The Canadian Supreme Court rejected an exclusion clause that
sought to exclude liability for all claims by unsuccessful bidders
"for compensation of any kind whatsoever, as a result of
participating in this RFP".
Principals and government entities involved in procurement
should undertake an urgent review of their Requests for Proposals
(RFPs) following a decision recently handed down by the Supreme
Court of Canada in Tercon Contractors Ltd v British
Columbia (Transportation and Highways 2010 SCC 4). The
decision sheds new light on the precise wording required to exclude
unsuccessful bidders from successfully recovering losses incurred
in a procurement process.
Broadly, the Canadian Supreme Court rejected an exclusion clause
that sought to exclude liability for all claims by unsuccessful
bidders "for compensation of any kind whatsoever, as a result
of participating in this RFP".
One of the eligible bidders had entered into a joint venture
with a company that was ineligible to bid. This gave this
particular bidder an advantage in terms of expertise and this bid
was ultimately successful. An unsuccessful bidder claimed damages
for loss it incurred in putting together a bid as a result of the
ineligible bidder being allowed to participate in the tendering
process and eventually being appointed the successful bidder.
Although the court acknowledged that parties have the right to
use exclusion clauses in their RFPs, it confirmed that such clauses
cannot be ambiguous. If they are ambiguous, the general principle
that ambiguous exclusion clauses will be construed against the
party seeking to rely on them will apply.
Although Canadian decisions are not binding in Australia, this
case is likely to influence the drafting of RFP exclusion clauses
and the interpretation of those clauses by Australian courts in the
The clear message from the Canadian decision is that a party
cannot rely on an exclusion clause unless the clause is drafted
broadly enough to apply to the specific claim brought by the
unsuccessful bidder. This is particularly so for entities who are
commercially sophisticated and have the ability to draft clear
The Canadian decision is especially pertinent with regard to
government procurement, because the court specifically referred to
transparency and fairness being essential in public
Principals and government entities should conduct a thorough and
urgent review of their exclusion clauses to minimise their exposure
to compensation claims from unsuccessful bidders in connection with
a procurement process.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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