Cases - J&A Developments Ltd v Edina Manufacturing Ltd

Record details

Name

J&A Developments Ltd v Edina Manufacturing Ltd

Date

[2007]

Citation

BLM Vol 24 No 7

Keywords

Tendering and procurement

Summary

Six contractors tendered for an industrial project in Northern Ireland; the conditions of tender included the Code of Procedure for Single Stage Selective Tendering. The client called the three lowest tenderers to a meeting and requested that they reduce their tenders. The lowest tenderer, J&A Developments, refused and was not awarded the contract when the second lowest tenderer reduced its price. J&A brought an action against the client for breach of contract. The court gave judgment for J&A, starting from the proposition that 'a collateral contract can exist between a tenderer and an employer' based on Blackpool and Fylde Aero Club v Blackpool BC [1990] EWCA Civ 13.

The Code of Procedure contained the principle that:

'... it is a deplorable practice to seek to reduce any tender arbitrarily where the tender has been submitted in free competition and no modifications to the specification quantity or conditions under which the work is to be executed are to be made or to reduce tenders other than the lowest to a figure below the lowest tender.'

The Code was clearly incorporated expressly into the conditions of tender. The court's conclusion was:

'... that there was a binding contract to the effect the principles of the Code would be applied and that therefore while there was no obligation on the defendants to accept the lowest tender they bound themselves to accept either no tender at all of those submitted or one at the price at which it was submitted subject to the possibility of reduction in circumstance contemplated by the Code.'

Nolan L J had said in Fairclough Building v Port Talbot BC (1992) 62 BLR 82 that:

'... provided that the ground of rejection does not conflict with some binding undertaking or representation previously given by the customer to the tenderer the latter cannot complain.'

The court applied this in concluding that:

'... a binding undertaking or representation was given by the defendants to the plaintiff that the tendering procedure would be conducted in accordance with the principles of the Code ... by entering into a process of negotiation by which tenderers were invited to reduce their tenders and awarding the contract to the second lowest tenderer at his reduced price the defendants were in breach of contract.'

The measure of damages was held to be the cost of tendering, plus loss of profit, subject to a discount of 20% for mitigation of the loss through availability for other work.