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Contracts - Commercial - Interpretation

Contracts - Tenders

Rankin Construction Inc. v. Ontario (Ont CA, 2014)

In this case the Court of Appeal gave some useful general characterizations of the law of bidding, in the context of public works tendering:

[12] Before outlining the trial judge’s findings, the appellant’s arguments on appeal, and my analysis of those arguments, some legal context is helpful.

[13] The Supreme Court’s most recent judgment dealing with the law of tender is Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 (CanLII), 2010 SCC 4, [2010] 1 S.C.R. 69. Though he and three others dissented in the result, Binnie J. provides a helpful overview of the law of tender, at para. 87:
For almost three decades, the law governing a structured bidding process has been dominated by the concept of Contract A/Contract B initially formulated in The Queen in right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., 1981 CanLII 17 (SCC), [1981] 1 S.C.R. 111. The analysis advanced by Estey J. in that case was that the bidding process, as defined by the terms of the tender call, may create contractual relations (“Contract A”) prior in time and quite independently of the contract that is the actual subject matter of the bid (“Contract B”). Breach of Contract A may, depending on its terms, give rise to contractual remedies for non-performance even if Contract B is never entered into or, as in the present case, it is awarded to a competitor. The result of this legal construct is to provide unsuccessful bidders with a contractual remedy against an owner who departs from its own bidding rules. Contract A, however, arises (if at all) as a matter of interpretation. It is not imposed as a rule of law. [Emphasis in original.]
[14] Tercon makes clear that the content of Contract A – sometimes referred to as the “bidding contract”[1] – is based on its express, and occasionally, implied terms: para. 17. In M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., 1999 CanLII 677 (SCC), [1999] 1 S.C.R. 619, the Court implied a term, based on the presumed intention of the parties, that notwithstanding a “privilege” clause stating that the owner was not obliged to accept the lowest or any tender, only compliant bids were open for acceptance. And in Martel Building Ltd. v. Canada, 2000 SCC 60 (CanLII), 2000 SCC 60, [2000] 2 S.C.R. 860, the Court implied a term requiring the owner to be fair and consistent in the assessment of tenders.

[15] At para. 93 of Tercon, Binnie J. cautions that “[o]nly in rare circumstances will the Court relieve a party from the bargain that it has made.”[2] He continues, at para. 94, that in determining whether a term should be implied, the focus is on the intentions of the actual parties, not those of reasonable parties, and that if there is evidence of a contrary intention, on the part of either party, a term may not be implied.

[16] Therefore, whether a Contract A has arisen, and what terms, if any, should be implied, are case-specific determinations.
And it made the following comments on the interpretive principles that the courts will applied to commercial contracts:
[29] Terms may be implied in a contract based on: (1) custom or usage; (2) legal incidents of a class or type of contract; or (3) the presumed intention of the parties, where the term is necessary “to give business efficacy to a contract or as otherwise meeting the ‘officious bystander’ test as a term which the parties would say, if questioned, that they had obviously assumed”: Canadian Pacific Hotels Ltd. v. Bank of Montreal, 1987 CanLII 55 (SCC), [1987] 1 S.C.R. 711, at p. 775; see also M.J.B. Enterprises, at para. 27; Double N Earthmovers, at para. 30; Martel, at para. 81. Any implied terms must fit and be the necessary implication of the express terms; if there is any evidence against the proposed term, it cannot be implied: M.J.B. Enterprises, at para. 29. In my view, none of the criteria for an implied term prohibiting investigation of allegedly non-compliant bids is made out in this case.

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