By submitting a bid of $600,000, SoftX entered into a contract A, as
defined by the new laws that were formulated because of the Ron Engineering case (1). This meant
that they had an obligation to enter into Contract B, which is the formal
agreement signed by both parties. In addition, the seal ensured that the bid
couldn’t be revoked, thus making it illegal for SoftX to withdraw the bid.
However, there do exist some exceptions that allow withdrawal of the bid
based on certain conditions that the law considers.
A contract A is only initiated if it can be proven that both the parties
intended to perform contractual obligations. In this case, a call for tenders
was sent out by the City and SoftX submitted the bid which was accepted by the
City and sealed under the crown. It was much later that SoftX realized that the
total cost for this project would sum up to a higher amount that they had bid
for. This proves the intent of both parties to enter contract A and fulfil all
In case of a mistake in the contract, for the contract to be withdrawable,
the promised amount must be grossly disproportionate to the reasonable amount
for the work to be done. In this case, the $100,000 difference accounts for
approximately 17% and is hence, not disproportionate enough.
As in the case of Toronto Transit Commission vs Gottardo Construction
Ltd (2), while it’s proven that the parties did enter a Contract A and the
unilateral mistake made was not considered to be grossly disproportionate, the
contract cannot be withdrawn.