THE BOTTOM LINE
- Cancellation Clauses are King: Clearly drafted tender documents allowing for unilateral cancellation are highly effective and will be upheld by courts, protecting the tendering company from claims.
- No Project, No Damages: To successfully claim for lost profits due to a flawed tender, a bidder must prove they would have won and the project would have proceeded. A complete, lawful project cancellation breaks this critical chain of causation.
- Accepting Terms Has Consequences: Bidders who unconditionally accept tender terms, including clauses that exclude compensation for costs, will face a significant uphill battle to recover expenses if the project is shelved.
THE DETAILS
In a significant ruling for any company involved in large-scale procurement, the Dutch Caribbean’s Joint Court of Justice has reinforced a client’s right to cancel a major tender process without liability. The case involved Aqualectra, Curaçao’s national utility, which launched a tender for a substantial solar energy project. After selecting a preferred bidder (CMEC) and disqualifying another (Sunny Side Up, or SSU), Aqualectra decided to scrap the entire project due to various setbacks. SSU subsequently sued both Aqualectra and the winning bidder for millions in damages, alleging the process was flawed and the cancellation was unlawful.
The Court’s decision hinged on the power of the initial contract: the tender documents themselves. Aqualectra’s Tender Instructions Document (TID) contained a clause explicitly giving it the right to “unilaterally cancel” the process if it saw grounds to do so. Critically, SSU had signed a declaration unconditionally accepting all of these terms when submitting its bid. The Court found this contractual freedom to be paramount. It ruled that Aqualectra’s decision to cancel was a legitimate business choice based on project difficulties, and the clear language of the tender documents protected it from claims by a disappointed bidder who had agreed to those very terms.
Furthermore, the Court dismantled the bidder’s claim for damages by focusing on causation. SSU argued that even if the cancellation was valid, it lost the opportunity to win because of alleged irregularities in how the preferred bidder was selected. However, the Court applied a straightforward “but-for” test. Since the entire project was lawfully cancelled, no one was ultimately awarded the contract, and no profits were ever made. Therefore, SSU could not prove it suffered a loss because of any alleged misconduct during the selection phase. The project’s termination was an independent event that severed any link to SSU’s claimed financial loss, and the tender documents also explicitly barred any reimbursement for bidding costs.
SOURCE
Source: Joint Court of Justice of Aruba, Curaçao, Sint Maarten and of Bonaire, Sint Eustatius and Saba
