How Can an Organization Unintentionally Create an Implied Contract through an Rfp?

Concept

The Unspoken Handshake in Procurement

An organization initiates a Request for Proposal (RFP) to solicit competitive bids for a project, viewing it as a straightforward procurement tool. Yet, within the procedural language and the very act of issuing the request, a set of unspoken obligations can materialize, forming what the legal system recognizes as an implied contract. This phenomenon arises not from a signed document, but from the conduct and reasonable expectations of the parties involved. The issuance of an RFP is interpreted as more than a mere invitation to negotiate; it can be seen as a promise to conduct the procurement process in a fair, consistent, and transparent manner, based on the terms laid out in the RFP document itself.

When a bidder invests significant resources to prepare and submit a proposal in response, their action can be viewed as acceptance of this preliminary “process” contract. This is where the risk materializes. The organization, without ever intending to, may find itself legally bound to a set of procedural duties it did not explicitly acknowledge.

From Invitation to Obligation

The core of an implied contract lies in the principle that one party should not be unjustly enriched at the expense of another. In the context of an RFP, the issuing organization seeks the benefit of competitive, well-developed proposals. The bidders, in turn, expend time, money, and intellectual capital to create those proposals. This exchange is predicated on the implicit understanding that the evaluation and selection process will be conducted in good faith.

An implied contract is formed when the actions of the organization lead bidders to a reasonable belief that a binding process is in place. This can happen through specific, promissory language in the RFP, a history of past dealings, or industry customs. The legal force of such a contract is equivalent to an express, written agreement, meaning a breach can lead to significant legal and financial consequences.

The very act of issuing a detailed Request for Proposal can establish a preliminary “process contract,” obligating the issuer to the terms of its own solicitation.

Two Dominant Frameworks of Implied Duties

The legal interpretation of these implied obligations varies by jurisdiction, but two primary models have emerged. In Canada, the landmark case of R. v. Ron Engineering established the “Contract A/Contract B” framework. Under this model, the RFP itself is considered “Contract A,” a unilateral offer to all potential bidders.

Submitting a compliant bid constitutes acceptance of Contract A, binding both the issuer and the bidder to the rules of the tender process. The subsequent awarding of the project to the chosen vendor forms “Contract B,” the formal agreement to perform the work. A breach of Contract A, such as awarding the project to a non-compliant bidder, can lead to legal action from the other bidders who upheld their end of the process agreement.

In the United States, particularly in government procurement, the concept manifests as an “implied-in-fact contract to fairly and honestly consider” proposals. This principle, affirmed in cases like Safeguard Base Operations, LLC v. United States, establishes that when the government solicits proposals, it implicitly promises to evaluate them in a fair and non-arbitrary manner.

While distinct from the Canadian two-contract model, the underlying principle is similar ▴ the solicitation process itself creates a set of binding legal duties. An organization that deviates from its own stated evaluation criteria or treats bidders inequitably can be found in breach of this implied contract.

Strategy

Navigating the Labyrinth of Promissory Language

The transformation of an RFP from a simple request to a binding legal instrument often begins with the language used within the document. Organizations unintentionally create implied contracts through overly prescriptive, specific, and promissory statements. Words like “shall,” “will,” and “must,” when describing the evaluation process or award criteria, can be interpreted by courts as creating firm obligations rather than flexible guidelines.

For instance, stating that the contract “will be awarded to the lowest responsible bidder” can create a binding commitment, stripping the organization of its discretion to consider other factors like quality or innovation. The strategic imperative is to shift from a mindset of rigid prescription to one of guided flexibility, ensuring the language preserves the organization’s right to make a final business decision that is in its best interest, while still running a fair and transparent process.

The Anatomy of High Risk RFP Clauses

Certain clauses within an RFP carry a heightened risk of creating unintended legal obligations. A detailed, multi-stage evaluation process with specific scoring weights can be interpreted as a firm promise to adhere to that exact methodology. If the organization later deviates from this process, perhaps by re-weighting criteria or introducing new, unstated factors, it may face claims of a breach of the implied process contract.

Similarly, clauses that incorporate by reference a vast number of external documents, regulations, or standards can inadvertently create a complex web of obligations that the organization may not fully comprehend. The key is to analyze each clause not just for its business meaning, but for its potential legal interpretation as a binding promise.

Overly specific language in an RFP, particularly regarding evaluation criteria and timelines, can inadvertently transform procedural guidelines into legally binding promises.

A primary strategic goal is to mitigate the risks inherent in the “Contract A/Contract B” scenario or the “duty of fair consideration.” This involves a careful audit of the entire RFP document to identify and revise language that could be construed as creating a preliminary contract. The objective is to make it unequivocally clear that the RFP is a solicitation for offers, and that no contract of any kind is formed until a definitive written agreement is signed by both parties. This requires a proactive, risk-aware approach to procurement document drafting.

The following table illustrates the strategic shift from high-risk, promissory language to lower-risk, non-binding language in RFP construction:

The Role of Disclaimers and Reservation of Rights

While careful drafting of the entire RFP is essential, the inclusion of clear, prominent, and comprehensive disclaimer clauses is a critical strategic defense. These clauses, often referred to as “reservation of rights” provisions, should explicitly state that the RFP is not an offer and does not create a contract, express or implied. They should reserve the organization’s right to:

• Waive irregularities ▴ This allows the organization to overlook minor errors in a proposal that it might otherwise wish to consider.
• Reject any or all proposals ▴ This reinforces the non-binding nature of the process.
• Modify or cancel the RFP ▴ This provides flexibility in case business needs change.
• Negotiate with one or more bidders ▴ This clarifies that the submission of a proposal does not guarantee an award.
• Not be liable for bidder costs ▴ This explicitly disclaims responsibility for the expenses incurred by bidders in preparing their proposals.

These disclaimers should be placed at the beginning of the RFP document to ensure they are seen and understood by all potential bidders. While not a complete panacea, especially in the face of egregious conduct by the issuing organization, well-drafted disclaimers provide a strong legal foundation to counter claims of an implied contract.

Execution

A System for Mitigating Implied Contract Risk

Executing a procurement process that minimizes the risk of creating an implied contract requires a systematic, multi-stage approach. It is a discipline that extends beyond the legal department and must be embedded in the practices of every procurement professional, project manager, and technical evaluator involved in the RFP process. The objective is to build a procedural firewall that prevents the leakage of unintended promises and preserves the organization’s ultimate decision-making authority. This involves a rigorous review and control process at each stage of the RFP lifecycle, from initial drafting to final award.

The Pre-Issuance Review Checklist

Before an RFP is released, it must undergo a thorough review focused specifically on mitigating implied contract risk. This review should be conducted by a cross-functional team, including legal counsel and senior procurement staff. The following checklist provides a framework for this critical stage:

1. Language Audit ▴ Scrutinize the entire document for promissory language. Replace words like “will,” “shall,” and “must” with less rigid terms like “intends to,” “may,” or “prefers,” where appropriate.
2. Disclaimer Verification ▴ Ensure that a comprehensive reservation of rights clause is included, is prominently displayed, and explicitly states that the RFP is not an offer and creates no contractual relationship.
3. Evaluation Criteria Flexibility ▴ Confirm that the evaluation criteria are presented as guidelines rather than a rigid, mathematical formula. Avoid assigning specific, unchangeable weights to different sections.
4. Communication Protocol Definition ▴ Clearly define the sole point of contact for all communications related to the RFP. Prohibit all other employees from engaging in discussions with potential bidders to avoid off-the-record statements that could be construed as modifying the RFP’s terms.
5. Confidentiality And IP Language ▴ Review clauses related to the bidders’ intellectual property. Ensure the language does not imply that the organization will use the bidders’ ideas without compensation, which could form the basis of a quasi-contract.

Managing the Process Post-Issuance

The risk of creating an implied contract does not end once the RFP is issued. The conduct of the organization throughout the evaluation period is just as important as the language in the document itself. Adherence to a strict, documented process is paramount.

The table below outlines key stages in the post-issuance process and the associated actions required to mitigate legal risk:

Consistent, documented adherence to the RFP’s stated process is as critical as the language of the document itself in preventing implied contract claims.

The Consequences of a Breach

An organization that is found to have breached an implied process contract can face significant financial and reputational damage. Courts have awarded aggrieved bidders a range of remedies, from the costs of preparing their proposal to, in some cases, the profits they would have earned had they been awarded the contract. The Tercon v.

British Columbia case is a stark reminder of this, where the court awarded the plaintiff $3.3 million in lost profits due to a breach of the “Contract A” process. Beyond the direct financial costs, a public finding that an organization runs an unfair or arbitrary procurement process can deter high-quality vendors from participating in future RFPs, ultimately leading to lower quality outcomes and reduced competition.

Reflection

The RFP as a System of Trust

Ultimately, the legal frameworks surrounding implied contracts in the RFP process point to a deeper operational truth. A Request for Proposal is not merely a document; it is the architecture of a temporary system built on trust. Bidders invest resources based on the belief that the system will operate according to its stated rules. When an organization, through carelessness or deliberate action, violates those rules, it breaks that trust.

The resulting legal exposure is simply a formal recognition of this breach. Viewing the procurement process through this lens transforms the task of mitigating legal risk. It becomes an exercise in system design, focusing on integrity, transparency, and consistency. An organization that masters this discipline does more than avoid lawsuits; it builds a reputation as a fair and reliable partner, attracting the highest quality of competition and fostering more innovative and valuable business relationships.