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American Asphalt Company, Inc. v. County of Gloucester

A-4360-09T3 (N.J. Super. App. Div. 2011) (Unpublished)

PUBLIC BIDDING — Even though New Jersey’s standard specifications for road and bridge construction may be incorporated into a bid package by reference to those specifications, if they are not referenced in the contract section concerning prices, and the contract does not contain any section on price adjustments or escalations, then the successful bidder is not entitled to raise its prices when the prices of raw materials increase.

A county solicited bids for road material. The proposal contemplated the award of an extendable, one-year, fixed-price contract and included detailed specifications concerning the materials to be supplied. In particular, the materials were to comply with New Jersey’s standard specifications for road and bridge construction, and the additions to and modifications of the standard specifications to county and municipal construction. The proposal specified that prices were to include all charges that might be imposed and that the prices would remain in effect for the entire contract period. Additionally, the proposal specified that in any dispute as to the meaning or intent of the instructions or specifications, the county purchasing agent’s decision would be final and conclusive.

The county awarded the contract to the lowest bidder, and the two signed a contract. The contract limited the maximum amount payable to the contractor. The contract further specified the agreed-upon contract prices. After the contractor began to supply the county, the market costs of commodities spiked. Because of this, the contractor wrote to the county a price increase. The contractor claimed that the contract allowed a price escalation by virtue of the contract’s reference to state specifications. Those contain a price index for asphalt and other materials. The index price for the supplied materials had increased. The county denied the price escalation. The contractor filed suit, seeking a declaratory judgment. The lower court agreed with the contractor that it was entitled to a price increase by virtue of the bid proposal’s references to the state specifications. It found the contract to be ambiguous, and construed it against the county because the county was the drafter. Finally, the lower court found that the spike in commodity prices was a unique, unforeseeable situation from which neither party should have obtained an advantage.

On appeal, the Appellate Division observed that the state specifications were not referenced in the contract section concerning prices. Nor, did the contract contain any section on price adjustments or escalations. Thus, it determined that the contract was not ambiguous regarding price. The connection that the contractor made between the contract and the state specifications was attenuated. Further, the contractor presented no testimony that, at the time of bid or contract, it expected that it would be eligible for a price increase. Thus, there was no meeting of the minds anticipating any price adjustment.

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