Evaluation Breached Tender Conditions: Alberta Queen’s Bench Court

You would think that the owner would get one thing right before issuing an invitation for tenders: its standard for evaluating the tenders.

Yet, in Elan Construction Limited v South Fish Creek Recreational Association, the Alberta Court of Queen’s Bench recently found that the owner’s tender evaluation criteria were unfair and did not reflect the terms of the tender, and awarded nominal damages to the unsuccessful bidder. The decision is a good checklist for owners in establishing tender evaluation standards.


In July 2010, the South Fish Creek Recreational Association (“SFCRA”), issued an invitation for tenders for the construction, as additions to its existing recreational facilities, of two ice surfaces and multi-purpose rooms and other spaces. Elan was a pre-qualified bidder and filed a bid.

The published evaluation matrix provided for a maximum of 100 points and contained the following elements: Price, 35 points; Date of completion, 35 points; Previous community and arena experience, 20 points; References, 10 points.

Elan was not awarded the contract and sued for damages. The trial judge found the following with respect to the bid criteria:

Price: Elan’s bid was the lowest by $400,000.

Completion Date:  The Invitation to Bid stated that SFCRA wanted the Project to be substantially completed by August 1, 2011, with that date highlighted in bold. The Instructions to Bidders contained a liquidated damages clause providing for liquidated damages in the event of late completion in the amount of $15,000 per day, later reduced to $3,000 per day.

Elan’s bid provided for substantial completion by August 1, 2011 and completion of deficiencies by August 15, 2011. The successful bidder’s completion date was August 31, 2011.

The adjudicator did not use August 1, 2011 as the relevant date. Instead, he took the average of the completion dates of certain, but not all, of the bidding contractors considered most relevant, arriving at a completion date of September 5, 2011; and then awarded bidders points out of 30 based on their proximity to that notional date. As a result, Elan received 25 points for its on–time date of August 1, 2011 for substantial completion, while the successful bidder received 34 points for its later substantial completion date of August 31, 2011.

The evaluator used the same approach to deal with the estimated time to complete deficiencies, arriving at an average figure of 45 days after his notional completion date of September 5, 2011. As a result, Elan received zero points for its 14 day estimate while the successful bidder received four points for its longer 30 day projection.

LEED: Leadership in Energy and Environmental Design (“LEED”) experience was used as a factor in the evaluation criteria factor, but there was no indication in the Bid Documents to this effect.

Court’s Decision

The Court of Queen’s Bench found that on various accounts the evaluation factors used by the owner had not been disclosed in the bid documentation, and therefore the owner breached the implied duty of fairness inherent in the tender process. Here are the reasons of the court on some of the factors:

Substantial Completion Date

“Mr. Quinn’s methodology, as described above, created an arbitrary standard that could not have been within the contemplation of the bidders. His testimony as to his method and rationale served only to underscore the arbitrary nature of his evaluation. Moreover, his approach created, in my view, the kind of undisclosed evaluation criterion that the Supreme Court of Canada has said constitutes a breach of Contract A.”


“….SFCRA’s approach to evaluating the relative experience of the bidders cumulatively amounted to breach of the Bid Contract….While I agree that it would not be unreasonable for SFCRA to put greater emphasis on arena experience given the nature of the Project, in my view, that emphasis should have been disclosed in the Bid Documents…..an explicit preference for such experience could and should have been indicated in the Bid Documents….”

Other undisclosed criteria

“I find that other undisclosed criteria influenced SFCRA’s assessment of the bidders’ experience. ….any consideration of LEED in the assessment of experience…..should have been brought to the attention of bidders….Similarly, while interviewing candidates may be useful and may fall within SFCRA’s right to seek further information, bidders should have been made aware that interviews were a possibility. Further, Elan should not have been forced into the position of attending an important interview without key employees who were designated to work on the Project. In my view, both the use of interviews and the process by which they are conducted must be fair to all bidders.

In its analysis the court referred to the recent decision of the Supreme Court of Canada in Bhasin v Hrynew. In that decision, the Supreme Court held that there is a duty to perform contracts honestly. Applying that principle, the Court of Queen’s Bench said:

“I hasten to add that there is no suggestion that SFCRA acted dishonestly or with malice. Nevertheless, as the Supreme Court of Canada held in Bhasin, a duty of good faith may require more than honesty. Where a bid evaluation has been conducted in an arbitrary manner or on the basis of undisclosed criteria, that is sufficient to constitute breach.

The court concluded that, absent the owner’s breaches of contract, Elan would have been the successful bidder.

In assessing damages, the court held that either the cost of preparing the bid, or the lost profit on the construction contract that would have been awarded to Elan, is the proper measure of damages, but not both. In assessing damages under the second approach the court reduced Elan’s claim:

  1. because Elan had, in the court’s view and based on the next lowest tender, underestimated the subcontracts. On this account Elan’s claim should be reduced by $185,000, from $704,908 to $519,908
  2. because the contractor who was actually awarded the contract was anticipating a $300,000 profit and made a loss of $600,000, and Elan would likely have encountered a similar experience. Accordingly, Elan’s claim should be reduced from $519,908 to nominal damages of $1,000.

Having awarded damages based upon loss of profit, the court said that no damages could be awarded for the cost of preparing the bid, and in any event no proof of that cost had been provided.


This decision is a good illustration of two perils relating to claims for breach of an invitation to tender, and the “smell tests” which the court will likely apply in the course of litigation over a tender.

First, a court will be very unsympathetic to an owner that has not prepared and applied tender evaluation criteria that fairly reflects the bid conditions. There is really no excuse for an owner applying criteria that do not accurately reflect the bid conditions which it has itself prepared and published. Interestingly, the court used the concept of “honest performance” of a contract, enunciated in the Bhasin case, to judge the owner’s performance of its obligations under the invitation to tender.

Second, the court will carefully scrutinize the bidder’s claim for damages. The court may well think: “Well, this contractor was fortunate not to have won that contract!”

Elan Construction Limited v South Fish Creek Recreational Association, 2015 ABQB 330

Construction law – tenders- Contract A/Contract B – honest performance – damages

Thomas G. Heintzman O.C., Q.C.,  FCIArb                                                      December 20, 2015



Waiver During A Bidding Process Held To Bar Claim Arising From The Tender

The Ontario Superior Court recently dealt with the troubling issue of whether an owner can rely upon a waiver of claims signed by a bidder during a tender to defeat a contractor’s claim arising from the tender. In Todd Brothers Contracting Ltd. v. Algonquin Highlands (Township), the court held that the owner was entitled to do so. The court also dealt with two other issues relating to tenders: whether there was a contract between the owner and the bidder; and whether the limitation period to assert a claim arising from the tender had expired.

For these three reasons this decision is an important one in relation to the law of tenders. .


Todd Brothers was the lowest bidder in an invitation to tender which closed in April 2009. The invitation to tender had been issued by the Township for the construction of a new runway and the rehabilitation of an existing runway at the Township’s airport. An environmental assessment of the project was undertaken of the project by the federal environmental agency. Todd Brothers then agreed to extend the time for acceptance of its tender to July 15, 2009. The municipality decided to proceed with the project in phases because some phases did not require environmental approval. Todd Brothers agreed to the phasing of the project, and to a further extension of the time for acceptance of its tender.

In September 2009, Township council passed a resolution accepting Todd Brothers’ tender in accordance with the tender documents, subject to the Canadian Environmental Assessment Act.

Prior to the Township council resolution accepting its tender, Todd Brothers signed a “Compensation Waiver Acknowledgment” which provided that Todd Brothers would:

“not seek any compensation for … work identified but not completed … in the event that the Township cannot proceed to any of the phases as a result of matters beyond the control of the Township of Algonquin Highlands, or delays resulting from the review being completed by the CEAA … any other public issues/concerns or the withdrawal of funding from applicable sources.”

The Canadian Environmental Assessment Agency (CEAA) completed its review in December of 2010. However, the new municipal council decided not to proceed with the project. Ultimately, the Township proceeded with a joint project with the provincial government which resulted in the first three parts of the original project not proceeding.

Todd Brothers started an action against the Township on July 10, 2013, asserting that the Township’s failure to proceed with the full project was a breach of contract. The limitation issue was whether Todd Brothers had discovered or ought to have discovered its claim prior to July 10, 2011. If so, its claim was barred by the two year limitation period in the Limitations Act, 2002.

Decision of the Ontario Superior Court

The first question was whether any contract had come into existence between Todd Brothers and the Township. The Township submitted that although the Township council passed a resolution accepting Todd Brothers’ tender, the tender documents said that an award of the contract required the Township’s “written confirmation mailed to the successful bidder”, and no such confirmation was mailed; and that no acceptance of the tender was ever communicated to Todd Brothers.
The court rejected that submission, stating:

 “This provision does not, as argued by the Township, make an award of the contract conditional upon the Township’s “written confirmation mailed to the successful bidder”. Rather, it provides an obligation on the part of the contractor to sign the contract contained in the RFT, within seven days of being advised that its tender was accepted. If the Township failed to mail written notice of the award to Todd Brothers, it cannot rely upon that failure to argue that acceptance of the tender did not create a binding agreement.”

In arriving at this conclusion, the court relied upon the Contract A/Contract B analysis of the Supreme Court of Canada in the Ron Engineering decision. The court in the present case explained the application of Ron Engineering as follows:

“Contract A is formed when a contractor submits a compliant bid in response to an invitation to tender. The principal terms of Contract A are the irrevocability of the tender during the acceptance period provided for in the RFT, and the obligation of both parties, if the tender is accepted, to enter into a contract (Contract B), on the terms set out in the RFT. The obligation of the parties to enter into Contract B arises from Contract A, and is not dependent upon communication of the acceptance from the owner to the contractor.”

The second question was whether the waiver signed by Todd Brothers barred its claim. The court held that it did. The circumstances fell within the wording of the waiver. The court concluded that the Township was unable to proceed with the first three parts of the project due to the ongoing CEAA review. Once that process was finished, then the Township was:

“unable to proceed with those parts of the original project after December of 2010, because of the joint airport improvement proposal made by MNR. Had the Township failed to pursue the joint project with MNR, as required by the OMAFRA contribution agreement, it risked withdrawal of provincial funding.”

The third issue was the limitation question. The court held that Todd Brothers did not discover nor ought to have reasonably discovered its claim before July 2011. Its claim only arose when “Todd Brothers discovered that this work would no longer be made available to it.” In July 2012, the discussions with the environmental authorities were still ongoing and Todd Brothers had reason to believe that they would work out. It was not reasonable to insist that Todd Brothers commence an action at that point when discussion between the parties were still unfolding.


Each of these three issues are of interest. The first point raises two questions:

What events give rise to a contract under an invitation to tender?

And if a contract arises, did it oblige the Township to enter into Contract B-the building contract?

The court answered the first question. It concluded that Contract A was formed when Todd Brothers submitted its bid and the tenders closed. At that point there was a Contract A between Todd Brothers and the Township governing the bidding process. That contract came into being automatically and without any need for a communication from the Township to Todd Brothers.

The court did not apparently answer the second question. Under the Ron Engineering regime, Contract A required the Township to enter into Contract B – the construction contract – unless there was a justifiable reason not to do so. But the court did not consider whether there was justification for the Township not to enter into Contract B. Why were the CEAA process and the dealings with the province of Ontario not a sufficient justification for the Township not to proceed with the contract with Todd Brothers? Indeed, in its discussion of waiver, the court appears to have concluded that the CEAA process and the dealings with the provincial government did justify the Township in not entering into the building contract with Todd Brothers.

The court’s conclusions about waiver also seem problematic. What was the consideration for the waiver? Todd Brothers was the low bidder and, under the Ron Engineering analysis, the Township was obliged to enter into the building contract with Todd Brothers, absent reasonable justification for not doing so. It does not seem open to the Township to say that it awarded the contract to Todd Brothers in consideration of receiving the waiver: as the court said, the Township was obliged to award the contract to Todd Brothers due to the Ron Engineering regime. So what was the consideration that made the waiver enforceable? Why was it not a gratuitous promise or unilateral offer that Todd Brothers was entitled to withdraw?

See Heintzman and Goldsmith on Canadian Building Contracts (5th ed.), chapter 3, part

Todd Brothers Contracting Ltd. v. Algonquin Highlands (Township), 2015 CarswellOnt 3045
2015 ONSC 1501

Building Contracts – Tendering – Contract A-Contract B- consideration – waiver – limitation periods

Thomas G. Heintzman O.C., Q.C., FCIArb                                     March 24, 2015




When Should A Contract Arising From A Tender Be Declared Void For Mistake?

We don’t usually think of the law of mistake as having any relevance in the 21st century. Mistake seems to be an 18th century problem which couldn’t possibly apply to today’s building contracts, especially those arising out of the modern law of tender.

But the recent decision in Asco Construction Ltd. v. Epoxy Solutions Inc. shows that this assumption isn’t correct. The Ontario Divisional Court held that a contract arising from a tender was void for mistake. The decision is a wake-up call about the need for reasonable certainty in tender information.  Otherwise the whole tender process may be for naught.


The City of Kingston hired Asco as the general contractor to renovate the Grand Theatre.  Asco invited tenders for the concrete and epoxy subcontract and gave bidders a sketch containing slab elevations. A revised sketch was also provided before tenders closed.

Epoxy Solutions submitted a bid for the subcontract work.  Asco confirmed that Epoxy was awarded the subcontract and the parties signed a letter of intent.  After Asco provided Epoxy with a draft contract to sign, Epoxy’s surveyor advised that the sketch forming part of the tender documents contained insufficient information, and that it was necessary to conduct an as built survey to calculate accurately the quantities of concrete necessary to perform the work.

Later, Epoxy told Asco that the elevations listed in the tender documents were inaccurate and that further work and material were needed for an additional cost of about $32,000. Epoxy refused to start the work without confirmation that it would be paid the additional amount. After accusatory correspondence between the parties which resolved nothing, Asco re-tendered the subcontract and hired another contractor at an additional cost of $17,800.00 plus taxes. Asco and Epoxy counter-sued each other for breach of contract.

The Decision

The trial judge dismissed Asco’s claim and awarded damages to Epoxy. The trial judge held that the sketch provided by Asco to Epoxy was misleading.  The parties appealed. The Divisional Court dismissed Epoxy’s appeal but allowed Asco’s appeal and dismissed Epoxy’s action. It did so on the basis that there was no contract between the parties arising from the tender process due to mistake.

The Divisional Court agreed with the trial judge regarding the misleading nature of Asco’s tender documents.  Epoxy was not aware of those errors and could not reasonably be expected to have discovered them prior to making its bid. The court found that Epoxy was under no obligation to investigate the accuracy of the tender invitation documents. The tender documents, it said, “constitute an implied representation to compliant bidders that the work described in the tender documents can be built as described. Contractors and subcontractors bidding on projects are entitled to rely on the accuracy of design information prepared by the owner or its engineers, rather than being compelled to duplicate design analysis prior to submitting bids.”

However, the Divisional Court dismissed Epoxy’s case because there was no contract between the parties due to mistake.  The Divisional Court arrived at this conclusion through the following reasoning:

“Both parties refused to budge from their positions. By their conduct, they walked away from any contractual obligations they had with each other. The positions they adopted arose from a common mistake. The sketch the appellant provided with the tender documents was not a detailed survey and failed to provide adequate information necessary to calculate accurately the costs of labour and materials required to do the work. The respondent did not become aware of the mistake until informed by its surveyor, almost ten months after submitting its bid, of the inadequacy of the sketch. We find that the mistake was so fundamental that it renders the contract between the parties void. No damages can flow from a contract that does not exist.”


This decision raises a fundamental issue under the Ron Engineering line of cases in relation to tenders. If there is misinformation in the tender documents, or if those documents are indefinite or confusing, what is the impact on the Contract A arising from the tender under Ron Engineering analysis?

It does seem strange that Asco, the party whose tender information was found to be misleading, should be entitled to have the contract set aside for mistake. Usually, mistake will only lead to a remedy – rescission – if the party seeking relief is innocent of any wrongdoing leading to the mistake.  In this case, Asco was not innocent of wrongdoing and, perhaps recognizing this fact, had not even asked for rescission or asserted a mistake.

Without Ron Engineeering, there would be no real issue here. The letter of intent created no contract, and without Ron Engineering there would be no contract between the parties. Ron Engineering created Contract A which governed the tender process itself.  That contract obliged Asco to act in good faith toward Epoxy in considering its bid as the lowest tender, and obliged Epoxy to keep its bid open and to enter into a Contract B consistent with the invitation to tender.  If the information provided by Asco was either misleading or indefinite, then Epoxy would have been entitled to rescind Contract A, or the subject matter of the contract or the dealings would have been too uncertain to create a contract.

If rescission was to be granted for mistake or misrepresentation at Epoxy’s request – a request that was never made – then Epoxy might have been disentitled to damages due to its own fault in not detecting the errors in the sketch at the time of bidding.  This approach would have led to the same result.

All in all, this decision raises puzzling issues about how to properly apply the law of mistake to misleading information in an invitation to tender and a bidder’s failure to detect the errors on a timely basis.  What the decision does do is provide a warning to owners and contractors about the perils of inaccurate tender information.

Asco Construction Ltd. v. Epoxy Solutions Inc., 2013 CarswellOnt 7940, 2013 ONSC 4001 (Ont. Div. Ct.)

Tenders – Misrepresentations – Contract A – Contract B analysis – Rescission – Mistake

 Thomas G. Heintzman O.C., Q.C., FCIArb                                                                                                September 16, 2013