STWZ5 CONTRACT GROUP B 1482 WORDS

Tender: Invitation to treat or an Offer?

At common law, the general rule that tenders are an invitation to treat is laid out in Spencer v
Harding1. However, this rule is not an invariable one, and tenders may be construed as offers,
depending on the facts and circumstances of each case. In Blackpool and Flyde Aero Club
Ltd v. Blackpool Borough Council2, the courts found that the Council’s tender amounted to an
offer because (i) the invitation to tender was addressed to a small number of interested parties,
(ii) the tender procedure was ‘clear, orderly and familiar’ and (iii) the outcome was consistent
with the ‘assumptions of the commercial parties’. Based on the facts, Sam only invited three
local building firms to his tender, which can be seen as “a small number of interested parties”.
His tender procedure of sending the bids to his office by Friday 10th August, either through e-
mail or post was “clear, orderly and familiar” to the parties involved. Lastly, Sam will award the
contract to the best bid, which is inferred to be the lowest bid, and that any bid beyond
£250,000 will be rejected; an outcome consistent with the “assumptions” of the commercial
parties. The combination of these factors suggests that this tender is a unilateral offer to
consider tenders submitted on time.
Relying on the analysis in Blackpool, there was a unilateral contract made by Sam to consider
any confirming tender, and a main contract to award the tender to the lowest bidder. Assuming
this tender is a unilateral offer to consider bids, the strengths of each building firm’s threat to
legal action will be now be assessed.
Alpha Builders:
The issue regarding Alpha Builders is whether their mistaken bid can be amended to reflect
their original intended bid, after they have submitted it.
Alpha sent their bid by post, but because of a clerical error, their intended bid of £150,000 was
presented as £750,000. Notably, their post arrived on 9th August, before the dateline. It can
be argued that in Traditional Structures Ltd v HW Construction Ltd3¸ the court allowed the
rectification of a mistake by the bidder on grounds that (i) the other party knew the mistake
existed and (ii) their conduct in failing to point out the mistake was either “dishonest” or
“unconscionable”. Based on the facts, it would be reasonable to assume that Sam knew of the
mistake, since Alpha Builder’s bid of £750,000 was beyond his threshold of £250,000, and it
is expected for bidders to make bids below that £250,000 threshold. However, to state that
Sam’s behaviour of not clarifying Alpha Builders’ bid was either “dishonest” or
“unconscionable” is untenable. Sam did not act dishonestly or exerted any undue pressure on
Alpha Builders.
Moreover, Alpha Builders’ bid of £150,000 was not communicated to Sam in any way before
the dateline. It would be unreasonable to expect Sam to consider their bid if they did not
communicate their intentions correctly. Despite this, Alpha Builders may be able to rely on
Tideland Signal Ltd v Commission of the European Communities4, where the courts held that
the failure to seek clarification was disproportionate and thus vitiates the rejection of a tender.
They can assert that Sam had a duty to seek clarification about the £750,000, which was
manifestly an error, and his failure to do so vitiates his rejection of the tender.
However, allowing Alpha Builders to change their bid might be deemed as the submission of
a new tender, which removes the Tideland duty imposed on Sam, as per SAG ELV Slovensko

1
[1870] LR 5 CP 561
2
[1990] EWCA Civ 13
3
[2010] EWHC 1530
4
[2002] 3 C.M.L.R 33

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as v Urad5. Moreover, it would be contrary to the principle of equality of treatment, and fair
play, to allow bidders to amend a mistake after submitting a tender, as per R (Harrow Solicitors
and Advocates) v The Legal Service Commission6.
Alpha Builders does not have a strong claim against Sam for not awarding the tender to them.
Bob’s Builders:
The issue regarding Bob’s Builders’ bid is whether they can rely on the postal rule to claim
that their bid was received by Sam’s office by Friday 10th August, and whether they have a
legitimate expectation to have their bid considered.
As stated in Household Fire Insurance v Grant7, acceptance occurs once it has been posted,
and not on receipt of the post. Whether Bob Builder’s bid was received by Sam is irrelevant;
they have already accepted the offer by posting their acceptance. Importantly, the postal rule
can only be relied upon if the parties have contemplated that the postal service would be used
for submitting the bid, as per Henthorn v. Fraser8. Based on the facts, Sam’s letter containing
his office address implicitly suggests that a bid can be submitted to him by post. Even if Bob’s
Builders may prima facie rely on the postal rule, Sam can avoid awarding the contract to them
on the following grounds.
First, the postal rule cannot be relied upon if proper postal procedures were not adhered to. In
Re London and Northern Bank9, it was held that handing a post to a post man does not
constitute as “posting”, since the post man was not an authorised agent of the Post Office.
Based on the facts, Bob’s Builders sent their bid to Sam via a courier, and not directly to the
Post Office; the courier had a company policy that it will not deliver the parcel unless someone
acknowledges it, thus causing the complication. It can be argued that the courier was a private
agent, not the official Post Office and since Bob’s Builders sought their services, the fault of
non-delivery on Friday lies on Bob’s Builders. Thus, the proper procedures were not adhered
to, and the postal rule should not be applicable.
Second, Sam may be able to prevent the use of the postal rule, if he specifically stated that
an acceptance is only valid if received. In Holwell Securities v Hughes10, it was held that stating
that acceptance through “notice in writing” was a valid exception to the postal rule. The issue
is thus whether Sam’s use of the phrase “received at my office” constituted an exception to
the postal rule. It is submitted that it does, since the words were clear and unambiguous.
Assuming Bob’s Builders cannot rely on the postal rule, they may be able to rely on Blackpool
and assert that their bid be considered, out of a contractual right, having submitted their bid
on time. Like Blackpool, where a staff wrongly marked the bid as “late” and did not consider
the bid, it was Sam’s fault for not having someone manning the office during office hours when
the parcel arrived. Had there been someone mending the office, the post would have been
delivered. Bob’s Builders may have a strong argument that there was a legitimate expectation
for there to be someone mending the office during office hours. Bob’s Builders would thus
have a legitimate expectation that having submitted their bid on time, that their bid would be
considered.

5
[2012] 2 C.M.L.R. 36
6
[2011] EWHC 1087
7
[1879] 4 Ex D 216
8
[1892] 2 Ch 27
9
[1900] 1 Ch 220
10
[1974] 1 All ER 161

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Bob’s Builders has a strong claim against Sam for not having their £200,000 bid considered.
Whether Sam ultimately awards the bid to Bob’s Builders depends on whether their bid was
the best bid. He nonetheless, has a contractual duty to at least consider the bid.
Cowboys R Us Builders:
Assuming Bob’s Builders bid of £200,000 must be considered, the issue relating to Cowboys
is whether their referential bid of £10,000 less than any rival bid is a valid bid. It should be said
in passing that their e-mail correspondence constitutes as valid, since Sam provided his work
e-mail address in the tender.
In Harvela Investments Ltd v Royal Trust Co of Canada11, the court held that unless expressly
stated in the original tender, referential bids are not allowed since it discourages fair play and
that Harvela had a reasonable expectation that the tendering will be done by a fixed bid. Based
on the facts, there was no indication that the tender process allowed for a referential bid.
Thus, Cowboys’ referential bid would be invalid and should be effectively discarded. Their only
valid bid was £245,000, which is higher than Bob’s Builders’ bid.
Conclusion:
Since Alpha Builders did not submit a valid bid, and should not be allowed to amend their
mistaken bid, their threat of legal action is weak. Likewise, Cowboy’s referential bid is invalid,
and their only valid bid was £245, 000. As Bob’s Builders’ bid should be deemed as valid, they
would be the lowest bidder and Sam would be obliged to award the tender to them, assuming
he meant the best bid as the lowest bid. Bob’s Builders’ threat of legal action is the strongest.

11
[1986] 1 AC 207

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Bibliography:
Cases:

Blackpool and Flyde Aero Club Ltd v. Blackpool Borough Council [1990] EWCA Civ
13
Harvela Investments Ltd v Royal Trust Co of Canada [1986] 1 AC 207
Henthorn v. Fraser [1892] 2 Ch 27
Holwell Securities v Hughes [1974] 1 All ER 161
Household Fire Insurance v Grant [1879] 4 Ex D 216
R (Harrow Solicitors and Advocates) v The Legal Service Commission [2011] EWHC
1087
Re London and Northern Bank [1900] 1 Ch 220
Spencer v Harding [1870] LR 5 CP 561
Traditional Structures Ltd v HW Construction Ltd [2010] EWHC 1530

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