How Can an Issuer’s Conduct during an Rfp Accidentally Create a Binding Contract?

Concept

From Invitation to Obligation

A Request for Proposal (RFP) is fundamentally a tool for information gathering, a structured conversation initiated by an issuer to survey the market for solutions. In its purest form, it is an “invitation to treat,” a legal concept signifying a request for offers, not an offer in itself. The issuer invites suppliers to present their proposals, from which the issuer can then choose to begin negotiations.

The process, however, is fraught with procedural nuances. An issuer’s specific language and conduct can inadvertently alter the legal nature of the RFP, transforming it from a non-binding solicitation into a binding preliminary contract, often referred to as “Contract A.”

This transformation occurs when the issuer’s RFP document, combined with its subsequent actions, demonstrates an intention to be bound by the rules it has set. If the RFP outlines a clear, formal evaluation process with defined criteria and deadlines, and states an intention to award the final contract (Contract B) based on adherence to these rules, the dynamic shifts. When a respondent submits a compliant proposal, they are not merely making an offer; they are accepting the terms of the process contract (Contract A) laid out by the issuer.

This acceptance creates a set of immediate legal obligations, primarily the duty for the issuer to conduct the evaluation process fairly and in good faith, according to its own stated terms. The accidental creation of Contract A is a critical failure in procedural design, exposing the issuer to significant legal risk if they deviate from the documented process.

The Contract a and Contract B Framework

The legal framework that governs this area, particularly in Canadian law following the seminal Ron Engineering case, is the “Contract A/Contract B” analysis. Understanding this dual-contract structure is essential for any issuer managing a procurement process.

• Contract A ▴ This is the process contract. It comes into existence the moment a bidder submits a compliant response to an RFP that was structured as a formal tender. The terms of Contract A are the rules of the tender process itself, as defined in the RFP document. Its principal term is the irrevocability of the bid for a specified period, and it binds the issuer to a fair and good-faith evaluation of all compliant bids based on the disclosed criteria. An issuer who creates and then breaches Contract A ▴ by, for example, accepting a non-compliant bid or changing evaluation criteria mid-process ▴ can be sued for damages by any compliant bidder, even those who would not have won the final contract.
• Contract B ▴ This is the ultimate performance contract for the goods or services. It is the agreement the issuer intended to form from the outset. Contract A essentially creates an obligation for both the issuer and the selected bidder to enter into Contract B. Once the issuer accepts a bid according to the rules of Contract A, both parties are bound to proceed with Contract B. An issuer cannot, at this stage, decide to negotiate different terms or simply change its mind without facing legal consequences for breach of Contract A.

The submission of a compliant bid in response to a formal tender creates a preliminary process contract, binding the issuer to its own rules.

The critical distinction lies in the issuer’s intent as expressed through the RFP’s language and structure. A carefully drafted RFP that emphasizes its non-binding nature, reserves the right to negotiate with any party, and avoids promissory language can maintain its status as a simple invitation for proposals. Conversely, an RFP that uses mandatory language, details a rigid evaluation methodology, and promises an award at the end of the process is likely to be interpreted by courts as an offer to form Contract A, regardless of whether the issuer explicitly intended that outcome.

Strategy

Architecting Ambiguity versus Certainty

An issuer’s primary strategic objective during an RFP process is to maintain maximum flexibility while encouraging competitive and innovative proposals. The accidental formation of a binding contract fundamentally undermines this objective. The core of the issue rests on the language and promises embedded within the RFP documents. Conduct that implies a promise to adhere to a specific process or outcome can be legally interpreted as an offer to form a process contract (Contract A).

For instance, using words like “must,” “shall,” or “will” in relation to evaluation criteria or the award process suggests a binding commitment. Stating that the contract “will be awarded” to the lowest-priced compliant bidder is a classic example of a statement that creates a legal obligation once a compliant bid is submitted.

Conversely, strategic ambiguity and the explicit reservation of rights are the primary tools for avoiding this pitfall. An RFP should be framed as a document for discussion and negotiation. The language should be permissive, using phrases like “may,” “it is anticipated,” or “the issuer intends to.” Most importantly, the RFP must contain clear, prominently displayed clauses that explicitly disclaim any intention to create a binding legal relationship through the RFP process itself. These “exclusion of liability” clauses are a strategic necessity to protect the issuer.

Language That Creates Legal Risk

The following table illustrates the type of language that can lead courts to determine a binding Contract A has been formed, contrasted with safer, non-binding alternatives.

The Duty of Fairness and Good Faith

Once an issuer’s conduct accidentally creates a Contract A, a duty to act fairly and in good faith toward all compliant bidders is immediately imposed. This duty is not a vague ethical guideline; it is a legally enforceable obligation. Any deviation from the published evaluation criteria, showing favoritism to one bidder, or changing the rules after submissions are received can constitute a breach.

For example, if an issuer’s RFP specifies a 100-point evaluation scale with 40 points for price and 60 for technical merit, they cannot then award the contract to a bidder with a higher price and lower technical score without breaching their duty of fairness. This holds true even if they believe the higher-priced option offers better long-term value, unless the RFP explicitly reserved the right to consider such subjective factors.

An issuer’s failure to follow its own explicitly defined RFP process can result in legal challenges from unsuccessful bidders.

A key strategic element to manage this risk involves designing an evaluation framework that is both clear enough to guide proponents and flexible enough to allow for professional judgment. Instead of rigid, mandatory requirements, an issuer can define “desirable characteristics” or “areas of interest.” The evaluation criteria should explicitly state that the issuer reserves the right to make a final decision based on its determination of “best value,” which may include subjective factors beyond the scored criteria. This builds a degree of necessary discretion into the process contract itself, reducing the risk of a successful legal challenge.

Execution

Operational Protocols for Non-Binding RFPs

Executing an RFP process that avoids unintended contractual obligations requires disciplined operational protocol. The entire process, from initial drafting to final communication, must be managed with the clear objective of preventing the formation of a Contract A. This begins with the document’s architecture. The RFP should be explicitly titled a “Request for Proposals” and not a “Tender” or “Bid.” The opening pages must contain a clear and unambiguous statement that the RFP is an invitation for discussion and is not intended to create any binding legal obligations on either the issuer or the respondents.

This disclaimer should be comprehensive, stating that the issuer is not required to accept any proposal, reserves the right to negotiate with any or all proponents, can cancel or modify the RFP at any time, and will not be liable for any costs incurred by proponents in preparing their submissions. This clause is the foundational defense against the accidental creation of a process contract. Every subsequent section of the RFP must align with this non-binding framework.

Mandatory language must be systematically eliminated and replaced with discretionary terms. The process should be described as a path toward negotiation rather than a competition leading to an automatic award.

Checklist for a Non-Binding RFP Process

1. Explicit Disclaimer ▴ Begin the RFP with a clear statement that it is a non-binding request for the purpose of initiating discussions and does not constitute a formal tender or create a process contract.
2. Avoid Promissory Language ▴ Systematically replace words like “will,” “shall,” and “must” with “may,” “intends to,” and “requests.” This applies to descriptions of the process, evaluation, and potential outcomes.
3. Reserve All Rights ▴ Include a “Reservation of Rights” clause that explicitly states the issuer’s right to cancel the RFP, modify the timeline, negotiate with one or more parties, or accept a non-compliant proposal at its sole discretion.
4. Frame Evaluation as a Guide ▴ Describe the evaluation criteria as a guide for the issuer’s internal decision-making process, not as a rigid formula that determines the outcome. State that the final decision will be based on “best value” as determined by the issuer.
5. Define the Outcome as Negotiation ▴ Clearly state that the intended outcome of the RFP is to select one or more parties to enter into confidential negotiations for a final contract (Contract B). This frames the process as a precursor to a contract, not a contract in itself.
6. Control Communications ▴ Ensure all communications with proponents, including emails and verbal discussions, are consistent with the non-binding nature of the RFP. Avoid making verbal promises or commitments that contradict the written document.

Risk Mitigation through Process Architecture

A well-architected procurement process provides a systematic defense against legal challenges. Beyond the language of the RFP document itself, the structure of the process plays a crucial role. For complex procurements, a multi-stage approach can be highly effective.

This might begin with a Request for Information (RFI) to gather general market data, followed by a non-binding RFP for a shortlist of suppliers, and concluding with detailed negotiations. Each stage should be governed by its own set of rules, with clear entry and exit points, reinforcing the idea that no binding commitment exists until a final, negotiated contract is signed.

A multi-stage procurement process with clear, non-binding language at each step is a robust defense against accidental contract formation.

The following table outlines a risk mitigation framework, connecting specific issuer actions during an RFP to the legal risks they create and the corresponding mitigation strategies.

Ultimately, the execution of a risk-averse RFP process is a matter of consistency. The legal protection afforded by carefully drafted disclaimers can be undone in an instant by inconsistent conduct. If the RFP document reserves the right to negotiate, but an evaluation committee member tells a bidder that “the lowest price will win,” that verbal statement could be used to argue that the issuer’s true intent was to be bound by that criterion. Therefore, internal training for all personnel involved in the procurement process is as critical as the legal review of the RFP document itself.

Reflection

The Architecture of Intent

The transformation of a simple request for proposals into a binding legal instrument serves as a powerful illustration of a broader operational principle ▴ in any complex system, unintended consequences arise from procedural ambiguity. The legal risks inherent in the RFP process are symptoms of a failure to architect intent with sufficient precision. An issuer’s goal is to solicit information and options, yet through imprecise language and inconsistent conduct, they can find themselves legally bound to a process they never intended to create. This underscores the necessity of viewing procurement not as a series of administrative tasks, but as the design and execution of a controlled, risk-managed system.

The knowledge of how a Contract A is formed provides more than just a legal defense; it offers a framework for strategic communication. By consciously designing an RFP process that maintains its non-binding status, an issuer preserves its own operational flexibility and control. Every clause in an RFP, every communication with a proponent, is a component of this system.

Ensuring these components are aligned and consistently reinforce the issuer’s core intent of open negotiation is the ultimate expression of procedural mastery. The final, signed contract should be the only point at which obligation is deliberately created, a result of conscious choice, not accidental commitment.