Analysis of Ron Engineering V the Crown landmark ruling leading to the Concept of Contract A and B in Contracting.

1. CROWNV
RON ENGINEERING
ANALYSIS
ALLAN CUTLER
Public Sector Procurement
Okafo EKE, Ifeoma Nneka
9/28/2015
An analysisof the LandmarkSupreme courtrulingbyJudge Esteyinthe case of Her MajestyThe Queenin
rightof Ontarioand the Water ResourcesCommission vRonEngineering&Construction(Eastern) Limited
(alsohere referredtoasthe Owner/Crownv.RonEngineering/contractor) whichresultedinthe creationof
Contract A andB terminologiesinthe biddingprocess andinCanadianLaw.As thisisnot a law course, a
summaryhas beenprovidedinthe appendix of the casescitedhereinastheypertaintothiscase.
FOR
BY

2. 1
Table of Contents
Executive Summary........................................................................................................................ 3
Summary of the Case ...................................................................................................................... 3
Introduction................................................................................................................................. 3
Paragraph 13 et al........................................................................................................................ 4
The Initial Court Case at the Trial Court ........................................................................................ 4
The Complainant - Ron Engineering’s position.......................................................................... 4
The Respondent – The Crown’s position.................................................................................... 5
The Trial Judge............................................................................................................................ 5
At the Court of Appeal.................................................................................................................... 6
The Complainant - Ron Engineering’s position.......................................................................... 6
The Respondent – The Crown’s position.................................................................................... 6
The Court of Appeal.................................................................................................................... 6
The Supreme Court ......................................................................................................................... 7
The Complainant - The Crown’s position................................................................................... 7
The Respondent – Ron Engineering’s position........................................................................... 7
The Court of Appeal.................................................................................................................... 8
Contract Not Executed:............................................................................................................ 8
Revocability of Offer:.............................................................................................................. 8
Contract A – the Initial Contract arising from accepting a tender........................................... 8
Paragraph 12 ............................................................................................................................ 9
Position with respect to the rulings of the Appeal Court......................................................... 9
Laws Governing Mistakes and as it Pertains to Contract A .................................................... 9
The Significance and Impact of the Decision in the Crown V Ron Engr..................................... 11
Detailed analysis of Contract A and Contract B........................................................................... 12
References..................................................................................................................................... 13

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Appendix A................................................................................................................................... 14
A flow chart of a Tender Process.............................................................................................. 14
Appendix B ................................................................................................................................... 15
Summary of Belle V Kaufman.................................................................................................. 15
Summary of McMaster V. Wilchar........................................................................................... 15

4. 3
Executive Summary
The ruling of Justice Estey in 1981on the case of the Crown v. Ron Engineering that was settled
in the supreme court of Canada in favour of the Water Commission of the province of Ontario,
was purported to have turned the laws governing bidding and tendering on its head in the
construction industry (Sandori, P., 2015, July). This was because the Justice by his ruling not
only created multiple contracts but by the stroke of pen created a quandary for bonding
companies who had issued bonds to construction companies that could no longer withdraw bids
that contained errors. Further, by his ruling, Justice Estey created what has come to be known as
Contract A and B and described as the tendering contract and the performance or construction
contract as shown in the time line in Figure 1 in the Appendix A at the end of the document.
Summary ofthe Case
Introduction
This summary and the subsequent parts of this report are based on the electronic summary of the
above case prepared by the Supreme Court of Canada in conjunction with Lexum (Supreme
Court Judgments., n.d.).
In responding to an invitation to Tender, Ron Engineering amongst other construction
contractors responded and submitted a tender/bid along with a stipulated deposit of $150,000
which was subject to forfeiture should a tenderer/bidder wish to withdraw their bid during the
lock-in period which was the 90 days preceding the closing of the tendering period and the
opening of the bids. A Ron Engineering employee – Hedges, discovered they had the lowest bid
by $632,000.00 when the bidding closed and the bids were opened. Suspecting a mistake,
Hedges called and informed her employer - Vered at Ron Engineering. Vered subsequently
discovered a mistake to the tune of $750,058.00 and admitted same in a telex sent the owner
after the bidding had closed. The telex further apologised and expressed the desire of Ron
Engineering to withdraw their bid while not being penalized.
The owner – The Water Resources Commission nevertheless, accepted Ron Engineering’s bid -
being the lowest bid - and submitted a contract for the contractor’s signature. Ron Engineering
did not sign the contract agreement. The owner, in line with the tender terms subsequently

5. 4
retained the deposit of Ron Engineering and proceeded to accept the next lowest tender from
another contractor. Ron Engineering proceeded with legal action to recover their deposit.
At Trial, the trial judge ruled in favour of the Crown – Ron Engineering did not get their deposit
back. Ron Engineering appealed this ruling and the Ontario Court of Appeal reversed the ruling
of the trial judge and ordered that the deposit be returned to Ron Engineering. The Crown
subsequently appealed the decision of the Appeals court at the Supreme Court. Judge Estey of
the Supreme Court upheld the ruling of the trial judge
Subsequent sections of this report shall outline the position of the various parties in the legal
proceedings at the Trial, Appeal and Supreme Courts respectively.
Paragraph 13 et al
The court proceedings revolved around the contents of the tender documentation and they will be
referred to in subsequent sections of this paper. Of much importance is the section identified as
‘Information for Tenderers’ and in paragraph 12, 13, and 14 under the heading ‘Tender Deposit’.
This section specified the terms under which the tender deposit may be rendered forfeited by the
tenderer which include in part that the tender guarantees that should:
i. A tender be withdrawn before consideration or before or after notification of acceptance
(paragraph 13) or
ii. The owner not be in receipt within 7 days of the executed agreement by the tenderer in
addition to the Bond documentation (paragraph 12) (and 90 days after opening tenders –
paragraph 14)
The tender deposit may be retained by the owner who may in-turn accept or not accept any
further tenders as it deems fit.
The Initial Court Case at the Trial Court
The original court decision was at the trial court where the complainant, Ron Engineering, filed a
suit to recover its deposit from the respondent and Crown.
The Complainant - Ron Engineering’s position
a. The complainant in spite of telex sent to the owner after the tendering process had
elapsed (indicating a desire to withdraw from the bidding process with apologies)
maintained in subsequent correspondence and in court that their bid was not withdrawn

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b. The telex entered in evidence surmised that fees to the tune of $750,058 was omitted
c. Ron engineering further maintained that by virtue of its notice to the owner of the error
alluded to above in its bid document prior to the acceptance of the tender document, that
the tender was incapable of being accepted and thus revocable.
d. Ron-Engineering further maintained that they should not be penalized by the retention of
their bid deposit since their bid was not capable of being accepted.
The Respondent – The Crown’s position
a. Notwithstanding the telex by Ron Engineering to withdraw its bid based on a mistake and
subsequent retraction to such a claim, the Respondent went ahead to proffer a contract to
Ron-Engineering in line with the terms of the bid document - Ron engineering had the
lowest bid.
b. When Ron Engineering refused to sign the contract document, the Crown took the
position that since the tender submitted by the tenderer was not flawed on its face (it did
not deviate significantly from their own estimates so as to impact the tenderer
negatively), and the tenderer also refused to sign a contract subsequently presented to
them as the tenderer of the winning bid (and lowest bid), the owner proceeded to act in
the belief that they were well within their rights to do so and
a. Retained the deposit of Ron Engineering in line with the terms set out in the bid
document
b. Proceeded with offering a contract to the next lowest bidder
c. Counter-claimed for damages arising from the contractor’s refusal to abide by the
terms of the tender thus necessitating their proceeding with the next lowest bid
The Trial Judge
The trial judge held that while the term ‘apology’ contained in the telex referred hereto was
challenging to understand, Ron-Engineering intended to withdraw its bid having discovered an
error in the calculations used to create the tender and not the tender itself – a mistake wholly the
responsibility of the contractor: Ron Engineering.
The Judge further acknowledged that:
i. The document was error free on its face and was what the contractor intended to file

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ii. The error was discovered after bidding had closed by the employee who submitted the
bid but said error was known by the employer before being informed by the employee
and the contractor was further diligent in communicating said error to the owner
iii. The owner had also been diligent and obtained from experts an estimate of the contract
which was short of the lowest bid in question by less than 0.2% ($3,300) even with profit.
Based on the foregoing and the contract terms highlighted above, the Trial Judge ruled that the
owner was entitled to retain the tender deposit of the conractor and dismissed their counter claim.
At the Court of Appeal
The contractor proceeded to appeal the judgement of the trail judge at the court of appeal. It
must be noted that the positions of the Contractor and the Crown did not deviate substantially.
The Complainant - Ron Engineering’s position
They maintained the same submission as they did at the trial court as stated above.
The Respondent – The Crown’s position
They also maintained the same submission as they did at the trial court as stated above.
The Court of Appeal
The court of appeal noted that the owner had indeed not properly executed the contract before
proffering the document to the next lowest bidder by virtue of the fact that:
1. Their signature was absent on the contract document
2. There was no time limit for contract execution on the contract document (even though it
was on the tender document)
The Judge further declared that the owner had not indicated its acceptance of the contractor’s
tender through signature but had merely relied on the terms of Paragraph 13. The appeals court
subsequently based its decision on precedent - Belle River Community Arena Inc. v. W.J.C.
Kaufmann Co. Ltd. et al (Belle River Community Arena , 2000, April 14), where it was held
that an offer could not be accepted after the offeree knows of an existing mistake since the offer
was not the offer that the offeree intended especially where the mistake had a material impact on

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the contract terms. In the case cited, a page was missing in the tender submission which had a
material impact– the mistake was in the tender not outside the tender and was not as the tenderer
intended it to be. Summary of Belle V Kaufmann is in the appendix.
Applying the same standards as in the case cited herein, the Judge ruled that:
i. The error existed, was material and was brought to the attention of the owner.
ii. Regardless of the fact that the notice of error was given after the bid closed, and that
owners may indeed be skeptical when a lowest bidder claims a mistake has been made,
the production of reasonable proof of said error suggests no impropriety on the part of the
contractor and renders the offer revocable and the deposit recoverable thus superseding
paragraph 13.
iii. The timing of the notice of error was of no consequence since the offer could not be
accepted.
As a consequence, the Judge overturned the trial judge and ruled in favour of the contractor to
keep their deposit and ruled that deposit forfeiture should apply only if there was a lack of the
bond performance terms as outlined in Paragraph 12.
The Supreme Court
The owner (the crown) appealed the verdict of the appeals court at the Supreme Court. Both
parties maintained the same positions that they did at both the Appeal and Trial courts. The
contractor, in this case the respondent, added to their position as listed below
The Complainant - The Crown’s position
They maintained the same submission as they did at the Trial and Appeal Court as stated above.
The Respondent – Ron Engineering’s position
Ron Engineering maintained the same position as they did at the Trial and Appeal Court as stated
above. In addition, the contractor took the position that since the owner did not execute (sign) the
construction contract before it was proffered I to them for signature, the owner had not abided by
the terms of Paragraph 13. By extension, the contractor implied that the owner could not use
Paragraph 13 to lay claim to its deposit if it did not fully abide by its terms.

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The Court of Appeal
The judge upheld the ruling of the Trial judge and dismissed the contractor’s claim for the return
of their tender deposit since the terms of Paragraph 13 clearly spell out the rights of the owner to
render as forfeit said deposit. To arrive at his rulings, the judge deliberated on the following and
stated his opinion as follows:
Contract Not Executed:
1. There is nothing in the “Information for Tenderers” or in the tender documents which
supports the position of the contractor that the bid had not been executed
2. Paragraph 13 literally means that the contractor has to sign an executed contract and file
it with the owner to avoid their tender deposit being retained. However, the contract
never came into existence since the contractor refused to execute the form of contract
forwarded by the owner to the contractor
3. Further, with respect to the un-signed construction agreement for execution which also
had a blank date for completion of work, the judge found this to be a clerical error and
that the contractor could have inserted their own date. Notwithstanding the judge was of
the opinion that this should not affect the rights and obligations of the concerned parties.
The judge further held it irregular to halt contract proceedings for a construction contract
because of a clerical error in the contract document for signature when the terms in said
contract were in conformance with the instructions to tender as well as the tender’s
tender.
Revocability of Offer:
According to the Judge, the revocability of the offer must be determined in line with the
“General Conditions” and “Information for Tenderers” and the related documents upon which
the tender was submitted - Paragraph 13
Contract A – the Initial Contract arising from accepting a tender
1. A contract arose when the tender was submitted by the contractor to the owner and said
tender could not be withdrawn for 60 days after the tender documents were opened.
2. Further, the contract named ‘Contract A’ was different from the construction contract
named ‘Contract B’ which would arise once a tender was accepted

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3. In addition, the terms of the contract A also provide for recovery of tender deposit 60
days after opening and a tender is not accepted by the owner as spelt out in the ‘terms and
conditions’ on the tender document –as noted here and further states that the tenderer
agrees that if requested, will execute and return to the commission contract documents
provided by the commission within 7 days of said request
Paragraph 12
Disagreeing with the contractor on the interpretation of the aforementioned, the Judge deemed
that paragraph 12 (here) spoke to the conditions of bond performance (after a construction
contract is signed) and subsequent forfeiture of bid deposit and as a consequence did not apply to
Contract A.
Position with respect to the rulings of the Appeal Court
In agreement with the Appeal court, the Supreme Court opined that the integrity of the bidding
system must be protected where possible under the law of contracts. However, circumstances
exist where a tender may not be accepted (such as an illegal tender) and therefore a tender
deposit not forfeited since a ‘Contract A’ cannot come to be. The Judge was of the opinion
however that the case before it did not meet the test for non-deposit forfeiture.
The Supreme Court disagreed with the Appeal Court when it ruled that an owner may not accept
a tender or seek to forfeit a tenderers bid deposit when a mistake on the part of the tenderer is
acknowledged and proven by reasonable evidence. The Judge stated that in-line with the terms
of revocability stated above, the test - for a revocable bid - should be imposed at the time a
tender is submitted and not at some future date when a tenderer has demonstrated a calculation
error. In other words, if at the time of submission of a tender, it is capable of being accepted (the
errors contained non-withstanding) then the rights of all parties under contract A have come into
existence including the exposure to forfeiture of the tender deposit designed to ensure the
performance of the obligations of the tenderer under contract A. In addition, it protects the
tenderer as the loss of the deposit might be lesser of the losses that might be incurred due to a
lack of performance in proceeding with contract B.
Laws Governing Mistakes and as it Pertains to Contract A
To address the law governing mistake, the Judge stressed that the part of the tender under review
was Contract A which unilaterally came into being on submission of the tender and was

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therefore irrevocable during the time stipulated in the contract (Paragraph 13). This was further
demonstrated with the example of:
“I will pay you a dollar if you will cut my lawn”
This offer just like a tender bore no obligation on any ones’ part to act. An obligation however
arose to pay $1.00 to the offeror once the lawn was cut (the invited act) by the offeree. Similarly,
once the offer was accepted and a tender filed in accordance with the terms and conditions of the
tender, the rights and obligations of the parties crystalized and a unilateral contract irrevocable
for the stipulated period came into existence. A consequence or corollary of the terms of the
tender is the obligation to enter into a construction contract – contract B should a tender be
accepted. Other terms of the tender included the obligation to accept the lowest tender.
Further guiding the tender are, the conditions under which the tender deposit secured to ensure
performance on the part of the tenderer becomes recoverable. The Judge opined that these
conditions were not met but however held that the conditions for forfeiture had indeed been met.
The claim that a mistake in calculation rendered a tender incapable of being accepted and not
subject to the forfeiture rules in the tender documents was deemed fallacious by the Supreme
Court Judge on two grounds:
1. There was no mistake as the contractor did indeed intend to file the tender in the form
and substance as filled.
2. There is no basis in law under which the tender was rendered incapable of acceptance.
The judge further demonstrated that unlike the case of McMaster University v. Wilchar
Construction Ltd. et al. (McMaster University v., 2000, April 14), the error was not obvious nor
could it be envisaged given a prior contract evaluation conducted deemed the tender document
close to the estimated value of the contract. In the case referenced, an entire page that was
material to the bid submission was omitted in the submission and was brought to the attention of
the owners. Further there was no meeting of the minds - animus contrahendi. It was held that
contract B could not have been formed. In the case of Ron Engineering, the Appeal judge held
that no patent glaring error was present. The judge further explained that the threshold had not
been met for a tender to be so flawed as not to be considered: such as when it is clear that $200
was meant to be written and not $20.

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Having considered all aspects of the Crown’s case as well as that of the contractor and prior
court proceedings, the Judge maintained that the only elements in law on which the case before it
could be adjudicated was that of contract A. Given the elements of law raised and deliberated on,
the Judge set aside the ruling of the Appeal Court and restored that of the Trial court based on
the afore mentioned deliberations.
The Significance and Impact of the Decision in the CrownV Ron Engr
As mentioned in the executive summary, the ruling in The Crown v Ron Engineering was
significant because of its impact not only in the construction industry but on how the tendering
process proceeded subsequent to the ruling. Beyond the creation of the principle of Contract A
and Contract B, the ruling affected all parties in the bidding and tendering process.
1. Contractors were suddenly forced to be more careful in the preparation of their tender
documents and to choose between withdrawing from a tendering process for which they
had submitted a bid that was prepared in hurry and contained miscalculations, errors,
omissions or genuine mistakes and losing their deposit or proceeding with the tendering
process in the hope that theirs was not the lowest bid. If they were, they could then be
obliged to be bound by Contract A, called upon to proceed with a contract B for which
they had under estimated or fall on their sword at that time, forfeit their deposit, be in
breach of ‘Contract A’ with the potential of a law suit for damages.
2. The ramifications of this ruling for a while further impacted other parties to tenders in
process to the extent that bonding companies were suddenly in a position of losing bond
deposits where their clients were not able to perform under the terms of contracts signed
and could no longer withdraw since they were now bound as a result of the rights of
parties to a tender ‘crystallizing’ and Contract B unilaterally coming into being.
3. More subtle was a clarification of the laws of mistake. The ruling provided clarity in the
sense that it was no longer sufficient for a contractor to claim that ‘a mistake had been
made’ for them to be able to withdraw their bid nor were they going to be let go without a
penalty once the bidding had closed. The Judge’s ruling meant that for a claim to a
mistake to be accepted in the bidding process, said mistake must be:
a. Material and obvious on its face to any reasonable person

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b. In the tender and not work product and
c. Acknowledged before bidding closes and the lock-in phase proceeds
Detailed analysis of Contract A and Contract B
Figure 1 in the Appendix provides a graphical representation of the analysis below. It
demonstrates what obtains in the course of a tender from the pre-bidding stage up to when the
winning bid is selected and the contract B is signed.
Stage Actions / Activities at Each Stage in the Tendering Process Outcome
Pre-Bid  Requirements are translated into a bid document
 Legalities and terms of the bid and bond performance rules set
 Other conditions and dates set and call for bid opened to public
An invitation to Tender
document is published
Bid Opens  Bids are accepted, clarification sought, amendments are published
by the owner and bids can be withdrawn up until the bid closes
Interested bidders submit
tenders until closure
Bid Closes  Bid documents are opened, lock-in period proceeds
 Withdrawal and bid deposit terms enforced
Lowest bid accepted &
Contract A is born
unilaterally
Contract B  Performance contract is created and presented for signature and
subsequently signed
Contract B is born
Table 1: Analysis of Contract A and B formation
As enunciated in the previous sections under “The Court of Appeal Ruling” and labeled
“Contract A…” and “Laws Governing Mistakes…”, the mechanics that govern and lead to the
materialization of Contract A and B have been elaborated on ad nauseam. It is pertinent to note
that while there is no compulsion to respond to a call to tender, once answered it places the
tenderer under the terms and once accepted the owner is duty bound to perform in accordance
with the terms to preserve the sanctity of the implied contract– Contract A so formed. Further,
the terms of a tender presume an understanding and a willingness to proceed with Contract B
once chosen. In essence, a response to tender implies a willingness if chosen (resulting in the
creation of Contract A) to proceed with contract B or decline and suffer the consequences per the
terms of the tender - the remedy while the owner is free to proceed as they choose either with
next lowest tender in line or cancellation of the bid in its entirety.

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References
Belle River Community Arena Inc. v. W.J.C. Kaufmann Co. Ltd. et al. (2000, April 14).
Retrieved October 7, 2015, from http://www.schuettlaw.com/course/course
materials/Cases/Tender Contracts/Mistake in Tender/1978 - Belle River v Kaufmann -
Appeal.htm
McMaster University v. Wilchar Construction Ltd. et al. (2000, April 14). Retrieved October 7,
2015, from http://www.schuettlaw.com/course/course materials/Cases/Tender Contracts/Mistake
in Tender/1971 - McMaster v Wilchar.htm
Sandori, P. (2015, July). Construction Bidding and Tendering: Principles and Pratice. Retrieved
October 7, 2015, from http://www.revay.com/
Supreme Court Judgments. (n.d.). Retrieved October 7, 2015, from http://scc-csc.lexum.com/scc-
csc/scc-csc/en/item/2504/index.do

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Appendix A
A flow chart of a Tender Process
Figure 1: Contract A and B Timeline
Pre Bid Bid Opens Lock-In Period Contract B
Pre Bid
• Terms of Tender
are created
• Condition and
Dates set.
• Terms of Deposit
and bond
established
Bidding Opens
• bidders submit
compliant bids
• Owner publishes
ammendments
• bidders ammend
and update bids
• Bids are
entertained until
the closing date
Bid Closes
• Bids are opened
• Lock-in perod
commences
• Evaluation proceeds
• Bidders selected
who subsequently
withdraw -penalized
by bid deposit
retention
• Winning bid is
selected
• Unilateral formation
of Contrat A with
Winner by owner
Contract B
• Tender of
winning bid is
accpeted
• Contract is signed
by the tenderer of
the winning bid
• Winner of tender
is annouced
• Other bidders are
informed

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Appendix B
Summary of Belle V Kaufman
In this case cited at the appeals court, the owner sued the contractor to recover the difference
between their bid and the next lowest bid that they ended up accepting. The case was dismissed
at appeal where the Judge held that once an owner has been notified of an error of a material
nature in a tender, said tender may not be accepted regardless of when notice was given with
respect to the bid open period.
Summary of McMaster V. Wilchar
In this case cited at the Supreme Court, the owner sued the contractor for damages for breach of
contract. The contractor submitted an incomplete bid document that was material to their
submission. The mistake was deemed obvious to a reasonable person. A page was obviously
missing from the tender documents and the owner and tender committee were made aware of it
but they chose to disregard it – ergo there was no meeting of the minds - animus contrahendi –
and contract B could not have been formed.