4760 ASSIGNMENT TWODue Monday, March 11 noon

No extensions, Must be BB submitted, in WordVersion Mar 04, 2013

[25] An Ontario municipality (the Owner) decided to update and expand its water treatment facilities. To do so, the Owner invited competitive tenders from contractors for the construction of the new facility

The Owner’s consultant on the project designed the facility and prepared the Tender Documents to be given to potential contractors interested on bidding on the project. The Tender Documents included the Plans and Specifications, the Tendering Instructions, which described the tendering procedure and other requirements to be followed by the bidders, the Tender Form to be completed by the bidders, the form of written contract that the successful contractor would be required to sign after being awarded the contract and a number of other documents.

According to the Tendering Instructions, each tender bid was to remain “firm and irrevocable and open for acceptance by the Owner for a period of 60 days following the last day for submitting tenders”. The Tendering Instructions also provided that each bidder was to include with its tender, a certified cheque for $200,000 payable to the Owner as a tender deposit. In addition, the Tendering Instructions contained the following provision describing the circumstances in which the Owner would be entitled to retain the tender deposit:“The bidder guarantees that if its tender is accepted by the Owner and the Owner does not, for any reason whatsoever, receive the Contract signed by the successful bidder within 7 days after the successful bidder has been represented with the Contract for signature, the Owner may retain the tender deposit for its own use and may accept any other tender.”

XYZ submitted its tender in accordance with the Tender Documents. Approximately 10 minutes after the tender closure time, XYZ discovered that it had made a clerical mistake in preparing its tender: XYZ had mistakenly copied a figure from a calculation sheet. Due to the error, XYZ omitted an amount of $800,000 from its tender price of $3,300,000. Immediately on discover of its error, XYZ contacted Owner and told him they wished to withdraw their tender. XYZ and the Owner agreed that the clerical error was genuine: however the Owner refused to permit XYZ to withdraw its tender.

Within 2 weeks, the Owner announced that it had awarded the contract to XYZ, who was the lowest bidder and presented XYZ with the contract for execution. XYZ refused to sign the contract. The owner then awarded the contract to the next lowest bidder, for a price of $3,600,000.

1. What potential liabilities in contract law could arise in this case?

The potential liabilities that are present is this case is breach of contract by XYZ, this is due to the fact that the owner clearly demonstrated through the tender package the rules associated with participating in the bidding process. The rules within the contract state that when a bid is selected, a package must be signed within seven day and sent to the owner to legally bind the agreement, this fact demonstrated that it is the bidders responsibility to effectively accept the term and sign the document. Failing to do so would result in the forfeiting of the deposit of $200 000 submitted to enter into the bidding process.

As demonstrated in the Belle River Vs Kaufman, it was suggested by a judge that a just and reasonable man will no profit by the mistakes of others. Therefore XYZ may have a case to refund its deposited money. However the owner may argue that he was not aware of the flaw within the tender submission grace period, and that the tender contract package consisted of all the agreements set forth by the owner to eliminate such conflict between tender bidders.

2. Would the Owner be entitled to claim from XYZ?

As is demonstrated by the case of Ron Engineering vs. the Queen, where the contractor Ron Engineering under quoted the bid by $750 000. The bid agreement and participation of the bidders followed a similar case scenario, where there were contractual rules set out for the bidders to follow. Initially Ron Engineering won the case, however the supreme court ruled against this because as stated by the judge “An advertisement for tender is an offer that is accepted when the tender is submitted and a contract is formed that precludes the contractor from withdrawing their bid” therefore XYZ will probably not be entitled to receive the money spent on the deposit. And therefore the owner may keep the money provided to enter the bidding agreement.

3. How would the amount of the claim be calculated?

There would be no claim since the owner in this case has the money surrendered by XYZ to enter into the bidding agreement, since XYZ did not accept the contract within the 7 day period and the contract has been breached; however the the contractor is entitled to keep the deposit money.

4. Would the Owner be entitled to retain the tender deposit?

Yes the owner would be entitled to retain the deposit as it is clearly stated within the contract agreement the following

“The bidder guarantees that if its tender is accepted by the Owner and the Owner does not, for any reason whatsoever, receive the Contract signed by the successful bidder within 7 days after the successful bidder has been represented with the Contract for signature, the Owner may retain the tender deposit for its own use and may accept any other tender.”

Therefore it is expected that all participants in the bidding process abide by the rules that they have agreed to enter into. An so the owner may keep the $200,000 deposit.