Much of the litigation concerning tenders in recent years has centered around whether the preferred tenderer was appointed in a manner which accords with the principles enshrined in our Constitution and subsequently legislated in the Promotion of Administrative Justice Act. A recent judgment concerning a tender had an entirely different focus. In African Information Technology Bridge 1 (Pty) Ltd v the MEC for Infrastructure Development (134/2014) [2015] ZASCA 104 (2 July 2015), the issue was whether there was a justus error, that is, a reasonable mistake, on the part of the Gauteng Department of Transport and Public Works (the “Department”), when it entered into certain tenders with a bidder.

The Facts

 The facts, briefly, are as follows:

African Information Technology Bridge 1 (Pty) Ltd (“AITB 1”) was a company formerly known as Crestwell Trading 9 (Pty) Ltd. The sole director of AITB 1 was a Mr Nicholas Tucker. African Information Technology Bridge Pty Ltd (“African Bridge”) was another relevant company, with three directors, Mr Nicholas Tucker, Mrs G Tucker and Ms N Rose-Dukhie. The acronym this company used in all its dealings relevant to the matter was AITB.

The Department was involved in the development of Construction Contact Centres and, in January 2006, it initiated a pilot project for that purpose.

African Bridge was invited to complete the pilot project in conjunction with another company, iNathi Technology Holdings (Pty) Ltd (“iNathi”). The pilot project was successfully completed.

In May 2006, the Department invited three tenders which were related to the completed pilot project.

Ms Rose-Dukhie was the sister of one of the senior managers in the Department. This connection would have disqualified African Bridge from the tender process. To overcome this potential conflict, Mr Tucker changed the name of Crestwell to AITB 1 and AITB 1 signed the bid documents the day after the name change from Crestwell to AITB 1 was registered.

AITB1 had not completed any projects for the Department and did not complete the pilot project. Although the tenders were submitted in the name of AITB 1, certain company details submitted with the bid, such as the UIF numbers and VAT registration numbers, were those of African Bridge. The bid documents required information relating to the company, such as the number of years the bidding company had been in business, the number of employees employed by the bidding company and the assets of the company. The information supplied in the documents relating to these requirements was that of African Bridge and not AITB 1.

In June 2006, the Departmental Acquisition Council (“DAC”) met and the minutes of the meeting recorded that one tender was awarded to “AITB Inathi JV”, another tender was awarded to “AITB and Inathi JV” and a third tender was also awarded to “AITB / Inathi JV” (subject to a condition). After the DAC meeting in June 2006, letters of acceptance for the tenders were sent to African Bridge and iNathi.

In July 2006, an employee of AITB 1 attended the Department, on the instructions of Mr Tucker, and requested that the letters of appointment be changed to reflect that the tender of AITB 1 (in place of African Bridge) had been accepted. The letters were signed by an employee of the Department, but were not discussed by the DAC.

Subsequently, difficulties arose between the parties relating to the execution of the tenders and it came to the Department’s attention that it had not contracted with African Bridge but with AITB 1. Nevertheless, the Department continued to negotiate with AITB 1, knowing it was AITB 1 and not African Bridge, in order to complete the tender.

Justus error and the Court’s decision

 The court did not deal with the first tender as it did not come to fruition. In respect of the second and third tenders, the Department argued that it intended to contract with African Bridge and not AITB 1 and accordingly, no contracts were entered into in respect of those tenders.

The court considered the law regarding justus error. One of the primary requirements of our law of contract is that there must be a meeting of the minds regarding the essentials of the contract that the parties intend concluding. A mistake vitiates the consent of the parties, if the mistake is fundamental and if it is a justus error, that is, a reasonable mistake. It then has the effect that the contract is void ab initio and the contract is unenforceable.

In this case, the court found that Mr Tucker had intentionally misled the Department in order to create the impression that it was contracting with African Bridge, the company which had completed the pilot project and complied with all the requirements of the Department in respect of the tenders. Mr Tucker had deliberately set out to create the impression that it was African Bridge and not AITB 1 that submitted the tender bid.

The court held that the mistake by the Department was reasonable as the actions of Mr Tucker were deliberately taken to mislead. The Court further held that it was reasonable for the Department to conclude that it was accepting the tender of African Bridge as Mr Tucker had intentionally created confusion. The mistake in the identity of the other contracting party was fundamental and therefore constituted a material and justus error, resulting in the tenders being invalid and unenforceable.