[1]The respondent Northern was a general contractor, and the appellant Gloge was a mechanical subcontractor. In August 1980 the Government of Canada (the owner) invited tenders from contractors for the work proposed to be done at the Edmonton International Airport. The tender deadline was stipulated to be September 19, 1980; about September 3, 1980 Northern invited tenders from various subtrades, including the appellant Gloge.

[2]As the trial judge noted, the practice in the industry would cause an interested prospective subcontractor to obtain copies of the plans, specifications and tender documents from the owner so that it might prepare its tender. The subcontractor would know from such documents that general contractors tendering would be bound by their tenders for up to sixty days while the owner considered the various tenders. The subcontractors would also know that a general contractor was required to disclose in its tender the identity of the subcontractors it proposed to use.

[3]Tenders were to close on September 19, 1980; apparently the practice of many subcontractors, including Gloge, was to telephone their tenders to the general contractors minutes before the close of tenders, in order to deny any time for "bid-shopping" by general contractors. Following this practice, Gloge communicated its tender by telephone to Northern perhaps twenty minutes before tenders closed. Northern would then complete its own tender for submission to the owner in the few minutes remaining before tendering closed.

[4]Gloge's tender was the lowest of the mechanical subcontract tenders received by Northern, and was used by Northern in the computation of its own tender. Additionally, Northern nominated Gloge as its mechanical subcontractor in its tender to the owner.

[5]There was a dispute in the evidence of some witnesses as to one aspect of Gloge's tender. Evidence adduced by Northern suggested that Northern noticed that Gloge's tender was considerably lower (12%) than the next higher mechanical tender. This was said to have been mentioned to the Gloge representative during the telephone submission of Gloge's tender, when Northern asked Gloge if Northern could rely on the tender. The answer was said to be yes. Evidence adduced on behalf of Gloge denied the conversation, and, indeed. Gloge now suggests that Northern had a duty to alert Gloge if its tender was so out of line with the other mechanical tenders so that it might seem erroneous. The trial judge did not find it necessary to resolve this evidential dispute.

[6]By September 23 Gloge had realized that its tender seriously understated the cost of the work. This error resulted from incorrect extensions etc. and resulted in a shortfall of approximately $180,000 below what the tender should have been. Therefore on that date Gloge contacted several general contractors to whom it had tendered and learned that Northern was the lowest bidder. Upon enquiry to Northern, Gloge then learned that Northern's tender to the owner had relied on Gloge's mechanical tender. Gloge then explained that its tender was erroneous, and details were provided. After discussion, Gloge undertook to provide Northern with written details of the tender, including details of the error, so that Northern might assist Gloge, by urging the owner to permit substitution of Gloge by another mechanical tender, and presumably to permit Northern to adjust its own tender by the amount of the increase in the mechanical tender.

[7]The owner agreed to the substitution, but refused to permit Northern to change the amount of its tender.

[8]The owner duly accepted Northern's tender and awarded it the work. Gloge refused to perform the mechanical subcontract, so that Northern was required to make alternative arrangements by employing a subsidiary at an increase of $341,299 in the mechanical subcontract price.

[9]The appellant Gloge has submitted:

AThat it was free to withdraw its tender at any time before Northern accepted that tender by awarding the subcontract to Gloge, and had done so.

BNorthern failed in a duty it owed to alert Gloge that its tender was sufficiently low that it must be erroneous.

CThat Northern could not purport to accept Gloge's tender after it knew that the tender was erroneous because of bona fide mathematical mistakes.

[10]The latter two arguments can be disposed of summarily. Gloge had purposely delayed submitting its tender until minutes before the deadline for submitting tenders. Thus Northern had no real opportunity to analyze Gloge's tender, or to make any meaningful comparison with other mechanical tenders. Accordingly, the evidence does not persuade us - nor did it persuade the trial judge - that Northern ought to have known of error in Gloge's tender. Furthermore, Northern had only minutes to submit its own tender after receiving Gloge's tender. Although it learned afterwards (on September 23) about the error in Gloge's tender, it was then too late for Northern to assist Gloge without the owner's consent which was not forthcoming.

[11]The real issue raised before us is Gloge's first submission -Was Gloge free to withdraw its bid, and did it do so? In our view, the decisions inRon Engineering & Construction (Eastern) Ltd. v. Ontario, Province of and The Water Resources Commission(1981)1981 CanLII 17 (SCC), 1 S.C.R. 111, 35 N.R. 40; andTheCity of Calgaryv. Northern Construction Company Division of Horrison-Knudsen Company Inc., et al(December 11, 1985, Alta. C.A.), provide the answer.

[12]Applying the analysis of Estey, J. inRon EngineeringNorthern made an offer to Gloge to submit a tender for the mechanical subcontract; Gloge accepted the offer by submitting its tender on September 19, 1980, and contract A (as described by Estey, J.) was made.

[13]As Estey, J. stated inRon Engineering:

"The tender submitted by the respondent brought contract A into life. This is sometimes described in law as a unilateral contract, that is to say a contract which results from an act made in response to an offer, as for example in the simplest terms, 'I will pay you a dollar if you will cut my lawn'. No obligation to cut the lawn exists in law and the obligation to pay the dollar comes into being upon the performance of the invited act. Here the call for tenders created no obligation in the respondent or in anyone else in or out of the construction world. When a member of the construction industry responds to the call for tenders, as the respondent has done here, that response takes the form of the submission of a tender, or a bid as it is sometimes called. The significance of the bid in law is that it at once becomes irrevocable if filed in conformity with the terms and conditions under which the call for tenders was made and if such terms so provide. There is no disagreement between the parties here about the form and procedure in which the tender was submitted by the respondent and that it complied with the terms and conditions of the call for tenders. Consequently, contract A came into being. The principal term of contract A is the irrevocability of the bid, and the corollary term is the obligation in both parties to enter into a contract (contract B) upon the acceptance of the tender.

[14]Was Gloge's tender revocable after close of tender? Gloge knew that Northern would select a mechanical tender and rely on it, and Gloge also knew that the tenders of the general contractors to the owner would be irrevocable for the time set out in the contract documents. Perhaps these facts of themselves might justify holding the Gloge tender to be irrevocable. But, in addition, the trial judge accepted certain expert evidence given at the trial by two witnesses who had been in the construction industry for many years. That evidence demonstrated that it was normal and standard practice for general contractors to accept last minute telephone tenders from subcontractors, and that it was understood and accepted by those in the industry that while such tenders could be withdrawn prior to close of tendering, if not so withdrawn, that such tenders must remain irrevocable for the same term that the general contractors' tenders to the owner are irrevocable.

[15]This industry practice is eminent common sense. Without such accepted practice the tendering system would become unenforceable and meaningless. Estey, J. observed inRon Engineering:

"I share the view expressed by the Court of Appeal that the integrity of the bidding system must be protected where under the law of contracts it is possible so to do."

[16]Applying the industry practice to this case, Gloge could not withdraw its tender to Northern after tenders had closed, and its tender was irrevocable for the same period as Northern's. Accordingly Gloge was obligated to perform the work when Northern awarded it the subcontract, and is liable for failing to do so.

[17]We observe that Gloge's conduct after its tender error was discovered is consistent with the industry practice already described. Gloge did not take the position with Northern that it had the right to withdraw its bid. Instead, it sought Northern's assistance in an attempt to persuade the owner to consent to the substitution of a higher mechanical tender to replace Gloge's.

[18]In the result, the judgment at trial is affirmed. The appeal is dismissed with costs to be calculated on the same basis as ordered by the trial judge.

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