Originally Published in The Generals (2026 Winter Edition), the official magazine of the Ontario General Contractors Association, this article is the third in a four-part series aimed at helping general contractors navigate the legal and strategic challenges at each stage of a construction project.
In our earlier article, “Prebid Contract Pitfalls,” we examine the pre-bid rollercoaster ride of striving to be the lowest bidder, while attempting to manage financial risks.
This article explains Contract A and Contract B in clear practical terms, then builds on the most current Ontario case law developments, particularly around subcontractor naming and owner privilege clauses.
Contract A and Contract B in Plain Language
Canadian tendering law operates on a two-contract model: Contract A and Contract B.
CONTRACT A — THE “BIDDING CONTRACT”
Contract A arises only when a compliant bid is submitted in response to an owner’s request for proposals.
Once Contract A is created, the owner, and its agents, must treat all compliant bidders fairly and equally. The owner, and its agents, must evaluate bids only according to the criteria as set out in the tender documents, all of which form part of Contract A, and the bidder must comply with all the terms and conditions of Contract A.
For example, being prohibited from withdrawing its bid for a period of 90 days.
If a bid is non-compliant, as determined by the owner and/or its agents, acting fairly and reasonably, Contract A is not created, and the bidder has no legal rights as a bidder.
For example, a bidder’s failure to strictly comply with all the requirements of Contract A, such as submitting a bid after the set “closing date”, submitting conditional bids and/or bids qualified in any manner or submitting unsolicited bids.
CONTRACT B — THE “CONSTRUCTION CONTRACT”
When the owner accepts one compliant bid, that acceptance creates Contract B, the formal contract, that now becomes the Prime Contract, which governs the actual work. There can be only one Contract B with the successful bidder.
Think of it this way: Contract A is about the fairness of the bidding process and the selection of the successful bidder, and Contract B is about the actual construction of the project.
Recent Developments in Ontario Case Law: What GCs Should Know
A. NO CONTRACT A, NO BIDDING RIGHTS
Ontario courts have recently reaffirmed that bidders who do not submit a compliant bid, or were never invited into the tender, have no rights under tendering law. Without Contract A being created, a bidder cannot insist on fairness, transparency, or equal treatment with other bidders during the tendering process.
Attempts to argue that Contract A was created through “implied acceptance” by the owner or “ongoing dialogue” with the owner post submission of the bid have been firmly rejected by the Courts. Courts emphasize that Contract A requires that a compliant bid be submitted to a directed request for bids, submitted within the prescribed timeframe, and on the prescribed terms, all as set out in Contract A.
For GCs, the takeaway is simple, rights flow from strict compliance of the tender documents, i.e. the terms and conditions of Contract A. If you want the protection of fairness in the evaluation of your bid and the owner’s selection of the successful bidder, your bid must create Contract A with the owner.
B. NAMED SUBCONTRACTORS: DO YOU HAVE TO USE THEM AFTER AWARD?
One of the most common sources of tension after award of the bid is the treatment of subcontractors named in the successful bidder’s bid.
The governing legal principle remains settled. If you list a subcontractor in your bid and win the tender, with limited exceptions, you are obligated to contract with that subcontractor to perform work under the Prime Contract.
This obligation arises through the operation of Contract A. When the owner selects your bid as the successful bidder, with limited exceptions, unless the owner expressly consents to the subcontractor substitution, both the owner and named subcontractors expect that the named subcontractors will perform the listed portions of the work.
However, Ontario law recognizes that subcontractor substitution can occur, without liability to a named subcontractor, only in limited circumstances, such as where the GC has a reasonable, objective, post-bid objection. For example, subcontractor bankruptcy.
It should be emphasized that the Courts frown upon “bid shopping”. Once Contract A is created a GC cannot unilaterally substitute a subcontractor simply because a different subcontractor becomes available at a better price, or because of a GC subcontractor preference that existed before bid submission but was never disclosed to other subcontractor bidders.
Owner Privilege Clauses and Local Preference: How Much Discretion Do Owners Really Have?
Most request for tenders include “owner privilege clauses” such as:
- “The lowest or any bid will not necessarily be accepted.”
- “The owner reserves the right to accept any bid or reject any or all bids.”
- “Local preference may be applied where a local bid is within 10% of the lowest bid.”
Ontario courts continue to hold that these clauses may be valid, but their enforcement is subject to the courts’ discretion.
As the law of tender evolves, GCs are cautioned not just to avoid bidding quickly, but critically to become fully aware of their legal rights, obligations, and risks prior to submitting their bid and being locked into Contract A. Understanding Contract A/Contract B concepts is no longer optional – it is essential to effective risk management.
¹ This article will primarily focus on the Contract A and Contract B concepts as between the owner and bidding general contractors and a successful general contractor and its subcontractors.