Tercon Contractors Ltd. v. British Columbia (Transportation and Highways)

Listen to Podcast

Case Brief

Facts

The Province of British Columbia issued a request for proposals (RFP) for highway construction, limiting eligible bidders to six pre-qualified proponents, including Tercon and Brentwood. The RFP contained an exclusion clause barring claims for compensation "as a result of participating in this RFP." Brentwood, lacking expertise, partnered with EAC (an unqualified bidder) in a pre-bidding agreement, submitting a bid in Brentwood's name but listing EAC as a major member. The Province, aware of this arrangement, selected Brentwood's bid. Tercon sued, arguing the Province breached the tendering contract by considering an ineligible bid. The trial judge agreed and awarded damages, finding the exclusion clause did not apply. The Court of Appeal overturned the decision, enforcing the exclusion clause.

Issues

1. Did the Province breach the terms of the tendering contract by considering a bid from an ineligible bidder? 2. If so, does the exclusion clause apply to the Province's conduct? 3. If the exclusion clause applies, should the court refuse to enforce it due to unconscionability or public policy?

Legal Analysis

The Supreme Court addressed the enforceability of exclusion clauses when a party breaches a contract. The Court established a three-part test: 1. **Interpretation:** Does the exclusion clause, as a matter of interpretation, apply to the specific circumstances? 2. **Unconscionability:** Was the exclusion clause unconscionable at the time of contract formation? 3. **Public Policy:** Should the court refuse to enforce the otherwise valid and applicable exclusion clause due to an overriding public policy concern? The majority found that the Province breached the contract by considering an ineligible bid, undermining the integrity of the tendering process. They interpreted the exclusion clause as not covering such a fundamental breach. The dissent argued the exclusion clause was clear and unambiguous, applying to the circumstances, and there was no overriding public policy reason to invalidate it. The dissent emphasized freedom of contract and Tercon's sophistication as a bidder.

Decision

The appeal was allowed. The Supreme Court held (5-4) that the Province breached the tendering contract by considering a bid from an ineligible bidder. The majority found that, based on its interpretation, the exclusion clause did not protect the Province from liability in this specific situation. The clause was not intended to waive compensation for conduct that strikes at the heart of the tendering process. The court did not need to address the unconscionability or public policy issues because the exclusion clause, properly interpreted, did not apply to the Province's breach.

Transcript

Okay, welcome back to Casepod! Today, we're diving into *Tercon Contractors Ltd. v. British Columbia (Transportation and Highways)*, a landmark case on exclusion clauses and the tendering process. So, picture this: British Columbia needs a highway built. They put out a request for proposals, or RFP, but limit the bidders to six pre-qualified companies, including Tercon and Brentwood. Now, here's where it gets interesting. The RFP has a clause – a pretty standard one, you might think – that says nobody can claim compensation for anything "as a result of participating in this RFP." Sounds broad, right? Brentwood, one of the pre-qualified bidders, wasn't exactly a road-building expert. So, they secretly teamed up with a company called EAC, who *wasn't* pre-qualified. They submitted a bid under Brentwood’s name, but everyone knew EAC was really running the show. And, get this, the Province *knew* about the deal and still picked Brentwood. Tercon, who lost out, was not happy. They sued, arguing the Province broke the tendering contract by even considering Brentwood's bid. The initial judge agreed, awarding damages, but the Court of Appeal flipped the decision, saying that exclusion clause covered everything. That takes us to the Supreme Court of Canada. The big question: can the Province really get away with this, hiding behind this exclusion clause? This case boils down to three key issues. First, did the Province *actually* breach the tendering contract by considering an ineligible bid? Seems pretty straightforward that they did, right? Second, if there *was* a breach, does that exclusion clause protect the Province? This is the real meat of the case. And third, even if the clause *does* apply, should the court refuse to enforce it anyway, maybe because it's just plain unfair or goes against public policy? The Supreme Court came up with a three-part test when we talk about exclusion clauses. It's now the go-to framework. First, **interpretation:** Does the clause, as written, even *cover* what happened? What did the parties intend? Second, **unconscionability:** Was the clause shockingly unfair when the contract was signed? And third, **public policy:** Is there a really good reason – a benefit to society – to ignore the clause, even if it seems valid? In *Tercon*, the majority said the Province *did* breach the contract. They argued that the exclusion clause wasn't meant to cover such a fundamental breach – essentially, cheating on the rules of the tendering process. It was about fairness. The dissenting judges saw things differently. They said the clause was crystal clear, covering exactly what happened. They emphasized that Tercon was a sophisticated company and freedom of contract should be respected. Ultimately, the Supreme Court sided with Tercon. They said the Province *did* breach the contract, and the exclusion clause, as they interpreted it, didn't shield them from liability. The clause wasn't designed to allow the Province to ignore the entire purpose of the bidding process. Because of this decision, the court didn't even need to discuss the unconscionability or public policy arguments. *Tercon* is crucial because it highlights the limits of exclusion clauses, especially in tendering contracts. You can't just write a broad clause and expect it to cover everything, especially when it undermines the integrity of the entire process. It's a victory for fairness and transparency in public procurement.