Overview
- A subcontractor’s bid does not automatically create a binding Contract A with a general contractor. Courts will instead consider whether the parties intended to create contractual relations through a structured bidding process or through an offer capable of acceptance.
- In the absence of a formal bid depository system or a clear tendering framework established by the general contractor, courts may be reluctant to find contractual obligations between a general contractor and a subcontractor.
- A subcontractor seeking to rely on Contract A principles must demonstrate that its bid was legally compliant. Material conditions, exclusions, or qualification may render a bid non-compliant and incapable of forming Contract A.
- Even where liability is alleged, damages for lost profit must be proven with reasonable certainty and remain subject to the duty to mitigate. Profits earned on other projects may substantially reduce or eliminate damage recovery.
The Case
In 1114136 Ontario Inc v Feltz Design Build Inc, 2026 ONSC 1512, the Ontario Superior Court considered whether a subcontractor could enforce alleged bidding obligations against a general contractor after the general contractor mistakenly identified the subcontractor in its tender submission. The Court ultimately dismissed the action and provided a useful review of when Contract A principles apply in the subcontractor context.
The dispute arose from renovations and additions to Stratford Central Secondary School. The Avon Maitland District School Board (“Board”) issued a call for tenders in April 2019. Feltz Design Build Inc. (“Feltz”), a pre-qualified general contractor, submitted a successful bid as the general contractor.
Core Tec, a masonry subcontractor, submitted an unsolicited bid to Feltz shortly before the tender closing deadline for subtrades. Its bid was approximately $769,000 plus HST, was open for 30 days, and contained several exclusions for the masonry scope of work. Another masonry contractor, Con-Tact Masonry Ltd., submitted a lower-priced bid of approximately $758,000 plus HST with fewer and narrower exclusions.
Feltz’s tender manager testified that he reviewed both bids and selected Con-Tact. However, during the rush of finalizing the tender submission before the deadline, “CORE TECK” was mistakenly entered on the tender form instead of “Con-Tact”. Feltz subsequently awarded the masonry contract to Con-Tact and never communicated with Core Tec regarding the project. Months later, Core Tec discovered that its name had appeared on the tender submission and commenced an action claiming that a binding contract had been formed and breached by Feltz.
The Issues
- Was there a binding contract between Core Tec and Feltz?
- If so, did Feltz breach the contract by retaining Con-Tact?
- If there was a breach, did Core Tec prove recoverable damages?
The Decision
The Ron Engineering Framework
Justice Smith began by reviewing the well-established tendering framework from The Queen v Ron Engineering, [1981] 1 SCR 111, under which:
- “Contract A” is the bidding contract created during the tender process.
- “Contract B” is the construction contract formed upon acceptance of a successful bid.
The Court emphasized that Contract A does not arise automatically whenever a bid is submitted. Whether Contract A exists depends on whether the parties intended to create contractual relations through the tendering process and whether there was an offer that could be accepted by submission of a compliant bid.
The Contract A/Contract B framework has been extended to the subcontractor level. In Naylor Group Inc v Ellis-Don Construction Ltd, [2001] 2 SCR 943, the Supreme Court of Canada held that where a general contractor “carries” a subcontractor’s bid through a formal bid depository system, a Contract A is formed requiring the prime contractor to award the subcontract to the named firm absent a reasonable objection. The existence and content of Contract A at this level depends on the facts of each case, including whether the parties structured their bidding process to create contractual obligations. The present case is distinguishable from Naylor because Feltz did not solicit Core Tec’s bid, did not submit it through a bid depository system, did not “carry” Core Tec’s bid intentionally, and had no structured tendering framework for subcontractors.
Feltz never intended to contract with Core Tec
The Court accepted the Feltz tendering manager’s evidence that he intended to select Con-Tact because it offered the lower price and that the inclusion of “CORE TECK” on the tender form was simply a clerical error. Justice Smith found this explanation commercially logical as Feltz had no incentive to select the higher-priced bid when both subcontractors were qualified to perform the work.
The Court also accepted that last-minute bid reviews and tender submission mistakes are common occurrences in the construction industry.
The Court concluded that Feltz never intended to contract with Core Tec.
No Offer, No Contract A
The Court’s central finding was that Feltz never made an offer capable of acceptance by Core Tec.
Unlike the Board’s tender call to general contractors, Feltz did not issue a tender call to masonry subcontractors, establish tender terms, solicit bids, create a formal bidding structure, or communicate with Core Tec before receiving its unsolicited quotation. Under the Ron Engineering framework, the invitation to tender constitutes the “offer” which bidders “accept” by submitting compliant bids. Here, Core Tec’s unsolicited quotation inverted this sequence; it was Core Tec that made the offer, not Feltz. Since Feltz never accepted that offer, no Contract A could have been formed.
The Board’s Approval of Substitution
Core Tec attempted to rely on a provision in the Board’s tender documents prohibiting the substitution of subcontractors without the Board’s approval. However, the Court rejected this argument because (1) Core Tec was not party to the contract between the Board and Feltz and (2) once the error was discovered, Feltz informed the Board and the Board approved Con-Tact’s continued involvement on the project, fulfilling the contractual requirement between the Board and Feltz.
Core Tec Submitted a Non-Compliant Bid
Even if Contract A principles could apply, the Court found that Core Tec’s bid was materially non-compliant as it was subject to Core Tec’s review of final working drawings, making it conditional rather than final.
Furthermore, the bid contained numerous exclusions from the masonry scope, which undermined the scope and pricing certainty that a structured tendering process would ordinarily provide.
Justice Smith held that these qualifications created material uncertainty regarding both price and performance. Hence, Core Tec’s non-compliant bid amounted to a counteroffer rather than acceptance capable of forming Contract A.
Although unaddressed in the decision, this finding is consistent with the principle, established in MJB Enterprises Ltd v Defence Construction (1951) Ltd, [1999] 1 SCR 619, that only compliant bids are capable of acceptance under Contract A. A materially non-compliant bid amounts to a counteroffer rather than an acceptance capable of forming Contract A (see Double N Earthmovers v Edmonton (City), [2007] 1 SCR 116, on the distinction between material non-compliance and minor irregularities).
No Breach
Having found that no Contract A existed, the Court proceeded to address breach and damages as alternative findings in the event its primary holdings were overturned on appeal.
The Court held that even if a Contract A somehow existed, Feltz would not have breached it as Feltz fairly reviewed and compared the competing masonry bids before selecting Con-Tact for their lower pricing.
Once Con-Tact was selected and engaged, any obligations arising from the bidding process would have been discharged. As an unsuccessful bidder, Core Tec had no standing to challenge the resulting subcontract.
Damages, Expected Profit, and Mitigation
Core Tec sought approximately $128,000 in alleged lost profits. However, the Court found that this figure was not a reliable measure of profit because it was derived largely from an "administration" amount that included overhead and other operating expenses. The evidence did not establish what portion of that amount, if any, represented actual profit. The Court also noted that Core Tec's estimate summary sheet suggested it had removed its anticipated profit from the final bid in an effort to secure the project.
The Court further found that Core Tec failed to properly account for mitigation. While it initially claimed that it had not obtained other work after May 2019, the evidence showed that it completed 4 projects during the relevant period and earned approximately $120,000 in profit. Those earnings substantially offset the damages claimed and significantly weakened Core Tec's position.
Even if a contract had existed and been breached, the Court held that Core Tec had failed to establish any recoverable damages.
The damages analysis underscores the evidentiary rigour required in construction litigation. Lost profits must be established with reasonable certainty and cannot rest on speculative or internally inconsistent figures. The Court’s observation that Core Tec may have removed its anticipated profit from its bid to secure the project is particularly significant, as it raises the question of whether any expectation damages existed even in principle.
Practical Takeaways
- Do not assume subcontractor bids create binding obligations.
- For a general contractor, lacking a structured bidding framework can preserve flexibility in selecting subcontractors.
- For a subcontractor, that same lack of structure can make it harder to claim Contract A obligations arose merely from placing a bid.
- Scrutinize bid compliance early and carefully as conditions and exclusions can render bids non-compliant.
- Ensure damage claims are supported by truthful and consistent financial evidence. Always investigate and document mitigation income as failing to do so can undermine credibility and/or eliminate damage recovery entirely.