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Harvela Investments v Royal Trust Co of Canada

[1986] AC 207

Case summary last updated at 03/01/2020 13:57 by the Oxbridge Notes in-house law team.

Judgement for the case Harvela Investments v Royal Trust Co of Canada

A was selling shares and invited B and C to “tender” (i.e. bid) bids for the shares which wouldn’t be disclosed to the other party. B offered one amount and C offered a lesser amount OR a sum on top of whatever B was offering. A accepted C’s bid. HL held that the invitation to the process must have been for fixed bids (lest both parties offer excesses on the other’s bids, which would lead to neither side winning; or only one side gets to bid (as here) or the company end up worse off, since without the option to make a referential bid, one would have to make a higher bid to increase chances of winning) and therefore C’s offer was not valid and couldn’t be accepted. That A’s acceptance letter did not create a second new contract per se but was simply a mistaken acceptance of an invalid offer and had no effect. There is a unilateral contract between the seller and all bidders that the seller accepts the highest offer, as well as, in most cases, the final contract of sale with the highest bidder (a “dual-contract” approach) 
Lord Diplock: an invitation to enter the tendering process is a unilateral contract (if you submit the highest bid, I will sell to you at that price). Lord Bridge points out that the terms of this unilateral contract (secret bids) were broken because it was impossible to determine what C’s bid was, without referring to the B’s bid, and therefore to accept C’s bid is to undermine the point of the “secrecy” element: that the bids should be made independent of each other. 

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