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Posted on February 21st 2006 in Legal Articles

Bids & Tenders 101

Bids & Tenders 101

In order to find a supplier, many businesses and government departments rely on the tender process. The party requiring a particular service or item will draft a request for proposals (RFP) and those who believe they can provide the service or item will submit a tender in the hopes of being the successful bidder. While this area is governed by the rules of contract law, over the years a number of principles, unique to tenders, have developed.


Two Contracts
An interesting thing about the competitive bidding process is that two different contracts come into play, Contract A and Contract B. This notion of two contracts was first introduced by the Supreme Court of Canada in the 1981 case of Ontario v. Ron Engineering & Construction (Eastern) Ltd. When a tenderer submits its proposal in response to an RFP, Contract A automatically arises, it being a contract to execute a formal contract if the tenderer’s bid is accepted. Once the issuer of the RFP has chosen the winning tender, the two parties will then enter into Contract B, the contract for the actual supply of services or materials.

In the 1999 case, MJB Enterprises Ltd. v. Defence Construction (1951) Ltd, the Supreme Court of Canada once again considered this area of the law. Finding that its previous decision had been too broadly interpreted by the lower courts, the Supreme Court stated that the existence of Contract A was not a given. Rather, one must look to the terms and conditions set out in the RFP to determine whether it was the intention of the parties to create Contract A.

With respect to mistakes made by a tenderer in its price, the general rule is that they are irrelevant and will not affect the creation of Contract A. However, if the mistake is obvious, such that a reasonable issuer would realize the mistake, the issuer is not entitled to “snap up” the tender.

In early September, the Ontario Court of Appeal handed down its long awaited decision in the case of Toronto Transit Commission v. Gottardo Construction Limited. This decision provides a good overview of this area of the law.
The Facts
The TTC had decided to undertake a major construction project. To that end, it prepared a request for proposals. The tender instructions set out a detailed process that tenderers were to follow, including that after the closing date tenders could not be withdrawn for a period of 120 days. The RFP also indicated that the TTC retained the right to request further documentation from tenderers before making its final decision.

Gottardo Construction was the lowest bidder. However, shortly after the tenders were made public, Gottardo advised the TTC that it had made an error in its tender price, having understated it by $557,000. Despite the mistake, the TTC took the position that Gottardo was bound by its original bid amount. When Gottardo refused to sign a contract, the TTC awarded the construction contract to the next lowest bidder. It then sued Gottardo for the difference between its original bid and the higher amount charged by the next lowest bidder.

The Court Decisions in Gottardo
Superior Court of Justice
The trial judge in the Gottardo case concluded that Contract A had not arisen at the time the bids were opened. This was based on the fact that the RFP indicated that additional documents would be required by the TTC before it made its final selection. This finding was particularly relevant because Gottardo’s calculation error became obvious only upon review of those additional documents. The trial judge concluded that since the mistake was discernable on the face of the documents and that Contract A did not arise until after those documents were made available, the TTC could not compel Gottardo to honour its original price.

Court of Appeal
The TTC appealed the decision to the Ontario Court of Appeal. The appellate court disagreed with the trial judge and reversed her decision. They found that it was clear from the bidding documents that “the parties intended to initiate contractual relations the moment the tenders were opened.”

Since Contract A was formed when the tenders were opened, there was no error apparent on the face of the tender. Justice Rouleau, on behalf of the court, stated “The fact that certain steps are taken and certain documents are to be produced by the tenderer after the submission and opening of tenders will not delay the formation of Contract A when the clear intent of the parties is to be bound as of the opening of the tenders.”

The result was that Gottardo was ordered to pay to the TTC damages in the amount of $434,000.

Drafting an RFP
This case illustrates the importance of preparing a clear and complete request for proposals. It is the request for proposal that sets out the rules for all those wishing to compete for a particular contract as well as for the party issuing the RFP. What follows are a few points to bear in mind when preparing your next RFP.

•The RFP should include legal provisions important to the issuer and to which the winning tenderer will be expected to agree to.

•The process must be open, fair and transparent. All the rules of the process must be made known to the bidders at the outset.

•Full disclosure of all relevant facts must be made.

•Evaluation criteria should be set out in the RFP.

Getting sound legal advice during the drafting stage as well as after receipt of the tenders is important. An experienced lawyer can assist in preparing the RFP, review the tenders and assist in the negotiation and preparation of Contract B.

For further information about this particular area of the law please contact Howard Steinberg or Stan Landau. 1
ce is expensive, uncertain and to some degree beyond a lawyer’s control.

A person cannot be divorced until at least twenty days have passed from his or her spouse having been served with the petition for divorce and then only if the other spouse has not filed an answer – the equivalent of a statement of defence. If the spouse is out of province, they have between 40 and 60 days to respond.

Clearance Certificate
Most importantly, no court will grant a divorce until it has received notification (a “clearance certificate”) from Ottawa that the divorce can be granted by that particular court. It takes between six and eight weeks for a clearance certificate to be issued, mailed, received and filed by the court. No judge will grant a divorce if there is no clearance certificate in the court file and there is nothing a lawyer or judge can do to expedite the delivery of the certificate.

Even after a divorce is granted, there is a thirty day period before remarriage is possible. A lawyer can try to eliminate the thirty day waiting period by having the ex-spouse sign an undertaking not to appeal the divorce, but that requires extra work as well as the co-operation of the ex-spouse and adds to the cost of the proceeding.

Divorce Judgment
Assuming that the clearance certificate has arrived and an undertaking not to appeal has been signed, there is one final hurdle to overcome. Normally, it takes the court between two and four months to issue a divorce judgment and return it to the parties. If a petitioner wants a divorce more quickly, his or her lawyer must place special clauses in the petitioner’s affidavit explaining why it is urgent that the divorce be granted immediately.

Then the lawyer must convince a registrar at the court office that there is good reason to put the motion record before a judge that same day. If successful, the lawyer will be directed to a judge who may or may not have time to review the material. The lawyer will often have to convince a court registrar to take the material to a judge. If a judge does not have time to review the material or if the registrar is not co-operative, the lawyer will have to try and find a more agreeable judge.

Having found a judge, the lawyer must persuade him or her to consider the motion record then convince the judge to grant the judgment. In a case that was heard in 2001 an Ontario judge stated that most people who are separated intend at some time to remarry and an imminent remarriage is not by itself, therefore, a special circumstance that justifies granting an immediate divorce.

If the judge signs the judgment that day, the lawyer must then convince the local registrar to stamp and record the judgment right away, rather than take the usual two weeks and then sign a certificate of divorce that day.

All of this adds enormous uncertainty, cost and stress to the file and this is assuming there are no other problems (such as difficulty serving the petition) that might delay things further.

Minimum Six Weeks
To conclude, it takes a minimum of six weeks from the date a petition is issued to the date when a divorce can be signed. Stories people tell of having their divorce petition issued and the divorce granted on the same day are not true – at least not in Ontario. Neither will a joint petition hurry matters along as no divorce will be granted until the clearance certificate arrives and the parties will still have to convince a judge of the urgency of granting the divorce.

If you are separated and plan to remarry, getting divorced from your previous spouse should be the first thing on your agenda. The added stress and cost of a “quickie divorce” may ruin what should be a joyous occasion and there is always a chance that the divorce will not be obtained in time, in which case, you will have to postpone the wedding.

Finally, remaining married maintains rights and obligations between people that perhaps the parties do not want to maintain and that alone may be reason enough to get divorced.

Grounds for Divorce
A divorce may be granted on the ground that there has been a breakdown of the marriage. A breakdown of a marriage is established only if

– the spouses have lived separate and apart for at least 1 year immediately before the divorce;
– one of the spouses has committed adultery;
– one spouse has physically or mentally abused the other spouse.

Both Nicola Savin and Jacqueline Peeters practice in the area of family law. Please visit our specialty site at www.familylawtoronto.ca