Private contract law imitating public contracting?

The case is often made, in Guam and the US anyway, that government contracting should be more like private contracting. In Canada, at least according to the following account by Paul Emanuelli, who has already featured beneficially in this blawg, it seems government contracting is providing principles either "found" in common law contracts or implied there.

In the US, it is well settled that, in government contracting, any change made to the contract terms beyond the "scope of the contract" should necessitate a new solicitation. On the other hand, I am not aware of any private law of contract case coming to any similar conclusion; the freedom of parties to contract is usually paramount. Any potential contractor bidding on a private contract does so with little safeguards: let the bidder beware.

Not so in Canada, so it seems (and this may be a good thing, no?).

Courts prohibit changes to contracts after bids are submitted by Paul Emanuelli

In its decision in Protec Installations v. Aberdeen Construction Ltd., the British Columbia Supreme Court found that the owner was not allowed to make changes to the tender call rules or negotiate material changes to the contract after the close of bidding.

The case involved a tender call for the construction of a mall in Richmond, British Columbia. With full knowledge of the low bidders’ price, the second-lowest bidder entered into post-bidding negotiations with the owner and submitted a revised bid for $5,000 less than the low bid. That bidder was awarded the contract. The low bidder sued.

The court found that the owner was not allowed to cut the low bidder out of the process while permitting a competitor to re-negotiate the terms of the deal and re-tender its price. The court found that the low bidder was prejudiced by the post-close indulgences granted to the competing bidder and awarded the low bidder damages.

Similarly, in its decision in Health Care Developers Inc. v. Newfoundland, the Newfoundland Court of Appeal recognized that an owner’s good faith duties include the duty to avoid varying the terms of the awarded contract from the terms contained in the tender call.

The case involved a tender call for the construction of health facilities and other buildings. The Court of Appeal noted that “In respect of the decision to award a contract other than that contemplated by the tender call, the trial judge found this was also a violation of the common law principles of contract.”

The Court of Appeal agreed, finding that the need to award a contract that is consistent with the contract contained in the tender call is one of the primary implied duties that applies under the duty of fairness and good faith

As this case confirms, any post-bidding changes to the awarded contract can undermine the integrity of the formal bidding process and the equal footing upon which all bidders are entitled to compete.

Furthermore, in its June 1996 decision in Emery Construction Ltd. v. St. John’s Roman Catholic School Board, the Newfoundland Court of Appeal also found that a privilege clause does not allow an owner to award a contract that varies from the Contract B contained in the tender call.

The case involved a tender call for the construction of a new school. The low bidder was bypassed in favour of the second-lowest bidder. The low bidder sued.

The Court of Appeal stated that the school board was not permitted to use its privilege clause to apply undisclosed award criteria or vary the terms contemplated in the tender call: such clauses do not permit the owner to choose among bidders on the basis of criteria not disclosed to the bidders nor does it permit the owner to award something other than contract B.

Whilst these cases seem to be about private contracts (the first involving a shopping mall and the third involving a private Catholic school), the rationale for the holding seems, on the other hand, to be derived, as quoted from the Newfoundland case, from and for government contracting:

The doctrine of good faith is applicable in this case, the necessity for its application to government tendering to “protect the integrity of the bidding system” was expressed in Kencor and I need not state the principle more broadly than that it is a part of the law of tendering for Government contracts.

I would be interested to know for certain that the scope of contract principle is being applied to private contract bids. Given its basis in "good faith", a concept that has yet to find firm roots in US contract law generally (especially beyond the Uniform Commercial Code), I'd be skeptical about relying on it in the US.

But I would encourage pushing the envelope. If private owners truly ask private bidders to go to cost and bother of bidding on projects, at the very least, there should be some kind of promissory estoppel to prevent the kinds of injustices the Canadian cases seem to mitigate.