D. The Conduct of Tendering Processes

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 147-151

Page 147

Under traditional doctrine, an invitation to tender followed by the submission of tenders constituted initial steps in a negotiation that would conclude only when the offer constituted by a particular bid or tender was selected by the inviter of tenders, thus accepting the offer and creating a binding contract. As we have seen in Chapter 2, in Ron Engineering & Construction Eastern Ltd. v. Ontario,³⁷the Supreme Court of Canada developed a new approach to the analysis of contract formation in this context and held that an initial contract, relating essentially to the tendering process was formed by the submission of a bid, which

Page 148

constituted the acceptance of an offer constituted by the invitation to tender. Thus, this initial Contract A, as it was called, contained and rendered enforceable the terms of the tendering process set out in the invitation. In Ron Engineering itself the issue raised was whether the bid deposit, as indicated by the terms of the invitation, was irrevocable in the sense that if a bidder was selected and then refused to enter into the ultimate agreement to do the work, called Contract B, the deposit would be forfeited and irrecoverable. In Ron Engineering, the plaintiff had submitted the lowest bid. However, when selected by the defendant, the plaintiff, because of a substantial calculation error in its bid, refused to enter Contract B. The Supreme Court held that, pursuant to the terms of Contract A, the plaintiff’s claim to recover its deposit must fail. In subsequent cases, it has become clearly established that Contract A also contains implied terms that have the effect of regulating the conduct of the person conducting the tendering process and requiring, in effect, that the process be conducted in a fair manner. In Healthcare Developers Inc. v. Newfoundland,³⁸ the Newfoundland Court of Appeal held that the person issuing the tender call must, under an implied term in Contract A, act in good faith, a standard that required "at a minimum ... that a party not act in bad faith."³⁹Cameron J.A. further explained that "it would be acting in bad faith to award something other than Contract B, to fail to reject tenders not in compliance with the call or to award Contract B on the basis of an undisclosed preference." Other courts have formulated the implied term as a duty to treat bidders "fairly" and in good faith.⁴⁰Still other courts, however, have imposed similar obligations by means of an implied term in Contract A to treat all bidders "fairly and equally," an implied term that contains no reference to the concept of "good faith."⁴¹In Martel Building Ltd. v. Canada⁴² the Supreme Court of Canada gave its imprimatur to an implied contractual duty of "fair and equal treatment."⁴³

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The concept of "fair and equal treatment" does indeed appear to capture the content of the implied term. Thus, in a number of cases, the conduct amounting to the breach of the implied term was the failure to disclose a preference for certain types of contractors, such as local contractors, that might result in unequal treatment of...