Ontario Court of Appeal Rules that Acting in Good Faith is Not a Defence to a Breach of Contract


In Maystar General Contractors Inc. v. Newmarket (Town), 2009 ONCA 675, contractors submitted bids to the Town of Newmarket for the construction of a $35 million recreation complex. The bid submitted by Bondfield contained mathematical errors. It set out a stipulated price, but the GST was based on a wrong amount, and the total cost of work was the sum of the wrong amount and the calculated GST.

In reliance on Bradscot (MCL) Ltd. v. Hamilton-Wentworth Catholic District School Board (1999), 42 O.R. (3d) 723 (C.A.)., the Town allowed Bondfield to correct its bid, and when it turned out to be the lowest, awarded the contract to Bondfield. The tender of Maystar would otherwise have been the lowest. Maystar sued for damages, arguing that Bondfields bid was uncertain and therefore incapable of acceptance.

The Court of Appeal agreed with Maystar and the court below, holding that Bondfields bid was uncertain and therefore non-compliant and incapable of forming the basis of a contract. The bid could not be corrected by a simple arithmetic recalculation, and the Towns tendering contract did not have an express provision allowing it to clarify the bids. The Court distinguished Bradscot, where the bid was certain with respect to the stipulated price, but contained a mistake in the paragraph addressing GST.

The Court of Appeal noted that the Town was in a difficult situation and that it acted in the best interests of its citizens by wanting to accept the lowest bid. However, by allowing Bondfield to correct its bid and then accepting it, the Town was in breach of its duty of fairness to other bidders. This decision emphasized the importance of preserving the integrity of the fair bidding process, where contractors will expend time and expense to bid, knowing that they will be treated fairly.

Commentary: This case is another illustration of “the tender trap” – if you award to party A you might be held liable to party B (as in the Maystar case) and at the same time if you were to instead award to party B you might be held liable to party A (as in the Bradscot case). The outcome of these cases is unpredictable, thus the need, from the perspective of the party issuing the tender, for vigorous “flexibility” language (discussed in various previous articles and publications by Clark Wilson, available at our Construction Group website).