#9046 - Tenders And Bids - Contracts Law

THEME 8: TENDERS AND BIDS

Traditionally, a call for tenders may be communicated by way of advertisement to the public or it can be an invitation to a specific group of companies made in a private manner. Under the traditional analysis, a tender is treated as an invitation to treat because a contractor chooses to send in a bid by way of a quotation.

Unless the initial invitation indicates that the lowest bid will be chosen, any decision can be made to choose the best bid based on economic principles. If there is a communication indicating that the call will choose the highest or lowest bid, there is said

to be an offer because the company is creating specificity (Harvala rule). Traditionally,

the bidder is only bound by an offer it makes when it’s accepted, so the offer of a bid can be withdrawn before acceptance. With Ron Engineering (SCC), policy seems to change this traditional rule such that offers cannot be withdrawn before acceptance because it would undermine the integrity of the tender system. The court says that in some cases, the formal tendering process may create a preliminary contract (A) such that the call was made as a unilateral offer. This is not always the case. The idea in Ron is that the caller needs to know that the call remains valid so the system remains fair. It remains unclear whether the caller must accept the best offer. We must look at business efficacy reasons to determine if the call is slanted in favour of the caller. The cases below demonstrate circumstances with a difference in the intention with the call.

COMMENTARY ON WESTERN MUTUAL BENEFIT: A corporation is considered a legal entity in this case so contractual law still applies. In the cause of a municipal resolution, the law of enforceable contract does not necessarily apply because it can be amended or rescinded at any time and is seen as little more than a political promise.

FRAMEWORK EMERGING FROM SCC IN RON

*ONLY one bidder wins A, and then B.

A is bidding process, and B is carrying out of contract.

Two contracts can be formed in tendering process:

• A) Under contract A, call for tenders is actually an offer to start fair tendering process and the submission of a tender is acceptance

  • Obligations under contract A – parties are required to abide by terms of contest

  • Party calling for tenders is called to fairly select best bid

  • Parties submitting bids are prohibited from revoking offers

  • There is no reward here because it ends after acceptance of the offer

• B) Call for bid is invitation to treat. Bid constitutes the offer. There will be one contract B when bids are submitted, after all As are submitted

  • Submission of tenders is offer, and selection is acceptance

  • Acceptance is the reward

TENDER RULE:

A statement of invitation to tender is seen as an invitation to treat, rather than an offer. A contract is made when the person who submitted the invitation to tender accepts a tender that’s been submitted (provides acceptance). The rules in invitation to tender can also create binding obligations on owner, and not just the bidder who is sending in a tender. Although that is the case, invitations to tender still give companies the ability to retain...