A Tenderer's Responsibility for Accuracy of Information in Tender Documents

Dear clients and friends,

On January 12, 2014, the Haifa District Court (the Hon. S. Srkrog) ruled in Administrative Proceeding 6411-04-12, Admiralty Investments Ltd v. Israel Land Administration, on an issue pertaining to the responsibility of an issuer of a tender with respect to information of economic significance that is included in the tender documents.

The plaintiff, a company that won a tender held by the Israel Land Administration (the “ILA”) for the purchase of an industrial property, argued that the manner in which the tender was issued by the ILA was misleading, due to the fact that the zoning plan that was attached to the tender documents did not clarify that a modification to the zoning of the property is necessary in order to obtain a building permit. The terms of the tender explicitly instructed bidders to examine all relevant planning information that apply to the property, including the conditions for obtaining a building permit, and that the winner would be estopped from raising claims against the ILA in this regard. Therefore, the ILA contended that it was the bidder’s responsibility to carefully examine all relevant facts before submitting a proposal to the tender, including the current zoning status of the relevant property.

The court accepted the plaintiff’s claims in part and ruled that the ILA was partially responsible for the damages caused to the plaintiff (subject to the plaintiff’s contributory negligence).

With regard to the manner in which the tender was held, the court ruled that the ILA, as tenderor, had the duty to ensure that the tender documents fully and accurately reflect the zoning status of the property.  The court further noted that in principle, the ILA, being an administrative authority conducting a tender, is subject to a broad duty to disclose; and that such duty exceeds the general duty of disclosure in negotiations between private contractual parties, especially given the fact that the information, which was significant for the bidders in order to submit a proposal for the tender, was in the ILA’s possession.

The court noted that a public tenderor’s duty to disclose complements its duties of transparency and integrity.  Therefore, a potential bidder is entitled to assume that the facts detailed in the tender documents are exhaustive and accurate, especially when such facts have economic significance.

The court determined that reliance by bidders on representations made in tender documents is an interest worthy of protection both under private law and public law.  Therefore, failing to provide full and specific disclosure, when required, may be a breach of a party’s duty to negotiate in good faith.

Under the specific circumstances of this case, the court determined that the plaintiff’s contributory negligence for not examining the current zoning status of the property before submitting its bid contributed to 70% of the damage, with responsibility of the remaining damage (namely 30%) resting with the ILA.

As this ruling was handed down by the District Court, it may still be subject to appeal (if filed) before the Supreme Court.

This publication provides general information and should not be used or taken as legal advice for specific situations, which depend on the evaluation of precise factual circumstances.

No Fields Found.