Contract Law Example Question

Reply Wed 4 Jan, 2017 08:47 am
My university teacher set this discussion question and I was wondering what every bodies thoughts on it were?

The NSC is a government body which arranges for the salvage of shipwrecks lying within the coastal waters of the UK. Recently, the Hesperus was reported as having been damaged in heavy seas and that its captain had run the ship aground on a remote Scottish island. The NSC invited salvage operators to bid for the salvage rights of the Hesperus in the following terms:

‘We imagine great interest in the ship as its cargo includes a quantity of Roman coins. Bidding is by sealed competitive tender. Only one bid will be accepted from any one company. All bids will remain confidential. We bind ourselves to accept the highest bid.’

A Ltd and B Ltd both bid for the salvage rights. A Ltd bid £100,000, whilst B Ltd bid ‘£90,000 or £10,000 more than the next highest bid, whichever is the greater.’ NSC assumed that B Ltd’s bid was the higher (i.e. £110,000) and therefore accepted it. A Ltd now claims that its bid was the higher and that NSC is in breach of contract in accepting B Ltd’s bid. Advise the NSC.
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Reply Wed 4 Jan, 2017 09:47 am
B submitted 2 bids, which was not allowed. (90,000 PLUS another bid that would outbid any others by 10,000. )
cicerone imposter
Reply Wed 4 Jan, 2017 11:57 am
I agree; they could have condioned their open bid to state their bid is always .01c more than the highest bid. There are no auction in existence that accepts such bidding.
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Reply Wed 4 Jan, 2017 02:22 pm
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Reply Tue 28 Feb, 2017 05:41 pm
This is a classic tenders question. In contract law one of the types of offer situation you will experience are competitive tenders. There is of course the bilateral contract to award the work to the chosen party. However, that is not the interesting aspect of this area. Tenders are interesting because they may on occasion constitute unilateral offers i.e. NSC makes an offer to consider bids and as a a unilateral offer it is accepted by performing the terms of the offer. This is what we call the 'two contract analysis' from the Blackpool case. Your key reference points here should be Blackpool, Harvela Investments and ensure you identify the narrow legal issue relating to whether a bid which is submitted in a blind tender that adds 'plus' an extra amount can be accepted. A very interesting case.

Don't forget to deal at the end about damages. This is an area which is unclear. If one of the parties has conformed to the conditions set to have their tender considered or accepted and it has not, the NSC will be in breach. The interesting question then becomes what measure of damages is available? None, if it can be shown the injured party would not have been chosen, the contract price if they were a certainty or maybe somewhere in between.
cicerone imposter
Reply Tue 28 Feb, 2017 07:43 pm
Under contract law, something is offered for sale, and the price is accepted. That's a legally binding contract.
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