By / Matthew T Potomak and Liam M Robertson, Kuhn LLP
It is common for parties involved in a legal dispute to disagree about the terms of a contract. However, it is less common for parties to disagree on whether a contract was formed altogether and particularly so after the parties demonstrate an intention to perform under the contract. In the recent case of Rumpel Construction Ltd. v. Western Construction Company Ltd., 2022 BCSC 980, the court considered, by examining the parties’ conduct, at which point in relation to a bid process that a contract had been formed.
Facts
The Plaintiff, Rumpel Construction Ltd. (“Rumpel”) was a framing contractor.
The Defendant, Western Canadian Construction Company Ltd. (“Western”), was the general contractor for a condominium development project in Victoria, British Columbia (the “Project”).
Rumpel and Western generally agreed that the following events occurred:
a. Western provided Rumpel with a “tender package,” which contained detailed designs for the Project;
b. Rumpel provided feedback on the Project’s design and Western provided Rumpel with an updated “tender package,” which contained bidding instructions;
c. Rumpel provided Western with a quote for the Project;
d. Western indicated that they would be “moving forward” with Rumpel as the framing contractor for the Project;
e. Rumpel met with Western at the job site on several occasions to discuss progress and scheduling of the Project;
f. the Project was delayed several times before Rumpel had begun its framing work;
g. as late as July 25, 2019, Western communicated with Rumpel regarding delivery of lumber for the Project;
h. on August 1, 2019, Western told Rumpel that the offer for framing of the Project was retracted and revoked;
i. in as early as July 2019 Western was in communications with another framing contractor who was later hired to complete the Project;
j. upon termination of the contract, Rumpel sent Western an invoice for the value of the work done to date, which Western declined to pay.
Rumpel’s position was that the contract was formed when Western accepted Rumpel’s formal bid, which was communicated to Rumpel orally and through Western’s conduct.
Western’s position was that the “pre-conditions” of the contract were never fulfilled and that Rumpel had never accepted Western’s offer with sufficient formality before it was revoked.
The Law
The Court considered a 2007 Supreme Court of Canada decision, which provided the following:
The call for tenders is the offer by the owner to consider the bids it receives and to enter into the contract to complete the project where a bid is accepted. A bidder accepts that offer by submitting a bid that complies with the requirements set out in the tender documents. The contractual rights and obligations of the parties to Contract A are governed by the express or implied terms of the tender documents.
A bid also constitutes an offer to enter into Contract B. This is the contract to complete the project for which bids were sought. Where a bid is accepted, the terms of the tender and bid documents become the terms and conditions of
Contract B.
The Court also considered a BC Court of Appeal decision, which provided that formal notice of a contract being awarded is not required, and the surrounding circumstances must be examined, including, whether acceptance of a bid was condition, the conduct of the parties, and whether a “letter of intent” was provided.
The Decision
In reaching its conclusion, the Court found that:
a. the “tender package” provided by Western to Rumpel contemplated the contract being awarded upon certain conditions being satisfied and constituted an “offer” as the essential terms were stipulated; and
b. that Western’s “acceptance” of Rumpel’s bid was communicated through Western’s conduct by:
i. Western stating that it was “moving forward” with Rumpel;
ii. Western meeting with Rumpel at the project site on several occasions to discuss availability of framers, subcontractors, and scheduling; and
iii. Western’s conduct post “acceptance” and up to the point of retracting/revoking the contract would have strengthened a reasonable person’s belief that Western had accepted Rumpel’s bid.
The Court found that Western had breached the contract with Rumpel by revoking it. As a result, the Court found that Rumpel was entitled to damages, which consisted of Rumpel’s loss of profits and actual costs.
Lessons Learned
- Although it is preferrable to have clear written communications, contractors and those alike should be aware that of how their conduct may be interpreted by the other party, particularly with respect to contracts that are “up for grabs”;
- Contractors and those alike should consider how to include provisions in their contracts to allow flexibility with respect to project scheduling as, more often than not, construction projects will be delayed at some point;
- When a dispute arises, it is prudent to contact a lawyer as early as possible to help understand your legal rights and obligations, assist in navigating communications, and help protect your access to potential legal remedies. ■
This article was written by Liam M. Robertson who is a lawyer that practises in construction law with the law firm of Kuhn LLP. This article is only intended as a guide and cannot cover every situation. It is important to get legal advice for specific situations. If you have any questions or comments about this case or other construction law matters, please contact us at 604-864-8877 (Abbotsford) or 604-684-8668 (Vancouver).
