This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its 1984 decision in Cardinal Construction Ltd. v. Brockville (City), the Ontario High Court of Justice held that the purchaser was under an implied duty to disclose all information that could potentially influence the supplier’s decision to submit a tender and the price bid in that tender. The case dealt with a construction contract for the reconstruction of sewers and water mains in the city of Brockville, Ontario. Performance issues arose. The contractor sued, alleging that the City and its advisors had failed to properly disclose relevant information in relation to the project. The Court agreed and held that the purchaser was under a duty to disclose material information in its tender call. More particularly, the court held that:
- Information should be provided with the average bidder in mind.
- Information should be correct and complete.
- All material information should be disclosed.
- Unreliable information should be disclaimed.
- Material facts that arise during the tendering process should also be disclosed.
The plaintiff maintained that “cable” markings on the relevant diagrams failed to properly highlight potential issues regarding the presence of a concrete duct structure and the complications that this could present in performing the work. The City argued that the markings were sufficient to inform a knowledgeable bidder. The Court held that this was insufficient disclosure to warn the individuals preparing the bids of the work conditions:
Thus the defendants’ witnesses are of the opinion that the “clues” in the contract documents and on site should have led a knowledgeable bidder to inquire further as to the nature of the Bell structure…. [M]r. Mangione did not accept the warning signs as calling for investigation in face of the plain labelling of the cable as such. Mr. Solomon in fact, as I find, did not deduce anything from the clues and assumed it to be cable as labelled.
The Court held that bidders should not be required to search for clues or perform detective work in order to uncover the true conditions with respect to a tendered project. Rather, to meet its disclosure duties, a purchaser should prepare its tender call documents with a view to the average bidder’s level of knowledge and sophistication:
[B]idders are not expected to play the detective or read between the lines to identify the nature of the work. On all the evidence the defendants do not satisfy me that an average bidder not having special knowledge of Bell systems would be likely to “read between the lines” and question the clear labelling by the engineers of cable or at most conduit which would make no difference. I am therefore unable to find that Solomon ought to have made further investigation on the basis of the indicia as submitted by the defendants. I add that the evidence as a whole is equivocal and the defendants have not discharged the onus of showing that Cardinal ought to have investigated further by reason of these indicia; I also interpret the contract documents, including the contract documents as whole, contra proferentem.
As the Court stated, since the purchaser is the party drafting the tender call documents, any ambiguities can be held against it in accordance with the contra proferentem rule. By inducing bidders to submit tenders on the basis of inaccurate information, the City had breached the duty of care it owed to those bidders and was therefore liable for damages. As this case illustrates, the institution issuing the tender call can be found liable for failing to meet its disclosure duties.
