Can a Proponent’s Conduct after Issuing an Rfp Invalidate an Otherwise Effective Disclaimer of Contract A?

Concept

The Inherent Architecture of Fairness

In the highly structured world of procurement, a Request for Proposals (RFP) initiates a sequence of events governed by a precise legal framework. Central to this framework is the distinction between “Contract A” and “Contract B,” a concept crystallized in Canadian law by the Supreme Court’s decision in R. v. Ron Engineering & Construction (Eastern) Ltd. Contract A is the process contract, which comes into existence the moment a bidder submits a compliant response to a tender.

This initial contract binds the proponent (the issuer of the RFP) to a set of rules, most notably the duty of fairness and good faith to all bidders. Contract B is the subsequent performance contract ▴ the actual work to be done ▴ which is awarded to the successful bidder. Proponents, seeking to maintain flexibility and control, often insert disclaimer or privilege clauses into their RFP documents. These clauses are designed to negate the formation of Contract A, explicitly stating that the RFP is merely an invitation for discussions and creates no binding legal obligations on the proponent.

The core tension arises from this very construction. A disclaimer clause represents a proponent’s attempt to architect a procurement process free from the legal duties that Contract A imposes. It is a declaration that the proponent wishes to operate outside the established system of irrevocability and fairness inherent in a formal tender. Yet, the law remains vigilant, scrutinizing the substance of the process over its labels.

A proponent’s actions can transmit a different message than its words. When a proponent’s conduct after issuing the RFP contradicts the “no contract” language of its own disclaimer, the legal system must determine which communication prevails. The central question becomes whether the proponent’s behavior has, in effect, reactivated the very contractual obligations it sought to disable. This examination is critical to upholding the integrity of the competitive bidding process, ensuring that proponents cannot use a disclaimer as a shield while simultaneously reaping the benefits of a formal, structured competition. The judiciary’s role is to preserve the equilibrium, preventing a situation where a proponent can have it both ways ▴ enjoying the competitive tension of a formal bidding process without shouldering the corresponding duty of fairness.

The Substance of Contract a Formation

The existence of Contract A is not a given in every procurement process. The Supreme Court of Canada, in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. clarified that the intention of the parties determines whether Contract A is formed. This intention is not divined from secret hopes but is inferred from the explicit terms and the overall structure of the procurement documents.

A process that looks and functions like a formal tender is likely to be treated as one, regardless of whether the proponent labels it an “RFP” or includes a disclaimer. Courts will dissect the document to see if it contains elements indicative of a binding process. These factors include the irrevocability of bids, the solicitation of tenders from a select group, specified evaluation criteria, and language that implies a definitive award process.

A proponent’s conduct following the issuance of an RFP can indeed override a disclaimer, creating binding legal duties where none were intended.

A disclaimer’s power is therefore conditional. It is most effective when the proponent’s subsequent actions align with the non-binding nature it professes. If the RFP document is structured as a flexible negotiation framework and the proponent’s conduct is consistent with that flexibility, a court is likely to uphold the disclaimer. In this scenario, there is no Contract A, and the proponent is governed by the more general principles of contract law, such as the duty of good faith in negotiations.

However, should the proponent’s conduct diverge from this path ▴ by enforcing bid irrevocability, for instance, or by treating the process as a rigid competition ▴ they risk invalidating the disclaimer. The proponent’s actions can be interpreted as an implicit waiver of the disclaimer, creating a Contract A with all its attendant duties. This is the critical pivot point ▴ where the operational reality of the procurement process overrides the carefully drafted legal text designed to control it. The system’s integrity demands that the parties’ conduct be a true reflection of their stated intentions.

Strategy

Circumventing the Fortress of Disclaimers

A well-drafted disclaimer clause acts as a legal fortress for a proponent, designed to repel claims from unsuccessful bidders. Yet, this fortress is not impregnable. A bidder’s strategy for challenging a procurement outcome often hinges on identifying proponent conduct that undermines the very foundation of this fortress. The most potent weapon in a bidder’s arsenal is the doctrine of estoppel.

Estoppel prevents a party from enforcing a contractual right (like a disclaimer) if they have, by their words or conduct, led another party to believe that the right would not be enforced, and the other party has relied on that representation to their detriment. If a proponent, through its actions, signals that a fair and formal competition is underway, it may be “estopped” from later hiding behind its disclaimer to justify an unfair decision.

Another strategic avenue involves the concept of waiver. A proponent can be deemed to have waived its reliance on a disclaimer if it acts in a manner inconsistent with it. For example, if a proponent disqualifies a bidder for a minor deviation from the RFP’s instructions, it is acting as if the RFP’s rules are binding. This conduct is inconsistent with the idea that the RFP is a non-binding invitation to negotiate.

By enforcing the rules of a formal tender, the proponent may be seen as having waived its right to deny the existence of a formal tender process (and the accompanying Contract A). A bidder’s legal team will strategically scrutinize every communication and action from the proponent, from the initial RFP issuance to the final award, searching for these inconsistencies. The goal is to build a narrative demonstrating that the proponent, despite its disclaimer, intended to create and be bound by a formal competitive process.

Varieties of Proponent Conduct and Their Consequences

A proponent’s actions post-RFP can be categorized to assess their potential for invalidating a disclaimer. The severity of the conduct often correlates with the likelihood of a successful legal challenge. Understanding these categories is a core strategic component for both proponents seeking to maintain a defensible process and respondents evaluating their options.

The Tercon Test a New Framework

The Supreme Court of Canada’s decision in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) introduced a new and influential test for analyzing these situations. While Tercon dealt with an exclusion of liability clause, its analytical framework is highly relevant to disclaimers of Contract A. The “Tercon Test” provides a three-part analysis for a court to consider when a proponent seeks to rely on such a clause:

1. Interpretation ▴ As a matter of interpretation, does the disclaimer/exclusion clause even apply to the specific circumstances of the case? The court will look at the precise wording of the clause to determine if it covers the proponent’s specific breach of fairness.
2. Unconscionability ▴ If the clause does apply, was it unconscionable at the time the contract was formed? This involves factors like unequal bargaining power. In the context of RFPs, this is less common, as bidders are typically sophisticated commercial parties.
3. Public Policy ▴ If the clause is valid and applicable, is there an overriding public policy reason to refuse to enforce it? This is the most potent part of the test. A court might refuse to enforce a disclaimer if doing so would undermine the fundamental integrity and fairness of the public procurement process.

The Tercon decision signals that courts are willing to intervene to protect the integrity of the bidding system, even in the face of clear and explicit exclusion clauses. For bidders, this provides a powerful strategic argument. They can contend that even if a disclaimer appears to be ironclad, enforcing it in a case of egregious unfairness would be contrary to public policy.

For proponents, Tercon is a warning ▴ a disclaimer is not a license to act unfairly. The overarching public interest in a fair, open, and transparent procurement system can, in some cases, outweigh a proponent’s privately drafted contractual protections.

Execution

An Operational Playbook for Proponents

For a proponent, the execution of a defensible RFP process that preserves the power of its disclaimer clause requires systematic discipline. The objective is to ensure that every action taken aligns with the “no contract” framework established in the RFP documents. Any deviation introduces risk. A successful execution is not about drafting the perfect clause; it is about maintaining operational consistency that reinforces the clause’s intent.

A disclaimer’s effectiveness is a function of the proponent’s disciplined adherence to a non-binding, flexible process.

Here is a procedural guide for proponents to follow:

• Language and Framing ▴ Use clear, unambiguous language throughout the RFP. Avoid terms like “tender,” “bid,” or “offer.” Instead, use “proposal,” “submission,” or “response.” The document should be explicitly titled a “Request for Proposals” and not an “Invitation to Tender.” Include a clause that explicitly states the RFP is not a tender, will not give rise to Contract A, and that no contractual obligations will arise until a formal written agreement (Contract B) is signed by both parties.
• Communication Protocol ▴ Establish a single point of contact for all communications. All questions and answers should be anonymized and distributed to all potential respondents simultaneously. This prevents any single respondent from gaining an informational advantage and demonstrates a commitment to a level playing field, which supports the overall fairness of the process even in a non-binding context.
• Flexibility in Process ▴ The process itself must reflect the flexibility that the disclaimer claims. Avoid overly rigid mandatory requirements. If a requirement is truly non-negotiable, it should be clearly labeled as such, but an excess of rigid requirements can make the process look more like a formal tender. The evaluation criteria should also allow for some degree of discretion, framed in terms of “desirability” rather than rigid scoring.
• Evaluation and Award ▴ The evaluation team must be meticulously trained to evaluate only on the criteria specified in the RFP. Any deviation introduces the risk of a claim of undisclosed criteria. The final decision should be framed as the selection of a “preferred proponent” for the purpose of entering negotiations, rather than the “award” of a contract. This reinforces the idea that the RFP process itself does not conclude with a binding award.
• Negotiation Phase ▴ If the intent is to negotiate with a preferred proponent, this should be clearly stated in the RFP. However, these negotiations should be genuine. If the proponent simply accepts the preferred proponent’s proposal without any discussion, it can look like the acceptance of a binding offer, undermining the “negotiation” framework.

A Bidder’s Guide to Identifying Actionable Conduct

For a bidder, success in challenging a procurement decision rests on evidence. A bidder who feels they have been treated unfairly must move beyond suspicion and gather concrete evidence of the proponent’s conduct. The goal is to build a case that the proponent’s actions created a de facto Contract A or breached the duty of fairness so egregiously that a court should intervene.

The law will scrutinize the substance of a procurement process, not just its label.

Executing a legal challenge is a significant strategic decision. It requires a careful cost-benefit analysis. Legal fees can be substantial, and the process can damage business relationships.

However, for a bidder who has invested significant resources into preparing a proposal and has clear evidence of an unfair process, a legal challenge may be the only recourse. The damages in a successful claim can include the costs of preparing the bid and, in some cases, the lost profits that would have been earned from Contract B. The decision to proceed must be based on a dispassionate assessment of the evidence and a clear understanding of the legal principles at play.

Reflection

The Integrity of the System

The principles governing RFPs and proponent conduct are more than abstract legal doctrines. They form the operational code for a system designed to achieve value and fairness in commercial dealings. The framework of Contract A/B, the duties of fairness, and the judicial scrutiny of disclaimers all point to a single, foundational concept ▴ integrity.

A procurement process is a complex interaction of stated rules and unstated expectations. The ultimate effectiveness of this system depends on the alignment of the two.

For a proponent, this means recognizing that a disclaimer clause is not a substitute for a disciplined and fair process. True control comes not from legal text alone, but from a consistent operational posture that reinforces the proponent’s stated intentions. For a respondent, it requires an understanding that the system contains mechanisms to challenge conduct that deviates from the principles of fairness.

The knowledge gained is a component in a larger framework of strategic risk management. It transforms a bidder from a passive participant into an active guardian of the process’s integrity, armed with the understanding of how and when to hold the system accountable to its own rules.