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Procurement Perspectives: The tender contracts chess game

Stephen Bauld
Procurement Perspectives: The tender contracts chess game

As I see it, whatever the case may be with respect to extreme forms of a RFP, the law is very clear that a “pure” tender (in which irrevocable bids are submitted on the understanding that the lowest compliant bid has at least a prima facie right to be awarded the contract) typically does in fact give rise to enforceable legal rights in favour of both the supplier and the contractor.

The determination as to whether such rights do in fact exist in relation to any given tender turns upon a series of questions, each of which must be resolved in favour of the prospective claimant. The first bridge that a court must cross before deciding that so-called Contract "A" rights have arisen in relation to a tender is to determine whether the terms and conditions governing the submission of a bid were sufficient to support such rights.

Alternatively stated: unless there is some basis for inferring that a tender contract arose by reason of the submission of a bid, no such contract will be presumed. In other words, there is no presumption that merely because tenders are sought, the contracting authority — or any person submitting a bid, for that matter — must have assumed that a contract would arise merely by reason of the submission of a bid.

Three particular issues are relevant at this stage of inquiry. The first is whether the terms and conditions of tender clearly envision further negotiation after the selection of a "preferred" bidder, before any contract is concluded. The second is whether the terms and conditions governing the tender, combined with the bid that is submitted are sufficiently definitive of the rights and obligations of the parties to give rise to a bidding obligation. The third is whether the terms and conditions governing the tender indicated an apparent intent for legally binding obligations to arise, once a bid was submitted.

It is also worth knowing that an agreement to negotiate is not enforceable.

Formal undertakings between two or more persons to work towards reaching an agreement are very frequently encountered in business. Despite their frequent occurrence, the general rule is that such undertakings are ineffective. Where the matter on which later negotiations is to take place is fundamental to the overall commercial efficacy of much wider business agreement, the effect is very frequently to render the entire agreement unenforceable.

This rule is a logical extension of the requirement for certainty in a contract. It nevertheless constitutes one of the most dangerous traps for practitioners of commercial law, and the businesses that they advise. The courts cannot enforce an agreement to negotiate and settle the terms of a contract.

Alternatively stated, a court cannot make a bargain for the parties which they themselves did not make, even if the declared intent of the parties in entering into the agreement to negotiate towards some future agreement was to enter into an undertaking that would be legally enforceable.

Contract "A" rights are not negated merely because it was intended that some form of contract be extended after the award of the contract to the successful bidder, provided the terms and conditions of the tender do not contemplate any further negotiation regarding its content.

At one time, it was common to hear it said that there was no such thing as a contract to contract — but language is now not so frequently employed, as it is clear that there are situations in which a promise to enter into a contract at some point in the future will be binding on the parties.

The most obvious situation where an agreement to contract is enforceable is in the case of an option contract for the purchase and sale of a given asset.

Stephen Bauld is a government procurement expert and can be reached at

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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