R. v Ron Engineering and Construction (Eastern) Ltd., [1979] 24 OR (2d) 332 (ONCA), revd [1981] 1 SCR 111, 119 DLR (3d) 267, is the leading Supreme Court of Canada

Supreme Court of Canada

The Supreme Court of Canada is the highest court of Canada and is the final court of appeals in the Canadian justice system. The court grants permission to between 40 and 75 litigants each year to appeal decisions rendered by provincial, territorial and federal appellate courts, and its decisions...

 decision on the law of tendering for contract

Contract

A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

s. The case concerned the issue of whether the acceptance of a call for tenders for a construction job could constitute a binding contract. The Court held that indeed in many cases the submission of an offer in response to a call for tenders constitutes a contract separate from the eventual contract for the construction. With the release of the decision, the tendering process practiced in Canada was fundamentally changed.

Background

A call for tenders was sent out requiring a deposit of $150,000 which would be lost if the tendered offer was withdrawn. Ron Engineering submitted an offer along with the required deposit in the form of a certified cheque. The submitted tenders were opened by the owner and Ron Engineering was the low bidder by a substantial margin. It was then discovered that the price on the tender documents was far lower than the price that Ron Engineering had intended to submit, and that they had made a mistake in calculating their total bid price. They informed the owner of the mistake and tried to have the offer changed. The change was refused, the contract was given to another company, and the owner kept Ron Engineering's bid deposit. Ron Engineering sued to get their deposit back. The owner counter-claimed for costs incurred as a result of having to go with a different bidder. At trial the counter-claim was dismissed but it was held that the owner was entitled to keep the deposit. The Ontario Court of Appeal reversed the trial decision and held, relying on the contractual doctrine of mistake, that Ron Engineering was entitled to get its deposit back. The owner appealed to the Supreme Court of Canada.

Decision

The Supreme Court held that the tender process involved two contracts - contract A and contract B - where the second was the construction contract being bid on and the first was a separate contract created to govern the tender process. Contract A was a binding contract and, per the terms of that contract as set out in the tender documents, Ron Engineering could not get their deposit back.