The New Zealand Courts have long recognised that a "two contract" approach may be appropriate in analysing the obligations of parties to a tender process. Where the approach applies, the first contract ("the preliminary contract") will be formed when a party responds to an invitation to tender. That preliminary contract will govern the manner in which the response is to be treated by the offeror, typically obliging it to follow a particular process in evaluating the response and comparing it to others. The second contract will arise if and when that response is accepted and the parties agree to enter into an agreement for services.

The two contract approach has been of assistance to unsuccessful tenderers who considered that their tender was unfairly rejected, as it has enabled them to sue on the preliminary contract. However, not every tender process will give rise to two contracts, as a recent High Court decision demonstrates.

In GHP Piling Ltd v Leighton Contractors Pty Limited [2012] 3 NZLR 255, the plaintiff, an unsuccessful tender candidate, claimed that, as a result of its response to the defendant's request for proposals (RFP), a preliminary contract had been formed that obliged the defendant (amongst other things) to act fairly and equally in deciding to which party to award the tender, consider only tenders submitted in accordance with the requirements of the tender documents and evaluate the tenders in accordance with the terms of those documents as well as the requirements of fairness and equity.

Justice Asher dismissed the claim, holding that no preliminary contract had been formed. He noted that a Court will not automatically assume that the submission of a tender in conformity with a tender process will create a preliminary contract. In determining whether such a contract exists, an analysis purely in terms of offer and acceptance will be unrewarding. Rather, the test is whether, viewed as a whole and objectively, the exchanges between the parties show a concluded agreement. Features that may indicate a formal process will include, amongst other things:

  • A requirement for registration of tenders and the payment of a deposit
  • Detailed specifications for tender that must be complied with
  • A stated methodology and criteria for processing and evaluating tenders
  • An express or implied commitment to accept the tender that best meets the criteria.

Applying these principles to the case before him, Justice Asher found that a contract had not been concluded. He noted that there was no requirement for registration or payment of a deposit, no formal tender procedure, no detailed specifications, no statement in the RFP that tenders would be evaluated in accordance with any specific criteria and no requirement in the RFP to accept a tender that complied best with any criteria.

The decision provides useful guidance for parties preparing RFPs. In particular, it is relevant to managing the risk that those documents may be deemed to give rise to enforceable contractual obligations.