Bidders are frequently told in bidding and tendering instructions that bids or tenders are required to be submitted "under seal" or that "sealed tenders are required". Confusion arises because the term "seal" is often used in three different contexts in the bidding and tendering world.
1. The seal as creating a binding promise
We previously discussed Ron Engineering and the Contract A - Contract B scenario. In essence, the courts treat the submission of a tender as a binding promise (Contract A) on the part of the bidder that, if it is selected as the successful bidder, it will enter into a contract (Contract B) with the owner.
Under contract law, however, promises made without receiving consideration in return are not enforceable. Without some consideration from the owner to the bidder, the agreement on the part of the bidder to enter into Contract B is unenforceable by the owner.
The law does, however, recognize promises given under seal as enforceable. Dating back to the early days of English common law, a promise to which a seal was affixed was known as a deed and was enforceable without the need to receive consideration in return.
Wax seals are no longer used, and in their place small red adhesive seals are often used where it is necessary to create a deed.
2. The seal as a symbol of corporate authority
Most corporations adopt a form of corporate seal, which is used to emboss corporate documents, contracts, indentures, etc. It is usually kept by the corporate secretary. It is most often used, after a document has been signed by the officers of the corporation, to indicate that the corporation has authorized the document.
The corporate seal is an indication of corporate authority only - while it may indicate that bid or tender was properly authorized by the corporation, it does not create a deed or an enforceable promise within the meaning of Ron Engineering.
3. Put it in an envelope
In order to avoid shenanigans, tendering procedures often require that all bids be submitted in sealed envelopes which will be opened at a specified time in public. Sealing a bid document in an envelope neither creates a deed nor indicates corporate authority.
4. Faulty tenders may be saved
There are many cases which have discussed the differences between the various concepts above and in which the courts have tried to avoid an injustice by turning an improperly sealed document into a deed, or turning a document to which a corporate seal was affixed into a deed. The courts are sometimes called upon to discuss the use of the phrase "c/s" or "seal" near signatures. See for example Fast v. Nieuwesteeg, in which many of the above concepts were discussed.
As a result, if bid procedures are not precisely complied with, there may be some room for latitude. But understanding of the above and strict compliance with procedures is still the best policy.
5. Best practices
For owners: be clear in bid procedures what is being asked of bidders. Be clear whether a wafer seal to create a deed is required, whether a corporate seal is to be affixed, and/or whether the bid is to be submitted in a sealed envelope. Do not intermingle the concepts referred to above.
For bidders: follow bid instructions precisely. If the bid instructions are not clear, ask for clarification as to what formalities are required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
