Case Comment - SCC - Tercon Contractors Ltd. v. British Columbia

On February 12, 2010, the Supreme Court of Canada (SCC) released its long awaited decision in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4. In a close (five judges to four) split Decision, the majority of the SCC agreed with the trial judge and found that the B.C. Government had misbehaved and breached Contract A with Tercon Constructors Ltd. by accepting a bid from an ineligible bidder for a road building project in Northern B.C. The Province argued that an exclusion of liability clause in the RFP protected it from the claim advanced by Tercon Constructors Ltd. The trial judge and the majority of the SCC (though not the B.C. Court of Appeal nor the minority of the SCC) disagreed with the Province and, while not criticising the right to use an exclusion of liability clause (nor even the wording of the clause in this case), found that the "egregious" conduct of the Province was outside of the protection afforded by the clause.

Freedom of contract purists (let's call them Contractarians) will criticise the trial judge and majority of the SCC for allowing perceived misconduct on the part of the Province to dictate a result that ignores and avoids the enforcement of an unambiguous exclusion of liability clause freely agreed to between two sophisticated, experienced parties. These Contractarians will say that the exclusion clause was valid and sufficiently broad to capture all conduct, and that it would have been the intention of the parties that the Province be protected from any and all claims. The Contractarians will ask, "Why should these sophisticated commercial parties not be held to their bargain?" These points have some merit.

Fairness in tendering/procurement purists (let's call them Fairnessarians) will criticise the Court of Appeal and the minority of the SCC for advocating an outcome that would erode the commercial need for fairness in the tendering process. Fairnessarians will argue that, if the exclusion of liability clause in this case were able to permit an owner to accept a bid from an ineligible bidder, then it is only a couple of feet down that slippery slope before such a clause could also allow an owner to accept a materially non-compliant bid. The Fairnessarians will ask, "How will the tendering process function if, with a single clause, owners can completely insulate themselves from liability and treat parties expending time and money to bid on work unfairly?" These points have some merit, too.

If bidding and tendering, or procurement generally, is important to your business or work, Tercon is a case that you will probably want to get to know. It doesn't result in any dramatic changes to the landscape of tendering law in Canada but it does put an interesting and important gloss on how parties to the Contract A - Contract B scheme ought to conduct themselves and adds another chapter to the epic struggle between the Contractarians and the Fairnessarians.

Please click here to read Adam I. Zasada's case comment on Tercon Contractors Ltd. v. British Columbia (Transportation and Highways).