This article is an excerpt from Government Procurement, which is available for purchase.
In January 1993, the Supreme Court of Canada confirmed that a contractor can launch a legal action for both breach of contract and for negligent misrepresentation in situations where it is prejudiced by a purchasing institution’s pre-contract misrepresentations. The Supreme Court’s judgment in BG Checo International Ltd. v. British Columbia considered a dispute between a contractor and the British Columbia Hydro and Power Authority. The parties had contracted for the erection of over 40 kilometres of electricity transmission towers. BC Hydro had committed to keeping the right-of-way lands clear so that BG Checo could perform its work without obstruction. It failed to keep this commitment.
BG Checo sued for extra costs, claiming that BC Hydro was liable for breaching its contractual commitment and was also liable in tort for negligent misrepresentation. BC Hydro challenged the tort claim, arguing that the remedy, if any, was limited to breach of contract. The Supreme Court of Canada disagreed, ruling that BC Hydro’s failure to keep the right-of-way clear of obstructions made it subject to claims in both contract and tort:
We conclude that neither principle, the authorities nor the needs of contracting parties support the conclusion that dealing with a matter by an express contract term will, in itself, categorically exclude the right to sue in tort. The parties may by their contract limit the duty one owes to the other or waive the right to sue in tort. But subject to this, the right to sue concurrently in tort and contract remains.
In the case at bar, the contract did not limit the duty of care owed by Hydro to Checo. Nor did Checo waive its common law right to bring such tort actions as might be open to it. It follows that Checo was entitled to claim against Hydro in tort.
Damages in Tort and Contract in this Case
The measure of damages in contract and for the tort of negligent misrepresentation are:
Contract: the plaintiff is to be put in the position it would have been in had the contract been performed as agreed.
Tort: the plaintiff is to be put in the position it would have been in had the misrepresentation not been made.
The matter was remanded to the trial level to determine the amount of damages. The British Columbia Supreme Court assessed damages for the negligent misrepresentation at $1.7 million and damages for breach of contract at $1.6 million. BG Checo was awarded the higher amount. As this case illustrates, during the pre-contract phase of the procurement process, purchasing institutions should be sure to disclose all material information that could affect price and should be aware that the contract management commitments they make can have a significant impact on the contractor’s pricing. Material disclosures should be accurate and thorough; once made, they should be honoured.
