The two landmark judgments have been confirmed upon appeal, ordering two contractors to pay a total of around €100,000 in pre-liquidated damages and double the Court expenses, as the Court of Appeal deemed appeals as vexatious.
In L-Aġenzija għal Infrastruttura Malta vs. Pitrolo Salvatore Restauri e Costruzioni Ltd and L-Aġenzija għal Infrastruttura Malta vs Appalitalia Srl Unipersonale TID 109520, the two recommended bidders had accepted the contract award following a public call to tender, but refused to sign the contract with the Agency for Infrastructure Malta to carry our roadworks in various rural roads in Malta.
This tendering process occurs through an online Electronic Procurement System. The acceptance of the award also takes place online. The Letter of Intent is then sent inviting the preferred bidder to sign the contract. The General Rules Governing Tenders, to which any bidder tendering to a government contact submit, stipulate that the offer must remain for a 90 day period. The same rules stipulate that if the recommended bidder does not enter into the contract he will have to pay the difference between the value of his offer and the value of the final awarded offer.
In both cases, the Court first dealt with the issue of pre-contractual liability. The latter does not originate from any obligation agreed and contracted between the parties but occurs in the phases before the signing of the contract. In Pitrolo Salvatore the Court said that once an offer to tender is submitted, a consensual relationship is created – tacit agreement de ineundo contractu – between the parties, in the sense that the offer will be considered properly and will not be set aside if not for reasons valid at law. The responsibility of those who fail to observe the conditions of this tacit agreement is the responsibility of those who fail to observe a contractual agreement, and therefore it is ex contractu. This echoes the same reasoning of the Appalitalia case wherein the Court established that although at a pre-contractual phase; it is a phase regulated by precise norms in force of the Regulations on Public Contracts that each bidder has to declare that he is accepting.
In Pitrolo Salvatore the court held that if the Agency had not to applied the conditions of the call, i.e. and not seek damages as stipulated, it would have violated the main principle of equal treatment which is also embraced in the Subsidiary Legislation 601.03 of the Laws of Malta and in the European Directives, as it would have carried out a substantial modification to the original call. The Court also insisted that this modification would have discriminated against potential and actual bidders by adjudicating a different call from the one published, which in an open procedure such as this is not possible. In essence this means that any contracting authority faced with the same issue is under an obligation to seek the pre liquidated damages, and not doing so would place that authority in default!
In Appalitalia the court determined that according to the rebus sic stantibus principle, parties wanted to enter into the contract according to the prevailing circumstances at the time of the making of the contract. It is up to the debtor to evidence the unenforceability of the obligation assumed by him due to force majeur. The impossibility must be total, objective and absolute and cannot consist of mere difficulties. Increase in prices is not enough to justify force majeur. In Pitrolo Salvatore the Court stated that in order to exempt itself from any guilt the defendant company must prove that in its actions it acted as a bonus paterfamilias. The Court opined that when the defendant company submitted an offer without having written confirmation of what the prices of the asphalt should have been, it failed to do the diligence required of it.
The Court of Appeal confirmed the judgments given by the First Hall Civil Court, ordering the respondents to pay double the court expenses as it considered the appeals to be vexatious.