Property problems: Exiting a tender without breaching contract

Q. My company was the successful tenderer for the construction of a new multi-level development in Auckland. Our tender was accepted three months ago, and a formal written contract was then supposed to be entered into setting out all the terms of the contract. However, we have not been provided with a draft contract to look at yet, and construction has not yet started. The develo

Monday, March 29th 2004, 6:38AM

by The Landlord

per has said that because of financing delays construction is not likely to start for a number of months. In the meantime we can't commit to other projects in case we are needed to start construction.
When we said to the developer that we would need to negotiate a new contract price because of the delay, he said that we were bound by the price we had tendered, and if we tried to back out of this he would engage a new contractor and sue us for any increased costs. Can he do this?
A. As you no doubt know, many construction contracts begin with a tender process. Often the tender documents will provide that until a formal contract is entered into, the tender offer and acceptance are to constitute the contract between the parties. Generally a "fuller" contract is then signed, setting out all the conditions of the contract. This may be based on a standard form contract that the parties have agreed to in the tender documents.

Even in the absence of a clause expressly recording that the tender offer and acceptance are to constitute the contract, generally a contract is formed once the tender is accepted.
In traditional "offer and acceptance" terms, the tender is the offer and the letter of acceptance of tender is the acceptance. This means that in a simple situation where a tenderer tries to back out of performing the contract, this is a breach of contract.

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