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Tercon Contractors Ltd v British Columbia (Transportation and Highways), 2010 SCC 4 (Link)

Facts:

BC put out a call (a request for expressions of interest - RFEI). Six teams responded (including Tercon and Brentwood). A request for proposals (RFP) followed, stating that only the participants to the RFEI could submit bids. Tercon responded; Brentwood responded but had partnered with EAC for part of the work. BC accepted the bid from Brentwood/EAC. Tercon sued BC for damages on the basis that by accepting an ineligible bid BC was in breach of contract, causing Tercon to lose the project.

Issue(s):

Did BC breach the tender contract by accepting the bid from the ineligible bidder? YES.
Did the exclusion clause successfully prevent a claim for damages for breach of the tendering contract? NO, the clause did not apply to the breach in question.

Ratio:

Tercon Test, for dealing with the interpretation of exclusion clauses in contracts:

1. As a matter of interpretation does the exclusion clause even apply to the circumstances (the breach) established in evidence? If no, then the Test ends.
** Will depend on the court's assessment of the intention of the parties.
** Construction of the contract can be applied narrowly.

2. If yes to #1, then is the exclusion clause unconscionable and thus invalid at the time the contract was made (based on Dickson J's decision in Hunter Engineering)? If no, then the Test ends.
** Deals with contract formation, not breach.
** Often deals with unequal bargaining power.
** If dealing with two commercial parties – it is hard to find unconscionability – it is presumed they are unequal bargaining power.

3. If the clause is invalid, should the court nevertheless refuse to enforce the exclusion clause because of an overriding public policy (based on Wilson J in Hunter Engineering)?
** In order to show the public policy, onus is on party seeking to avoid enforcement of the clause, because there is a strong presumption of freedom of contract (this is about balancing the freedom to contract, and abuses of contract)
** Overriding public policy concerns what is necessary – will only in cases where harm to the public is substantially incontestable

Analysis:

Fundamental breach is no longer law.

The words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract.
** Will only interfere if it was unconscionable at the time the contract was entered in to.

The exclusion clause does not cover BC's breach in this case because the clause only covered claims arising as a result of participating in the RFP, not to claims resulting from the participation of other ineligible parties.


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