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LEXIKON
Violation of the duty to warn in tenders
The facts of the case
In 1996, a geologist wrote a geological report on a flood control facility in which he certified that the material at the side extraction point was suitable for the purpose. The use of this material was also based on the water law and nature conservation law decision. Before the flood control facility was built, another geologist wrote another geotechnical report in September 2006. He had excavations carried out in the area of the planned side extraction site and took representative soil samples from them. The report found that the fine-grained soils with high water content, as encountered during the exploration, are difficult to compact and that appropriate measures are therefore recommended when using this material. Both geological reports were included in the tender documents.
Contractually, the contractor was free to use the material. Nevertheless, he had to submit the property owner’s consent to the removal of material when submitting his bid. In the course of removing the material from the side extraction point, the plaintiff discovered that it contained too many fine particles and was too wet. Despite implementing the measures required by the expert opinion, the plaintiff had to determine after the start of construction that the material did not meet the requirements of the dam to be built and that the material also had to be stabilized. The costs incurred in connection with the stabilization of the material were now claimed as additional costs in a lawsuit against the builder.
On the duty to inspect and warn
According to Section 1168a of the Austrian Civil Code (ABGB), a contractor is liable for damage if the work fails as a result of the obvious unsuitability of the materials provided by the customer or obviously incorrect instructions from the customer and the contractor has not warned the customer. An instruction within the meaning of Section 1168a ABGB also exists if the customer not only specifies his own objective, namely the work to be produced, but also prescribes the manner of execution in one direction or another in a concrete and binding manner.
Based on the specific tender documents, it is unlikely that a bidder would offer and carry out the construction using materials other than those preferred by the client. According to the Supreme Court, this results in a situation that is at least equivalent to a binding instruction.
Duty to warn before concluding a contract
According to the Austrian Civil Code (ABGB), an explicit legal duty to check and warn only applies after a contract has been concluded, and therefore not to the bidder, but only to the contractor. However, according to case law, the contractor’s duty to warn under Section 1168a ABGB may also apply at the pre-contractual stage. The principles of pre-contractual duties of care are therefore also applicable in procurement procedures to the relationship between tenderers and bidders. A special feature of the procurement procedure is the obligation to treat all bidders equally with the aim of determining the best bidder in a transparent and objective manner, particularly in the case of public procurement.
This purpose would be undermined if a bidder became the best bidder with an offer even though they already intended to submit a supplementary offer for work that was unavoidably necessary from the outset after receiving the contract. By keeping the bid low in this way, they gain an unfair advantage in the tendering process. This constitutes a case of culpa in contrahendo, in particular a violation of the duty to warn under Section 1168a of the Austrian Civil Code (ABGB).
If the entrepreneur fails to issue the warning required under Section 1168a of the Austrian Civil Code (ABGB), they not only lose their claim to remuneration, but must also compensate for any further damage. Anything that must be recognized by the entrepreneur based on their presumed expertise (Section 1299 ABGB) is considered “obvious” within the meaning of Section 1168a ABGB.
In the present case, according to the Supreme Court, the findings made are not sufficient for a final assessment of the questions raised. The case was therefore referred back to the court of first instance.
Result
In light of the above decision, in the event of the bidder asserting claims for additional costs for services not specified in the contract resulting from the incompleteness or inaccuracy of the tender prepared by the client, it must be clarified whether these errors in the tender were already recognized during the bidding phase and should have been pointed out.