The Province of Ontario (hereinafter referred to as “the owner”) required a new water and sewage treatment plant to be constructed; therefore, a call for tenders was sent out. In addition to the estimated budget, the owner’s tender documents required a deposit of $150,000 and stated that the tender deposit could be retained if the tender were to be withdrawn or the contractor refused to execute the construction contract (Hirst, 2009). Ron Engineering (hereinafter referred to as “the contractor”) responded to the call for tender by submitting a $2,748,000 offer along with the required deposit. Unfortunately, they submitted a bid much lower than intended by $750,058 (Ron Engineering v. The Queen, 1979). The contractor communicated the error to the owner after the tenders were already opened and offered a submission of other documents to show the error and also requested to withdraw from the bidding process without being penalized (Baker, 2010). However, the owner continued to seek the contractor’s signature on the contract documents regardless of their error. The contractor refused to sign the contract document. From that point, the owner believed that they were entitled to keep the $150,000 deposit and proceeded to award the contract to a different bidder other than the contractor.
The conflicts arising from this case are the following:
• Was there a contract between the owner and the contractor?
• Was the contract void due to a mistake, or was the contract breached by the contractor?
• Is the owner eligible to recover damages?
• Should the deposit be returned to the contractor or kept by the owner?
The relationships between the involved parties are seen in Figure 2. There was a relationship formed between the owner and the contractor when a tender and deposit was submitted. However, that relationship was severed by the contractor when they decided to not sign further contractual documents with the owner and decided to withdraw their bid. As a result, this decision forced the owner into a new relationship with a different contractor who bid much higher than Ron Engineering.
The obligations for the tendering process are as follows: the owner’s obligation to consider all conforming bids in accordance with the conditions of tender, the owner’s qualified obligation to accept the lowest tender, the mutual obligation of owner and contractor to enter into Contract B, and the bidder’s right to recover any tender deposit if the bid is not accepted (Devonshire, 1998). Prior to the Supreme Court decision, the traditional tendering process was unclear of whether the contractor had a legal obligation to the owner. Traditionally, a bidder was free to withdraw its bid at any time prior to acceptance by the owner because the bid was simply an offer made in response to the owner's invitation to tender. However, the law relating to tenders was changed dramatically from the R. v. Ron Engineering & Construction (Eastern) Ltd. case. The Supreme Court held that...