In the recent decision of Rankin Construction Inc. v.
Ontario, the Ontario Court of Appeal clarified and provided
some commentary on the complex law of tendering in construction
projects. In the action, the Ministry of Transportation
("MTO") concluded that the lowest bid for a contract,
deposited by Rankin Construction Inc. did not comply with the terms
of the invitation to tender. The MTO therefore awarded the contract
to the second lowest bidder. Rankin Construction sued the MTO for
lost profits because of the MTO's alleged failure to accept the
Appellant's tender. Rankin Construction Inc.'s action was
dismissed. An appeal was heard at the Court of Appeal.
The decision in the Court of Appeal covers various issues
relating to the law of tendering but in our view the critical issue
is the interpretation of the exculpatory clause contained within
the instructions to bidders. That clause stated as follows:
"The Ministry shall not be liable for any costs, expenses,
loss or damage incurred, sustained or suffered by any bidder prior,
or subsequent to, or by reason of the acceptance or the
non-acceptance by the Ministry of any tender, or by reason of any
delay in acceptance of a tender, except as provided in the tender
The Court found that this clause is a complete defence to the
claim of Rankin Construction Ltd. The Court found that the
exculpatory clause is "a commercial response to the increased
litigation faced by owners arising out of the acceptance, and
corresponding non-acceptance, of bids."
The Court also found "The relevant commercial context also
includes that bidders are sophisticated parties and are free to
choose not to submit a tender in the face of a broad exculpatory
clause in the tender documents. And if, faced with such a clause,
desirable bidders do not respond to requests for tenders, market
forces will drive the owner to modify the terms of its tender to
stimulate competitive tenders."
The Court further commented that, "It is possible that
there may be circumstances where the conduct of the owner in the
bid process is so aberrant that it would justify a court's
refusal to enforce an exculpatory provision in the tender documents
on public policy grounds."
In other words, the Court of Appeal ruled that there would have
to be extreme circumstances where such an exculpatory clause would
not be enforced by the Courts. Therefore, we can conclude, based on
this decision, that this type of clause, in almost all
circumstances, will provide a complete bar to actions by unhappy
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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