[1999] 1 S.C.R.     M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.
   619

M.J.B. Enterprises Ltd. Appellant

v.

Defence Construction (1951) Limited and the said
Defence Construction (1951) Limited
carrying on business as
Defence Construction Canada and the said
Defence Construction Canada Respondent

Indexed as: M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.
File No.: 25975.
1998: November 6; 1999: April 22.
Present: Lamer C.J. and Cory, McLachlin, Iacobucci, Major, Bastarache and Binnie
JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ALBERTA
Contracts --Tendering process -- Tender documents defining material to be
included in valid tender -- Privilege clause providing that lowest or any tender
would not necessarily be accepted -- Lowest bid accepted but that bid not in
conformity with tender requirements -- Whether inclusion of a "privilege clause"
in the tender documents allows the person calling for tenders to disregard the
lowest bid in favour of any other tender, including a non-compliant one.
The respondent invited tenders and awarded the contract to the lowest tenderer
of the four received notwithstanding the fact that the bid did not comply with
the tender specifications. The tender documents included a "privilege clause"
that stated that the lowest or any tender would not necessarily be accepted. The
winning bid included a hand-written note outlining a schedule of final costs
even though amendments to the tender documents required tenderers to submit only
one price. The other tenderers complained that this note constituted a
qualification that invalidated the tender. The respondent nevertheless
determined that the note was merely a clarification and accepted the bid. The
appellant, who had submitted the second lowest tender, brought an action for
breach of contract claiming that the winning tender should have been
disqualified and that its tender should have been accepted as the lowest valid
bid.
The parties agreed on damages prior to trial, subject to the determination of
liability. The trial judge found that the note was a qualification but held
that, given the presence of the privilege clause, the respondent was under no
obligation to award the contract to the appellant as the next lowest bidder. The
Alberta Court of Appeal dismissed the appeal. At issue here is whether the
inclusion of a "privilege clause" in the tender documents allows the respondent
to disregard the lowest bid in favour of any other tender, including a non
compliant one.
Held: The appeal should be allowed.
The submission of a tender in response to an invitation to tender may give rise
to contractual obligations (Contract A), quite apart from the obligations