Church Property – Part 1

Church Law and Tax 1989-09-01 Recent Developments Church Property Richard R. Hammar, J.D., LL.M., CPA

Church Law and Tax 1989-09-01 Recent Developments

Church Property

What recourse does a church have if the low bidder on a church construction project attempts to withdraw its bid on the basis of an alleged computational error? That was the issue before a Georgia state appeals court in a recent case. The church invited bids for the construction of a new facility, and warned bidders (in the bidding instructions) that “negligence on the part of a bidder in preparing the bid confers no right for the withdrawal of the bid.” The contractor that made the lowest bid was awarded the contract. However, a few days later it informed the church that it was withdrawing its bid on the basis of “an error in adding certain estimated costs.” The church sued, arguing that the contractor had agreed that negligence on its part would not excuse an erroneous bid. A trial court rejected the church’s motion for a summary judgment, and the church appealed. A state appeals court ruled that the contractor did have a legal right to withdraw its bid. It observed that a contractor may withdraw an erroneous bid if (1) the other party knew (or should have known) of the mistake and attempts to “snap up the offer and profit thereby,” or if (2) the following conditions are satisfied: (a) the mistake is of such a nature that enforcement of the contract, under the circumstances, would be “unconscionable” (i.e., shocking to the conscience); (b) the mistake relates directly to the obligation assumed by the mistaken party; (c) the other party would not be prejudiced or harmed by the withdrawal of the mistaken bid. The court acknowledged that the church was not aware that the lowest bid was mistaken (it was only 7% lower than the next lowest bid), but it did conclude that the other factors necessary to justify the withdrawal of a bid were present. Specifically, the mistake related to the nature of the contractor’s obligation under the contract, the church was not prejudiced by the withdrawal of the bid (“it lost only what it sought to gain by taking advantage of the contractor’s mistake”), and allowing the church to take advantage of the mistake “would not be just.” With regard to the warning in the bidding instructions that negligence in the preparation of a bid would not enable a contractor to withdraw a bid, the court simply observed that “provisions such as these have … never been held effective when equitable considerations dictate otherwise.” First Baptist Church v. Barber Contracting Co., 377 S.E.2d 717 (Ga. App. 1989).

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