OF TEXAS
AUWCIN. Trcx~s 78711
April 6, 1977
The Honorable B. L. DeBerry Opinion No. H-972
Engineer-Director
State Department of Highways He: Whether the Depart-
& Public Transportation ment of Highways and
Austin, Texas 78701 Public Transportation can
limit bidding to persons
licensed to do business
in Texas.
Dear Mr. DeBerry:
You have requested our opinion regarding the authority
of the Texas Department of Highways and Public Transportation
to restrict bidding on contracts for highway projects to
persons licensed to do business in Texas. Competitive
bidding is statutorily required for highway contracts and
the Highway Department is not permitted to attach conditions
which restrict the field of bidders beyond restrictions
imposed by the Legislature. V.T.C.S. art. 6674h; Texas
Xi;hwaaxCo~63~ Texas e. of Steel Importers, 372W.2d
Article 8.01 of the Texas Business Corporation Act
provides:
No foreign corporation shall have the
right to transact business in this
State until it has procured a certificate
of authority so to do from the Secretary
of State.
Sec. A. The statute then, '[wlithout excluding other activities,"
lists thirteen acts which specifically do not constitute
"transacting business." Sec. B. Bidding on contracts is
not among the listed activities. You ask, therefore, whether
bidding should be deemed "transacting business" for purposes
of article 8.01.
P- 4048
The Honorable B. L. DeBerry - page 2 (H-972)
No Texas court has ever ruled directly on this question,
but other jurisdictions have addressed the problem. In
Hogan v. City of St. Louis, 75 S.W. 604, 605 (MO. 19031, the
Supreme Court z Missouri explained its rationale thus:
Now, when our statutes say that a foreign
corporation shall not "transact business"
here until it establishes a public office
in this state, where books are kept and
process may be served, and until it pays
its quasi incorporation tax, and takes
out its license, do they mean that the
corporation must do all those acts before
it can lawfully enter into a contract to do
any business here? Does our law mean that,
when advertisements inviting bids on public
or private works in this state are read
by foreign corporations, they are to under-
stand that they have not the right to bid and
have their bids accepted unless they shall
have already complied with the terms of
our statute to enable them to transact
business here?.. No; that is not the meaning
of our statutes. No such policy of exclusion
has ever been shown in any of our legislative
acts. Foreign corporations have always been
invited and encouraged to come. The obtaining
of a desirable contract is sometimes an
inducement for a foreign corporation to come
into the state. It is not bound to establish
itself here before it can obtain such a
contract. -Entering into a contract like the
one in question undoubtedly is "transacting
business," within the unlimited meaning of the
term, but that is not the sense in which the
term is used in the statute just quoted. As
there used, it means carrying on the work for
which the corporation was organized, and, in
its application to the facts of this case, it
means performing the work called for by the
contract.
See also Automotive Material Co. v. American Standard Metal
--
Products Corp., 158 N.E. 698 mlT1927); State v
L American
Book c, 76 P. 411 (Kan. 1904).
p. 4049
The Honorable B. L; DeBerry - page 3 (H-972)
On the basis of the rationale from other,jurisdictions,
it is our opinion that the Texas Supreme Court would probably
hold that the mere bidding on a contract is not embraced
within the meaning of "transacting business" in article 8.01
of the Texas Business Corporation Act. As a result, while
the Department of Highways and Public Transportation may
require reasonable qualifications relating to a bidder's
responsibility, it may not, in our opinion, restrict bidding
on contracts to persons licensed to do business in Texas.
SUMMARY
We believe ina case of first impression
in Texas, the Texas Supreme Court would
probably hold that bidding on a contract
is not included within the meaning of
"transacting business" in article 8.01 of
the Texas Business Corporation Act and thus,
a state agency may not restrict bidding
On contracts to persons licensed to do
business-in Texas.
gzg#
Attorney General of Texas
-ROVED: u
Opinion Committee
jwb
P. 4050