Harvela Investments Ltd v Royal Trust of Canada (CI)
Court: House of Lords
Facts: The Royal Trust invited tenders for the purchase of its shares, stating that they would "bind ourselves to accept [the highest] offer." Harvela Investments Ltd submitted a fixed bid of $2,175,000, while Sir Leonard Outerbridge made a referential bid of "$2,100,000 or $101,000 in excess of any other offer." The Royal Trust accepted Outerbridge’s bid, valuing it at $2,276,000. Harvela sued the Royal Trust for breach of contract, arguing that referential bids were invalid.
Issue: Can referential bids be valid in a competitive tender process, and does an invitation to tender create a unilateral contract binding the offeror to accept the highest fixed bid?
Held: The House of Lords held that the invitation to tender was a unilateral contract that could only be accepted by the highest fixed bid. Referential bids were deemed invalid, and the Royal Trust was bound to accept Harvela’s bid.
Unilateral Contract: The invitation constituted a unilateral offer to enter into a contract with the highest bidder. Once the highest bid was submitted, the unilateral offer converted into a mutual contract.
Referential Bid Invalid: The invitation required bids to be fixed and independent. A referential bid, contingent on other bids, undermines the bidding process. Lord Templeman emphasized, "Sealed competitive bidding relies on the submission of independent, self-contained bids. Allowing referential bids would undermine the integrity of the bidding process."
Key Judicial Statement: Lord Templeman stated that the invitation to tender was a unilateral offer to accept the highest bid, and Referential bids are inconsistent with effective sealed competitive bidding.
💡Leveluplaw: Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd establishes that referential bids are invalid in competitive tenders. The case highlights that an invitation to tender can form a unilateral contract that binds the offeror to accept the highest fixed bid. This decision preserves the fairness and integrity of the competitive bidding process by ensuring bids are independent and self-contained.