Contract Lectures Transcrips

CONTRACT LECTURES TRANSCRIPTS C. STRICKLAND

LECTURE 1

Track/Slide 25 6.10

Tenders. There are two general positions. Firstly, normally invitations for tenders are invitations to treat. Tenders sent in thus represent offers. The tender accepted might be accepted for reasons other than just the price, for instance, quality of services. Second point is that for competitive tendering, price is the key component. So when an invitation to tender mentions the ‘highest bid’ the courts may see this as specific enough to be an offer and so the highest tender submitted would be the acceptance. It all depends on the words in the invitation, the surrounding circumstances or both. Key cases here are Spencer v Harding 1870, Blackpool and Flyde Aero Club Ltd v Blackpool Boro Council 1990 and the Harvela investments case.

In Spencer v Harding the general position was laid down that usually invitations to tenders are just that, invitations to treat and the tenders sent in are the offers which may be accepted or rejected. A very informative case that you really should read at source is the Harvela investments case. This case concerned offers to buy a parcel of shares. Harvela Investments and Sir Leonard were invited to submit a sealed offer or a confidential telex by a stipulated date. They were told that the shares would go to the ‘highest bidder’. The point was that the vendors of the shares, the Royal Trust Company of Canada held 12% of the shares in the company concerned and whichever of Harvela or Sir Leonard got them would get the controlling interest in the company because they each already owned 43% and 40% of the shares respectively. Harvela Investments submitted a bid for $2,175,000 and Sir Leonard submitted a bid of $2,100,000 or $101,000 in excess of any other offer. The Royal Trust Company accepted Sir Leonard’s bid at $2,276,000. Harvela Investments brought an action saying that Sir Leonard’s ‘referential bid’ was invalid. It was a referential bid as the amount bid could only be determined by reference to other bids. The key speech in the House of Lords is that of Lord Templeman which you should read first and then read the speech of Lord Diplock. Lord Templeman states that the first issue in the case is to decide whether the invitation to submit tenders represents: a fixed bidding sale or an auction where bids are adjusted by ‘reference’ to other bids – called referential bids. Lord Templeman concluded that, by looking at the invitation as a whole, it was obvious that it instigated a fixed bidding sale and on this basis the referential bid of Sir Leonard was invalid. Lord Diplock in a sense tidies up the language in the case. He makes it clear that the invitation to submit tenders was actually a unilateral or ‘if’ contract. Submission of the highest bid represented an acceptance of the unilateral offer, the performance of the act was submitting the highest tender. As such, Sir Leonard did not make a contract, rather, Harvela investments did as they actually submitted a fixed bid. You should read the case to see why referential bidding can only work in a sealed bidding situation when it is stated that the bidders must also include a maximum bid. Pure referential bids would mean that no one would ever win. You should also read the Blackpool case. In this case, the council invited tenders from seven parties to operate pleasure flights from the airport owned by the council. The claimants tender was put in a box by the deadline but the council failed to empty it and so did not consider the bid. The council thus asked everyone to bid again, but the club that won on the first round objected. The council thus scrapped the second round of bids and gave the contract to the club with the highest bid on the first round. The claimants sued saying that the council was in breach of contract for not considering its bid. It was held in the Court of Appeal that usually tender invitations are merely invitations to treat but they can be unilateral offers where the language is specific and all circumstances support it. In this case, they said the said invitation to tender was a unilateral offer at least to consider tenders and the club’s submission of a timely tender was an acceptance.