Defence Construction tendered for construction bids according to 11 specific documents. There was an indicated privilege clause which stated "the lowest or any other tender shall not necessarily be accepted". One of the four bidders (Sorochan) submitted a bid suggesting an alternative cost (in effect disqualifying their bid). The owner accepted this. M.J.B. Enterprises had the next lowest bid. The appellant brought an action stating that this alternative cost invalidated their tender and therefore M.J.B. should have been awarded the contract.
- Is it implied that only complying bids will be accepted in a tender?
- Does the owner have to accept the lowest bid, even when there is a privilege clause?
Appeal allowed. The contract with Sorochan is not binding, however the respondent does not have to contract with M.J.B.
The court holds that it is an implied term in tenders that only complying bids will be accepted and that Sorochan's bid did not comply with the terms – therefore, it cannot be accepted. In accepting the disqualified bid the owner is in a breach of Contract A (as outlined in the analysis of Ron Engineering) with the other bidders. Although the privilege clause does not overrule this obligation to only accept compliant bids, it does allow the owner to not simply accept the lowest bidder. Therefore, the owner was under no obligation to contract with the plaintiff. However, on the balance of probabilities the court finds that M.J.B. would have been awarded the contract and assesses damages of $398,121.27 based on an agreement of liability arranged before the case at bar
- A privilege clause is only compatible with accepting compliant bids.
- In the absence of a privilege clause, you are most likely to be bound to accept the lowest offer.