On November 18, 2010, the Michigan Court of Appeals held that the Bishop International Airport Authority formed a binding construction agreement when its Board authorized acceptance of the Garrison Company’s bid. In The Garrison Company v. Bishop International Airport Authority, the court reversed a lower court decision dismissing Garrison’s action for lost profits and other damages stemming from the Airport Authority’s refusal to go forward with the contract. In the course of its opinion, the Court made the following points:
- Where the parties agree on all material elements, a contract can be formed even if further details are left, even if due diligence is yet to be performed, and even if the contract execution is expressly contemplated to occur at a future date.
- Even if a construction agreement had not been formed prior to formal execution, the parties were contractually bound to execute the contract, and a breach of that “agreement to agree” would give rise to a cause of action.
- It is significant that the bid documents made clear that, upon bid acceptance, the contractor would be required to perform, and the (AIA-A201) general conditions included in the bid package did not expressly require execution as a precondition to performance obligations. Because the Airport Authority presumably would have required the contractor to perform once its bid was accepted, the court held that the Airport Authority itself must be similarly bound at that time.
- Michigan’s Public Airport Authority Act (“PAAA”), MCL 259.108, et seq. does not grant an airport authority’s CEO exclusive authority to enter contracts. Although the PAAA does contemplate that a CEO would have that authority, it also indicates that an airport authority’s board has independent authority to contract.
