Procurement Law in the Early Years
Prior to 1981 most Canadian lawyers did not consider that putting work out to tender created a legal relationship. The common view was that a tender was an “invitation to treat” - like an advertisement. If a person submitted a tender, this was an offer to do the work which could be accepted by the owner. Only once the offer was accepted did a contract come into existence.
R. v. Ron Engineering Redefined Legal Status of the Invitation to Tender
This view was successfully challenged in the 1981 Supreme Court of Canada case of R. v. Ron Engineering. In that case, a bidder submitted a tender, but quickly realized that its bid was too low - it had made a mistake in adding up the elements of the bid and missed a price out. It told the owner it was withdrawing the tender.
If the tender call had been an invitation to treat, withdrawing the tender should not have been a problem. An offer can be withdrawn at any time until it is accepted. But the Supreme Court of Canada disagreed.
Defining Contract A and Contract B in Canadian Contract Law
The Supreme Court of Canada held that putting out an invitation to tender was in effect an offer, which was accepted by every person who submitted a tender - creating a range of contracts with each bidder. These are known as “Contract A” - the bid contract.
Then, when the owner accepts one of the tenders and the parties enter into the contract to carry out the work - known as Contract B.
The result in Ron Engineering was that the bidder could not withdraw its bid. The owner was entitled to call on the bid bond submitted with the bid to cover the additional amount it paid to the next lowest bidder. Later cases have looked in more detail at the nature of contract A and the consequences for such bidder or owner. These will be explored further in later blogs - starting with looking at M.J.B. Enterprises Ltd. and the implied term that only a compliant bid may be accepted.