Canada: The Procurement Process In Canada After The Supreme Court Of Canada Tercon Decision

Last Updated: February 18 2010
Article by Michael E. Mitchell

Most Read Contributor in Canada, September 2018

The tendering and procurement process in Canada has traditionally been treated by the courts as a special area of contract law in which fairness and protecting the integrity of the tender process have been guiding principles. Courts have implied terms into contract "A" bid contracts that have obliged owners to act fairly, and wide discretionary clauses have been interpreted narrowly to ensure the integrity of the tendering process.

Owners looking to maximize their control over the selection of contractors have continued to fine-tune instructions to bidders and attempt to limit their own liability. How far will the courts go to intervene in these commercial contracts because of the special status historically bestowed on the tendering process? In a 5 – 4 split decision, the Supreme Court of Canada (SCC) has delivered its views in the case of Tercon Contractors Ltd. v. British Columbia (Ministry of Transportation and Highways), 2010 SCC 4. The SCC has highlighted the importance of maintaining the integrity of the tendering process and treating bidders fairly, but has also "laid to rest" the doctrine of fundamental breach in connection with exclusion clauses and provided guidelines for the future preparation and analysis of tender documents.

Facts in Tercon

The British Columbia Ministry of Transportation and Highways (MOTH) issued a tender call for the construction of a gravel highway and the bid rules prohibited joint venture bids. MOTH accepted a low bid submitted by a joint venture consisting of two parties, one of which might have alone been a qualified bidder, and MOTH directed the "acceptance" to that single member of the two-party joint venture bidder. Tercon Contractors Ltd. was one of the unsuccessful bidders, and they sued MOTH on the argument that the contract could not be awarded to a non-compliant bidder. On the facts, MOTH had broken its own tendering rules but it rejected Tercon's claim for compensation and relied on the following limitation provision included in the MOTH tender instructions:

"Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for any compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a proposal each Proponent shall be deemed to have agreed that it has no claim."

Variations on this clause have since become known as "Tercon clauses."

Supreme Court of British Columbia Decision (March 2006)

The British Columbia Supreme Court heard the arguments of the parties and determined that MOTH had awarded the contract to a non-compliant bidder. The BC Supreme Court maintained that it had the discretion to restrict the enforceability of the Tercon limitation clause. The court decided that the discretion to limit such exclusionary clauses may be exercised in the tendering context on policy considerations, and under general contract law on principles of fundamental breach, unfairness, unreasonableness and unconscionability. In this case, the court found that it was neither fair nor reasonable to enforce the exclusion clause and that MOTH had acted egregiously in awarding the contract to a non-compliant bidder. Tercon was awarded damages in the amount of $3,293,998.

Court of Appeal for British Columbia Decision (December 2007)

MOTH appealed the trial decision and the Court of Appeal did not consider it necessary to determine whether the successful bid was non-compliant with the instructions to bidders. Instead, the Appeal Court focused on the exclusion clause and found that the trial judge had erred in refusing to give effect to it.

The Court of Appeal recognized that while the integrity of the bidding process, especially for public works, should be given high value, it considered " ... the words of the exclusion clause so clear and unambiguous that it is inescapable that the parties intended it to cover all defaults, including fundamental breaches."

In answer to the argument that such exclusion clauses may be contrary to the public interest by disrupting an orderly and fair scheme for tendering, the Appeal Court observed that judicial intervention in this area of commercial dealings is not appropriate and that the industry will have to react by choosing whether to bid in the presence of such clauses.

The clear and unambiguous exclusion clause was held to be a complete bar to Tercon's claim against MOTH.

Supreme Court of Canada Decision (February 2010)

In a 5 – 4 decision of the SCC, the appeal of Tercon was allowed. While the entire court agreed on the appropriate framework of analysis in reviewing whether a party can avoid the effect of an exclusion clause, they were divided on how the formula applied to the facts of Tercon. The majority concluded that the words in the exclusion clause, "participating in this RFP," must mean "participating in a contest among those eligible to participate." Consequently, the majority decided that the Province of British Columbia had accepted a bid from a party who should not have been eligible to participate, and a process involving ineligible bidders could not be covered by the clause. The minority sided with the BC Court of Appeal and considered the exclusion clause to be clear, unambiguous and applicable.

The SCC decided that a party attempting to escape the effect of an exclusion must apply the following three-step analysis:

  1. the clause does not apply to the circumstances, as a matter of interpretation; or, if it does apply;
  2. the clause was unconscionable at the time it was made and therefore invalid, such as in the case of an inequality of bargaining power between the parties; or, if this cannot be shown;
  3. the clause offends "an overriding public policy ... that outweighs the very strong public interest in the enforcement of contracts" (this third part of the analysis replaces the doctrine of fundamental breach as a policy basis for avoiding a contract provision).

The Future of Exclusions in Procurement Documents

Exclusion clauses that will be upheld by the courts will require more detailed acknowledgements and clarity in order to be enforced. Although the minority decision in Tercon considered the exclusion clause to be clear and unambiguous, the preparation of such clauses will require more fine-tuning to avoid judicial interference. The Tercon decision provides some guidance, or at least a reaffirmation, of the principles to be followed in the administration of any procurement process:

  1. Prepare clear rules regarding how the procurement process will be administered, and follow those rules. Do not award to a party who is not in material compliance with the rules.
  2. If a revised "Tercon clause" is to be included in procurement documents, it must address, to the greatest extent possible, the circumstances of the parties and the mutual acceptance of the intent to waive claims arising out of the process. If this approach is repugnant to contractors they may refuse to participate, and this risk will have to be evaluated by the entities initiating the procurement process.

The message from the Supreme Court of Canada seems to be that clearly drafted, unambiguous exclusion clauses will be permitted in the absence of egregious conduct by the party conducting the 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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions