Project Management Procurement

WEEK 2- Fundamentals of Contract Law

Case Studies
Note: Pre- reading required for Case Studies # 1 &2 below. The Bidding In Canada ( item 3) Case studies
should be discussed as part of the self-study as a group ( per assignment team) and/ or individually.
Expectation is to do at least 1 or all if you can.

1. The Traditional Law of Bidding in Canada - Dickinson vs Dodds –1874

The Brief
On Wednesday, June 10, 1874 Dodds (D) sent Dickinson (P) a memorandum in which he
agreed to sell a specified piece of land for 800 pounds with the offer held open until 9AM the
following Friday. Dickinson alleged that he had decided to accept Dodds’ offer on Thursday
morning but did not contact him immediately because he thought he had until Friday morning
to accept. On Thursday afternoon Dickinson learned that Dodds had offered or agreed to sell
the land to a third party. Dickinson wrote a note accepting the offer and delivered it to his
home, leaving it with his mother-in-law who neglected to give the note to Dodds. On Friday
morning before the original deadline to accept the offer, both Dickinson and his agent gave
Dodds a written acceptance of the offer. Dodds stated that he had already sold the land to
another party the previous day.
Dickinson sued for specific performance. The trial court found in Dickinson’s favor and ordered
that Dodds convey the property to him and Dodds appealed.

2. Revolution in the law of bidding: 1981

R (Ontario) v Ron Engineering & Construction (Eastern) Ltd–1981
The Brief
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tendered offer was withdrawn.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.
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Project Procurement and Contract Law Instructor – Juanita DeSouza-Huletey
 3. Bidding in Canada
Case Studies - Group Exercise (Duties and Rights of Owners)

A. Best Cleaners and Contractors Ltd ( Canada). (1985)

Brief Summary
• DOT published invitation to bid for operation and maintenance of the airport at
Iqaluit (Frobisher Bay)
• The bid offered a 2 year contract and bidders were requested to provide an
indicative price (not firm offer) for a further period of 2 years
• Only 2 bids were accepted by DOT
• Best Cleaners –Initial period at $948K approx
• $4.5K less than Tower Arctic Ltd.
• But –the price for the extended period was
• $60K more than Tower’s
• After the bids were opened DOT contacted Tower to see if it would agree to
enter into a 4 year agreement, Tower agreed
• DOT recommended that to Treasury Board
• When Best Cleaners heard of this they wrote to say that DOT had no right to
negotiate either of the bidders for a change in the terms of the proposed
contract
• Treasury board sought legal advise and determined awarding the 4 year
contract to Tower would be illegal
• They awarded the 2 year contract to Tower instead
• Best Cleaners sued claiming that the award was made in bad faith because the
decision was not based on the merit of the bids or abilities of the bidders but
rather the “illegal”negotiations with Tower
• The case eventually ended up in the court of appeal
• What should happen here?

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Project Procurement and Contract Law Instructor – Juanita DeSouza-Huletey
 B. Elgin Construction v. Russell Township (1987)

Brief Summary
• Russell invited bids for water mains and sewers.
o Ad in paper -“The township reserves the right to reject any and all
tenders, and the lowest or any tender will not necessarily be accepted”
o Bid documents contained the same warning
• The invitation to tender included a privilege clause
• Elgin submitted the low bid but with a completion of 52 weeks.
• Atomik submitted a higher bid but with a completion of 28 weeks.
• The cost to Russell would be less with the Atomik bid since the supervision
costs would be much less.
• Russell suggested to Elgin that it should qualify its bid by reducing the
completion time to 28 weeks.
• Elgin complied but Russell awarded to Atomik.
• Elgin sued on the grounds that in rejecting Elgins bid it failed to follow a
“custom of trade”.
• What do you think should happen here?

C. Chinook Aggregates v Abbotsford (1989)

Summary Brief
• Abbotsford awarded a gravel-crushing contract to a local company even though
Chinook was the lowest bidder.
• The invitation to tender contained a privilege clause
• The policy was deliberately not made clear to bidders because Abbotsford did not
want to alert local firms that they had preference
• Abbotsford had a secret policy that if any local bidder was within 10% of the lowest
bid, the local company would get the contract
• At trial Judge Selbie held that Contract A came into effect when Chinook submitted
a bid
• Judge Selbie held it was an implied term of Contract A that the lowest compliant
bid must be accepted
• Abbotsford appealed saying that the judge had erred in incorporating an implied
term into Contract A when that term was contrary to the express term (privilege).
Their lawyer referred to the Elgin decision where custom and usage cannot
override express terms
• What will happen in the appeal?

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Project Procurement and Contract Law Instructor – Juanita DeSouza-Huletey
 D. Acme Building and Construction Limited v Newcastle (1992)
• Acme submitted the lowest bid but the Town accepted the 2nd tender.
• The Town considered that the 2nd bid would do the project in less time and
save the Town rent.
• In addition, more of the subcontractors would be local.
• Acme sued, relying on the “custom of the trade” argument.
• At trial, court rejected Acme’s arguments and concluded that the procedures
were fair.
• Acme’s appealed
• What are your thoughts?

E. Kencor Holdings v Saskatchewan

• Kencor Holdings v Saskatchewan (1991)
• Kencor was low bidder on a project.
• Graham Construction was second bidder.
• The contract was awarded to Graham in spite of a report that said that Kencor
was more qualified.
• The reason given was that it was “expedient and in the public interest.”
• The bid documents contained a privilege clause.
• Kencor sued.
• What happened?

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Project Procurement and Contract Law Instructor – Juanita DeSouza-Huletey