Blackpool and Fylde Aero Club v Blackpool Borough Council

Facts of the Case:

The Defendant’s, a local council, owned and operated Blackpool Airport, and since 1975 had granted the Plaintiff’s club a concession to operate pleasure flights out of the airport . In 1983 when the last concession was to expire, the Council sent out to seven potentially interested parties (including the Plaintiff) an invitation to tender for a three year concession. The invitation was in common form, it stipulated that the Council ‘does not bind itself to accept all or any part of any tender’ and that all tenders were to be submitted in the envelope provided with the upmost confidentiality in mind. It further stated that any tenders received after the date and time specified would not be considered.

The Plaintiff’s posted their tender in accordance with the time specifications and instructions. However because of an oversight the Town Clerk Staff failed to empty the letter box that day and subsequently the Plaintiff’s tender was recorded as being too late for consideration.

The Defendant’s accepted another tender (lower than the Plaintiff’s) and the Club then bought an action against the Council for breach of contract and negligence (which will not be discussed here). The claim contended that the Council had warranted that if a tender was received in accordance with their instructions it would be duly considered and the Council had acted in breach of that warranty.

Procedural History:

The case originated in the Queens Bench Division at Manchester District Registry, presided over by Judge Jolly. The Council then appealed the decision of Judge Jolly to the Court of Appeal (Civil Division). The appeal was heard by Stocker, Bingham and Farquharson L.J.J. with Bingham L.J. delivering the lead judgement of the unanimous court. The appeal was dismissed with costs and the application for leave to appeal to the House of Lords was refused .

Legal issues in dispute:

The main issue in dispute was that under the traditional view of offer and acceptance the general rule regarding tenders is that an invitation to tender was merely an invitation to treat, that is a request by the Council for parties to submit offers. The Council argued that if any of these offers were to be accepted, only then would it give rise to contractually binding obligations . In the alternative the club claimed that an invitation to tender could give rise to binding contractual obligations in certain circumstances.

Further dispute arose about formation as the trial court had found a unilateral contract through implication. The Council argued on the basis of the Judgement in Liverpool City Council v Irwin that courts should be stringent about implying a contract and “terms should not be implied because it is reasonable to do so” . The club argued in the alternative.

The court also had to resolve the dispute as to whether or not the parties had a clear intention to contract, however this issue is not discussed further in this case note.

The Decision:

It was held in dismissing the appeal that an invitation to tender was normally no more than an invitation to treat, being a proposal to receive bids. However the Court found in certain circumstances it could be found that it gave rise to binding contractual obligations. The Council’s letter requesting tenders did not overtly state that they would consider tenders conforming to their instructions. However the court found there was an implied contractual obligation to consider the Plaintiff’s tender in conjunction with all the other tenders received.

In the leading Judgement given by Bingham L.J. he analysed the nature of the tender and the Council’s actions in juxtaposition with the conduct on the Plaintiff’s side. He considered that the typical analysis of a contract was consumed with identifying offer and acceptance and that the general principle was that an invitation to tender was no more than an invitation to treat .

Bingham L.J. identified that the Council did not have the liberty to accept the first tender it received before the expiration of the deadline, nor did it have the liberty to accept tenders after the expiration date. This was confirmed in the Council’s own letter of invitation. Bingham L.J believed that this would lead to large discrepancies between contract law and the expectations of parties. His Lordship recognised the fact that tendering processes are heavily weighted in favour of the inviter, and that considerable expense (although not in this case) and effort often goes into preparing a tender .

Bearing this in mind the ratio for his decision is contained in the argument that a tenderer is protected at least in the sense that if he submits a conforming tender before the closing date then he is entitled, not as a matter of mere expectation but of contractual right to have that tender considered. A tenderer is entitled to be sure that his tender will be considered in conjunction with all conforming tenders or in the very least if the others are considered he could reasonably expect that his would also be considered .

Bingham L.J acknowledges that there is no explicit statement to consider all timely and conforming tenders, which is why his Lordship was concerned with implication. He also acknowledges that the Council did not expressly state that they were not under an obligation to consider any tender received, only that they were not bound to accept all or any part of any tender received. His Lordship then viewed this objectively and stated that it could be easily understood by a reasonable invitee to be implied that if the Council were to consider any such tenders at all, then all such tenders would be considered .

Bingham L.J readily accepted that contracts are not to be lightly implied, stating “That a court must be able to conclude with confidence that both parties intended to create contractual relations and that the agreement was to the effect contended for” . He also supported the proposition by Mustill L.J that the court must be able to in most cases, answer the question of “What was the mechanism for offer and acceptance?” His Lordship applied the principles to the facts in this case only and did not make any substantial determinations regarding the principles of offer and acceptance for future cases. He believed that the Council through its invitation to tender, made an offer, albeit in a limited capacity, which the Club accepted by performance, that it submission of its conforming tender . The offer was a separate unilateral contract which the only obligation was to consider conforming tenders, which did not prevent them denying any or all tenders received.

Analytical Discussion of the implications for the principles of law regarding offer and acceptance:

The court relied on several established principles of law to assist in reaching a decision in this case. Of those the identification of a unilateral contract in the Carbolic case. This case is the long standing recognition of the exception to the general principle that acceptance must be communicated . It was established in this case that a contract will still exist in a unilateral sense when performance constitutes acceptance . In the Blackpool case the court did not explicitly refer to the case in a unilateral context however there appears little difference between Carbolic and Blackpool in application of the stated principles. The offer was found in the Council’s invitation to tender and the club submitting a tender constituted acceptance through performance.

The principle issue was the difference between invitation to treat and a contractually binding offer (conditional upon acceptance). The Council relied upon the general rule that invitations to treat are not offers and cannot give rise to contractually binding obligations . The invitation to treat principle relating to tenders is explained as ‘any tenders made by suppliers in response to such an invitation constitute offers which may be accepted or rejected and that tenders are not offers which the tenderer accepts, leading to a binding contract with each tenderer ‘. The second half of this proposition, if true, would conceivably be problematic in the tendering process as each tenderer could possibly have a contractual claim.

The Club accepted the general rule, however claimed an exception for when particular circumstances on the facts could give rise to contractually binding obligations .

In this case the court analysed the invitation to tender as a separate unilateral contract which the party making the tender accepts by the act of tendering and which therefore forms a binding contract in respect of the subject matter of that unilateral contract. In reaching a decision concerning the invitation to treat it was necessary for the court to adopt implication. In order for an invitation to treat to be construed as an offer it is necessary to look at any additional circumstances of conduct or words to establish an implication obligatory for the facts in this case . The court in Blackpool found implication in both the words/conduct and the expectations of the parties. The Council’s insistence that tenders received after the deadline would not be considered gave rise to the implication that tenders that were submitted in accordance with requirements would be considered . The Club did so by establishing a tender conforming to these guidelines so that they would be considered. This is where the general rule concerning invitations to treat is set aside and the exception, concerning implication, is transformed into offer and acceptance and parties are consensus ad idem.

Several commentators have heavily criticised the judgement in Blackpool for its apparent undermining of the previously existing law of offer and acceptance. It is believed by some that this analysis of the rules of offer and acceptance leaves the door open to a variety of inventive claims and disregards the need for intent in contract formation, which could elevate the risk of the decision being taken to exceptional heights . These commentators have relied on the rule expressed by Roskill L ; “It is not correct in principle, in order to determine whether there is a legally binding bargain, to add to those terms which alone the parties have expressed, further implied terms upon which they have not expressly agreed and the by adding the express terms and the implied terms together thereby create what would not otherwise be a legally binding bargain”. The court in Blackpool did not follow this line of reasoning and as such concerns regarding the decision were raised. It is noted by another commentator though that despite the possible wide spread ramifications of this decision, there has been limited subsequent case law concerning this decision .

With the upmost regard, the legal reasoning that gives rise to the decision does appear to have an element of self fulfilling prophecy about it. The decision did not fit well within the traditional rules of offer and acceptance so the court expanded those rules, adopting implication, to fit the facts of the case. Whilst this is heavily criticised , I respectfully have to disagree with the criticism and argue that this is what the common law was designed to do. In order for the court to stay aligned with the development of modern society it is essential that the common law expands and adjusts to the same societal standards of expectations and fairness, including the modern interpretation of a sometimes archaic law.

The decision in Blackpool has achieved this. It has expanded the rules of offer and acceptance more than the traditionally narrow approach to satisfy protection of people’s rights under an evolving contract law.

It is important to note that the scope of Blackpool is possibly very narrow in England . On a Case appealed from another jurisdiction the Privy Council gave some indication of how Blackpool is to be applied. In the decision on the New Zealand case it held that there was no violation of implied contract and set out a number of principles, in a cautious manner, that could arise under implication.

Current Law in Australia regarding offer and acceptance:

The law in Australia was initially governed by the principles enunciated in the Gibson and Carbolic cases. These traditional views and approaches are still existent in Australian law however it is accurate to say that the principles have been expanded.

In 1997 the approach by the Blackpool court was taken further in a decision of Finn J of the Federal Court of Australia. It is unnecessary to go into the complex facts of this case for our purposes it is sufficient to state how the principle from Blackpool was applied. It relates to the contractual obligations on the defendant in relation to the bidding process. Finn J held that by explicitly stating in formal terms that it would apply strict criteria to the selection process of awarding the available contract, the defendants had come under a contractual obligation to strictly apply the criteria they asserted. He further held that an implied term in these circumstances would easily pass the standard tests for the implication of terms and that such a term should normally be implied in a competitive tender process, especially one involving a public body (as in Blackpool). He went on to clarify the extent of Blackpool and Pratt to say that the application of an invitation to treat giving rise to binding contractual obligations will be determined on the facts in each case.

Following the above case Heydon JA in Brambles identified the problems with the traditional approach of offer and acceptance and admitted that facts do not always slide easily into this analogy. He applied a more interpretive, objective view of the events and identified the need to look at the bigger picture . His Honour in Brambles did not apply the traditional views of offer and acceptance, instead adopting an acid test which involved viewing the whole case from the point of view of a reasonable person on both sides of the dealings to show a concluded bargain . In other words he looked for an outward manifestation of mutual assent.

Here it appears that Heydon JA is attempting to take the reasoning of both Hughes and Blackpool a few quick steps forward. His Honour believes that it is neither sufficient nor necessary to always establish an offer and acceptance and identified this approach does not work well in various circumstances; Heydon JA went further to say that if principles of offer and acceptance are not always sufficient or necessary, other principles such as rejection of an offer brings the offer to an end, cannot be universal . In short he states that offer and acceptance is not the only way to solve contractual disputes. As case law develops further in this jurisdiction it will become clearer what the settled position on this point of law is.

Theoretical perspective:

Classical Contract Theory (CCL) was the fundamental theory in the development of contract law in England during the 19th Century, on which significant areas of Australian contract law is still based today. CCL thrives on the notion of the freedom of parties to contract and is inherent in this theory that liability is self imposed and that courts should respect the expression of will between the parties. The principles were developed as a respect for voluntary choices and there was no room for the imposition of contractual obligations without the consent of the parties. The court in Blackpool, imposed an implied obligation into the contact which when viewed in the eyes of a advocate for CCL would be seen as extremely detrimental to the freedom to contract and the will of the parties. Neither the Council, nor the Club expressly stated a will to contract, a problem in this case which could have easily been remedied by communication between the parties.

CCL assumes that parties negotiate on common ground, which is one of the criticisms of this theory. It assumes equal bargaining power, however in the Blackpool case the court recognised that the tendering process is heavily weighted in favour of the invitee, this could easily lead to disadvantage on behalf of the tenderer and arguably did so in this case.

CCL identifies courts to only be concerned with procedural fairness and not substantive fairness, provided the contract was voluntary and an expression of will of the parties. The court in Blackpool didn’t adhere to this reasoning when it concerned itself with the loss suffered by the Plaintiff and the subsequent intervention to remedy this injustice.

Conclusion:

Contract Law is irrefutably based on the objective determination of mutual assent. The traditional approach to determining assent is to identify a clear offer where one party undertakes to be legally bound on certain terms, which is then accepted on those terms by the other party. However more recently it has been accepted by courts in both England (although in a more restrictive sense) and Australia that it is equally valid to analyse the conduct and words of the parties to objectively assess whether there is any binding legal obligation, in the form of a manifestation of mutual intent.

The traditional rules of offer and acceptance are being recognised by the courts as not always the most pragmatic of approaches, in Australia at least. As each significant case develops the common law principles governing contract law, it is possible the courts will continue to develop the interpretation away from the traditional view.

BIBLIOGRAPHY

Arrowsmith S ‘ The “Blackpool” implied contract governing public sector tenders: A review in the light of Pratt and other recent case law’ (2004) 5 Public Procurement Law Review 125-131

Chandler A and Brown I ‘Intent and Contract Formation’ [1991] Conveyancer and Property Lawyer 149-151

Paterson J, Robertson A and Heffey P, ‘The principles of contract law’ (2nd Edition, Lawbook Co, Sydney, 2005) Ch 3