Blackpool and Fylde Aero Club Ltd v. Blackpool Borough Council [1990] 1 WLR 1195, Court of Appeal

The appellant council invited tenders for a concession to operate pleasure flights from the local airport. Among the recipients of this invitation was the respondent club which in fact had held the concession since 1975. The invitation stated that:

‘The council do not bind themselves to accept all or any part of any tender. No tender which is received after the last date and time specified shall be admitted for consideration.’

The date and time stipulated was 17 March 1983 at noon. The club submitted its tender by posting it in the appropriate box on the morning of 17 March. The box was normally checked and cleared each day at noon but on this occasion it was not checked until the following day: 18 March. The council at its meeting later in March refused to consider the club’s tender on the ground that it had been received late and the concession was awarded to another party. When the council discovered that the club’s bid had in fact been submitted on time it sought to rectify the situation by declaring the initial tenders invalid and by re-scheduling the tendering procedure. But they backed down after being threatened with legal proceedings by the company whose bid had been accepted. The club then brought an action for damages against the council. It was held by the trial judge and by the Court of Appeal that the council was contractually obliged to consider the club’s tender and, for breach of that obligation, it was held liable in damages.

Bingham LJ [set out the facts and continued]

The judge resolved the contractual issue in favour of the club, holding that an express request for a tender might in appropriate circumstances give rise to an implied obligation to perform the service of considering that tender. Here, the council’s stipulation that tenders received after the deadline would not be admitted for consideration gave rise to a contractual obligation (on acceptance by submission of a timely tender) that such tenders would be admitted for consideration. In attacking the judge’s conclusion on this issue, Mr Toulson [counsel for the appellants] made four main submissions.

First, he submitted that an invitation to tender in this form was well established to be no more than a proclamation of willingness to receive offers. Even without the first sentence of the council’s invitation to tender in this case, the council would not have been bound to accept the highest or any tender. An invitation to tender in this form was an invitation to treat, and no contract of any kind would come into existence unless or until, if ever, the council chose to accept any tender or other offer. For these propositions reliance was placed on Spencer v. Harding (1870) LR 5 CP 561 and Harris v. Nickerson (1873) LR 8 QB 286.

Second, Mr Toulson submitted that on a reasonable reading of this invitation to tender the council could not be understood to be undertaking to consider all timely tenders submitted. The statement that late tenders would not be considered did not mean that timely tenders would. If the council had meant that it could have said it. There was, although [counsel] did not put it in these words, no maxim exclusio unius, expressio alterius.

Third, the court should be no less rigorous when asked to imply a contract than when asked to imply a term in an existing contract or to find a collateral contract. A term would not be implied simply because it was reasonable to do so: Liverpool City Council v. Irwin [1977] AC 239, 253H. In order to establish collateral contracts, ‘Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shewn’: see Heilbut Symons & Co v. Buckleton [1913] AC 30, 47. No lower standard was applicable here and the standard was not satisfied.

Fourth, Mr Toulson submitted that the warranty contended for by the club was simply a proposition ‘tailor-made to produce the desired result’ (per Lord Templeman in CBS Songs Ltd v. Amstrad Consumer Electronics plc [1988] AC 1013, 1059F) on the facts of this particular case. There was a vital distinction between expectations, however reasonable, and contractual obligations: see per Diplock LJ in Lavarack v. Woods of Colchester Ltd [1967] 1 QB 278, 294. The club here expected its tender to be considered. The council fully intended that it should be. It was in both parties’ interests that the club’s tender should be considered. There was thus no need for them to contract. The court should not subvert well-understood contractual principles by adopting a woolly pragmatic solution designed to remedy a perceived injustice on the unique facts of this particular case.

In defending the judge’s decision Mr Shorrock [counsel for the club] accepted that an invitation to tender was normally no more than an offer to receive tenders. But it could, he submitted, in certain circumstances give rise to binding contractual obligations on the part of the invitor, either from the express words of the tender or from the circumstances surrounding the sending out of the invitation to tender or (as here) from both. The circumstances relied on here were that the council approached the club and the other invitees, all of them connected with the airport, that the club had held the concession for eight years, having successfully tendered on three previous occasions, that the council as a local authority was obliged to comply with its standing orders and owed a fiduciary duty to ratepayers to act with reasonable prudence in managing its financial affairs and that there was a clear intention on the part of both parties that all timely tenders would be considered. If in these circumstances one asked of this invitation to tender the question posed by Bowen LJ in Carlill v. Carbolic Smoke Ball Co [1893] 1 QB 256, 266, ‘How would an ordinary person reading this document construe it?’, the answer in Mr Shorrock’s submission was clear: the council might or might not accept any particular tender; it might accept no tender; it might decide not to award the concession at all; it would not consider any tender received after the advertised deadline; but if it did consider any tender received before the deadline and conforming with the advertised conditions it would consider all such tenders.

I found great force in the submissions made by Mr Toulson and agree with much of what was said. Indeed, for much of the hearing I was of opinion that the judge’s decision, although fully in accord with the merits as I see them, could not be sustained in principle. But I am in the end persuaded that [the] argument proves too much. During the hearing the following questions were raised: what if, in a situation such as the present, the council had opened and thereupon accepted the first tender received, even though the deadline had not expired and other invitees had not yet responded? or if the council had considered and accepted a tender admittedly received well after the deadline? Mr Toulson answered that although by so acting the council might breach its own standing orders, and might fairly be accused of discreditable conduct, it would not be in breach of any legal obligation because at that stage there would be none to breach. This is a conclusion I cannot accept, and if it were accepted there would in my view be an unacceptable discrepancy between the law of contract and the confident assumptions of commercial parties, both tenderers . . . and invitors (as reflected in the immediate reaction of the council when the mishap came to light).

A tendering procedure of this kind is, in many respects, heavily weighted in favour of the invitor. He can invite tenders from as many or as few parties as he chooses. He need not tell any of them who else, or how many others, he has invited. The invitee may often, although not here, be put to considerable labour and expense in preparing a tender, ordinarily without recompense if he is unsuccessful. The invitation to tender may itself, in a complex case, although again not here, involve time and expense to prepare, but the invitor does not commit himself to proceed with the project, whatever it is; he need not accept the highest tender; he need not accept any tender; he need not give reasons to justify his acceptance or rejection of any tender received. The risk to which the tenderer is exposed does not end with the risk that his tender may not be the highest (or, as the case may be, lowest). But where, as here, tenders are solicited from selected parties all of them known to the invitor, and where a local authority’s invitation prescribes a clear, orderly and familiar procedure (draft contract conditions available for inspection and plainly not open to negotiation, a prescribed common form of tender, the supply of envelopes designed to preserve the absolute anonymity of tenderers and clearly to identify the tender in question and an absolute deadline) the invitee is in my judgment protected at least to this extent: if he submits a conforming tender before the deadline he is entitled, not as a matter of mere expectation but of contractual right, to be sure that his tender will after the deadline be opened and considered in conjunction with all other conforming tenders or at least that his tender will be considered if others are. Had the club, before tendering, inquired of the council whether it could rely on any timely and conforming tender being considered along with others, I feel quite sure that the answer would have been ‘of course’. The law would, I think, be defective if it did not give effect to that.

It is of course true that the invitation to tender does not explicitly state that the council will consider timely and conforming tenders. That is why one is concerned with implication. But the council does not either say that it does not bind itself to do so, and in the context a reason[1]able invitee would understand the invitation to be saying, quite clearly, that if he submitted a timely and conforming tender it would be considered, at least if any other such tender were considered.

I readily accept that contracts are not to be lightly implied. Having examined what the parties said and did, the court must be able to conclude with confidence both that the parties intended to create contractual relations and that the agreement was to the effect contended for. It must also, in most cases, be able to answer the question posed by Mustill LJ in Hispanica de Petroleos SA v. Vencedora Oceanica Navegacion SA (No 2) (Note) [1987] 2 Lloyd’s Rep 321, 331: ‘What was the mechanism for offer and acceptance?’ In all the circumstances of this case (and I say nothing about any other) I have no doubt that the parties did intend to create contractual relations to the limited extent contended for. Since it has never been the law that a person is only entitled to enforce his contractual rights in a reasonable way (White and Carter (Councils) Ltd v. McGregor [1962] AC 413, 430A per Lord Reid), Mr Shorrock was in my view right to contend for no more than a contractual duty to consider. I think it plain that the council’s invitation to tender was, to this limited extent, an offer, and the club’s submission of a timely and conforming tender an acceptance.

Mr Toulson’s fourth submission is a salutary warning, but it is not a free-standing argument: if, as I hold, his first three submissions are to be rejected, no subversion of principle is involved. I am, however, pleased that what seems to me the right legal answer also accords with the merits as I see them.

I accordingly agree with the judge’s conclusion on the contractual issue, essentially for the reasons which he more briefly gave.

Stocker LJ delivered a concurring judgment and Farquharson LJ concurred.

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