i]t is undoubtedly true that, filing a bid, as plaintiff did,
upon invitation, was an offer intended of itself, if accepted, to create legal relations beyond the
power of one party to sever without liability, because no future negotiations were contemplated
and nothing remained to be done beyond reducing the same to form strictly in accord with the
accepted offer.’” Id. at 446 (citation omitted). We hold that such was the situation here.
In regard to the topic of using local subcontractors on the project, defendant does not
point to any provision in the bid documents, including the construction contracts, nor any
language in the resolution, which makes that matter a contractual issue or a basis to find that a
contract was never formed.
In sum, the parties had a binding contract as a matter of law and plaintiff was entitled to
summary disposition on the issue. Plaintiff prays for an order referring the case to arbitration
pursuant to the construction contracts. However, we decline to do so. Rather, the case is
remanded to the trial court for entry of an order finding the existence of a binding contract. The
parties and the trial court can then pursue the issue of whether defendant is compelled to engage
in arbitration.
Reversed and remanded for proceedings consistent with this opinion. We do not retain
jurisdiction. Plaintiff having prevailed in full is awarded taxable costs pursuant to MCR 7.219.
/s/ William B. Murphy
/s/ Patrick M. Meter
/s/ Douglas B. Shapiro
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