Legal Blog

Leaky Bid

After all of the high level decisions on the law of tender, one would think that tender disputes could easily be resolved because the law is so clear. Unfortunately, it does not work that way. The law may be relatively clear but the facts rarely are. They seem clear after the reasons for decision are handed down but, by that time, their murkiness has been distilled by a trial. A case in point is Silex Restoration Ltd. v. Strata Plan VR 2096, a 2002 decision of the British Columbia Supreme Court.

When it Rains 

Many Vancouver condominiums were beset with problems of leaks in the building envelopes. One of these condominiums decided to do something about it. The condo had been spending $100,000 per year on spot remediation and was not pleased. It hired a consultant to design a complete remedy for the problem and went to tender with the design.

The plaintiff general was the low bidder. A member of the condo’s building committee called the general’s owner and told him that the bid had been accepted. The request for tender, however, stated that only a formal notice of award could accept the tender.

A couple of weeks later, the president of the condo called the general’s owner and requested that the general extend the bid bond from 2 months to 3 months because the condo needed more time to call a meeting of members to approve the bid and the funding. Of course, the general complied. We say “of course” because the tender required a bid bond of 3 months. At this point, the general realised that its tender was non-compliant; the owner had not realised it yet and the general certainly did not make that point clear to the condo.

The condo president then wrote to the general informing it that the tender was accepted subject to the condo owners approving funding and subject to amendments to aspects of the general contract. The general did not object to these conditions and the general and owner engaged in contract negotiations.

It Pours 

For unstated reasons, the condo had the design of its consultant reviewed by another consultant. The new consultant advised of deficiencies in the first consultant’s remediation plan and noted that the first consultant was not registered as a building envelope professional with the City of Vancouver. The condo, concerned with both the plan and the integrity of the first consultant, fired the first consultant and decided, after the unit owners refused to approve funding, not to award any contract based on its plans. The general, seeing its contract aspirations spiral down the tubes, sued for breach of the tender contract.

The general alleged that:

1.   The owner had waived non-compliance with its tender when the building committee member informed the general of the acceptance of its bid; and

2.   The condo dealt with the general in bad faith when the unit owners voted not to approve funding for the project.

Waiver 

The judge was not sympathetic to the first argument. The tender could not be accepted by an oral phone call, only by a formal notice of acceptance. Further, it would be difficult to waive non-compliance if the condo had no knowledge of that non-compliance. The judge held that the general knew of the non-compliance and was willing to negotiate the terms of the contract because it knew that it could not enforce its tender. If it was negotiating the terms of the contract, how could there already have been a contract?

Bad Faith 

The request for tender had the standard clause. All cases have recognised that an owner has a right to cancel a project relying on this clause. The judge held that, when the unit owners refused to approve funding, the condo did not deal in bad faith by relying on the clause and cancelling the project. There was sufficient evidence for the condo owners to conclude that the work was not in the condo’s best interests.

Second Chance 

The judge dismissed the general’s action. The condo did perform some remedial work with the new consultant. The general was invited to tender on this work. Given the litigation that was still pending at the time of the re-tender, the general declined to tender and lost its chance to recoup some of the work that it lost due to the cancellation of the original project.

One would think that this action was doomed to fail from the outset. However, we suggest that, before the trial, the facts were not as nearly as clear as they appear to be in hindsight.