When a large organization such as a company, hospital, local council or government ministry needs to find a supplier of goods or services, it will often advertise for tenders. Organizations wishing to secure the business then reply to the advertisement, detailing the price at which they are willing to supply the goods or services, and the advertiser chooses whichever is the more favorable quotation. Tenders can be invited for the sale of goods, in much the same way as bids are made at an auction.
As a general rule, a request for tenders is regarded as an invitation to treat as stated in Spencer v Harding (1870). So there is no obligation to accept any of the tenders put forward. The tenders themselves are offers, and a contract comes into existence when one of them is accepted.
In exceptional cases, an invitation for tenders may itself be an offer, and submission of a tender then becomes an acceptance of that offer. The main example of this is where the invitation to tender makes it clear that the lowest tender or the highest in the case of tenders to buy will be accepted.
An invitation to tender may also be regarded as an offer to consider all tenders correctly submitted, even if it is not an undertaking actually to accept one.
In some cases a tenderer makes what is called a ‘referential’ tender, offering to top anyone else’s bid by a specified amount as was illustrated in the case of Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd (1985).

Acceptance of tenders
The implications of choosing to accept a tender depend on what sort of tender is involved.
Specific tenders: Where an invitation to tender specifies that a particular quantity of goods is required on a particular date, or between certain dates, agreeing to one of the tenders submitted will constitute acceptance of an offer (the tender), creating a contract. This is the case even if delivery is to be in installments as and when requested.
Non-specific tenders: Some invitations to tender are not specific, and may simply state that certain goods may be required, up to a particular maximum quantity, with deliveries to be made ‘if and when’ requested.

Scroll to Top