Winning in a Tender or Gambling in a Casino

Winning in a Tender or Gambling in a Casino

February 26, 2024

A tender is an offer to the public to enter into a contract with the tender holder, when the person who meets the established criteria and offers the most suitable offer, wins the tender and contracts. However, what if winning the tender means that it may actually cause damage to the winner under certain circumstances? This situation is more like gambling in a casino, than competing in a tender.

Tender laws are subject to the principles of administrative law such as proportionality, the right of standing and the right of a hearing. In addition, and despite the opinion sometimes prevalent among State officials (regardless of their religious orientation), according to which they can also take the position of God, State officials are also subject to obligations under contract law, because a tender is considered a contract. Meanwhile, the State is also subject to the duty of restitution stipulated in Section 21 of the Israeli Contracts Law, including in the case where the contract depends on a condition precedent that is not met. Due to the inherent inequality between the State and the individual, as well as the authority's monopolistic power in tender, the authority also has an increased duty of good faith and is required to comply with the principles of administrative law as well as contract law.

Thus, for example, in a petition submitted in August, 2023, which even reached the Supreme Court, a bidder in the tender for the management and development of a land quarry demanded to revoke a precondition in the tender, which stated that the winner would be required to pay millions of shekels in Land Authority permit fee, but if the quarry expansion plan is not approved, it will not be entitled to a refund of this payment, even if the reason is beyond the winner’s control. The meaning of this tender clause is in fact that the bidder involuntarily turns into a gambler. In that case, the bidder understood this and moved the Court to demand that the tender be amended, but sometimes bidders bid without understanding the true meaning of winning the tender. For example, a case handled by our office and discussed in the District Court of Tel Aviv in October, 2009, dealt with a tender for the operation of the catering services at the Ramat Gan Safari and the case was even appealed to the Supreme Court. Only thereafter did the winner (who also won the legal case) discovered that it could not provide the services under the tender and had to find someone who would step into its shoes.

In light of the above, it is extremely important to read the tender documents (including the terms of the contract which are part thereof) carefully and consult with an attorney with experience in the field of tenders and with an attorney with experience in the field of the contract that is part of the tender. While many tenders seem prima facie simple participation in such seem to only involve filling out forms, submitting an offer in a tender without carefully examining its terms is tantamount to gambling in a casino.