Introduction Contracts Management

8/9/2019 Introduction Contracts Management

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CONTRACTS AND CONSTITUTION-LAW

OF CONTRACTS


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CONTRACT MANAGEMENT

CONTRACTS;

AND ITS MANAGEMENT


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CONTRACTS

THE WORD CONTRACT IS DERIVED

FROM LATIN WORD CONTRACTUM

WHICH MEANS DRAWN TOGETHER;

EVERY PROMISE OR EVERY SET OF

PROMISES FORMIMG THE

CONSIDERATION FOR EACH OTHERSIS AN AGREEMENT;


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CONTRACTS (CONTD)

CONTRACT IS AN AGREEMENT BETWEEN

TWO OR MORE PARTIES, WHICH IS

ENFORCEABLE BY LAW;

TO FORM AN AGREEMENT THERE MUST

BE A PROPOSAL OR OFFER BY ONE PARTY

AND ITS ACCEPTANCE BY ANOTHER;

AGREEMENT= OFFER + ACCEPTANCE;


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ESSENTIALS OF A VALID CONTRACT

(CONTD)

OBJECT OF AGREEMENT MUST BE LAWFUL;

AGREEMENT MUST NOT HAVE BEEN

EXPRESSELY DECLARED VOID BY ANY LAW INFORCE IN THE INDIA;

AGREEMENT MUST BE CERTAIN AND NOTVAGUE OR INDEFINITE;

LEGAL FORMALITIES (STATUTORY

REQUIREMENTS OF MAKING IN WRITING, INPRESENCE OF WITNESSES OR REGISTERED ORSIGNED BY AUTHORIZED PERSONS) MUST BECOMPLIED WITH;


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REQUIREMENTS OF A VALID

CONTRACT

MUST BE UNCONDITIONAL;

MUST BE MADE AT THE PROPER PLACE;

MUST CONFORM TO THE TERMS OF OBLIGATIONS;

MUST BE MADE AT THE PROPER TIME;

MUST BE MADE IN PROPER FORM;

PARTIES MUST BE ABLE AND WILLING TOPERFORM ITS OBLIGATION;

THERE MUST BE REASONABLE OPPORTUNITY FOR

INSPECTION; MUST BE MADE TO THE PROPER PERSON;

MUST BE FOR FULL AMOUNT;


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OVERVIEW OF CONTRACT LAW

LAW OF CONTRACTS MAY BE DESCRIBED AS THEENDEAVOUR OF PUBLIC AUTHORITIES TOESTABLISH A POSITIVE SANCTION FOR THE

EXPECTATION OF GOOD FAITH WHICH HASGROWN UP IN THE MUTUAL DEALINGS OF MEN;

IN CIVIL LAW OR THE LAW OF THE STATE ORTHE LAND, LAW SIGNIFIES A COMMAND FROM ASUPERIOR AUTHORITY PRESCRIBING A COURSEOF ACTION, DISOBEDIENCE WHICH WOULD

ENTITLE PUNISHMENT; THE OBJECT OF THE LAW OF CONTRACTS IS TO

REGULATE THE DEALINGS BETWEENINDIVIDUALS/ PARTIES;


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OVER VIEW OF CONTRACT LAW

(CONTD)

LAW OF CONTRACTS IS NOT THE

WHOLE LAW OF AGREEMENTS NOR

IS IT THE WHOLE LAW OF

OBLIGATIONS; IT IS THE LAW OF

THOSE AGREEMENTS, WHICH

CREATE OBLIGATION AND THOSEOBLIGATIONS WHICH HAVE THEIR

SOURCE IN AGREEMENT;


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OVER VIEW OF CONTRACT LAW

(CONTD)

BROAD CLASSIFICATION OF LAW- PUBLICAND PRIVATE;

PUBLIC LAW DEALS WITH THEADMINISTRATIVE POWERS OF STATE ANDALSO CERTAIN RELATIONS BETWEEN THESTATE AND THE INDIVIDUAL;

PRIVATE LAW DEALS WITH THE RIGHTSOF SUBJECTS INTERSE;

INDIAN CONTRACT ACT 1872;


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GOVERNMENT AND PRIVATE

CONTRACTS

MOST OF THE MAJOR INFRASTRUCTUREPROJECTS IN OUR COUNTRY FOR THE

PRESENT ARE BEING EXECUTED BYGOVERNMENT AND HENCE MOST OF THECONTRACTS ARE PUBLIC CONTRACTSGOVERNED BY PUBLIC LAW;

MAJOR PART OF THE GOVERNMENTEXPENDITURE IS THROUGH THEPROCUREMENT OF GOODS, SERVICES ANDCONSTRUCTION ACTIVITY;


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PUBLIC PROCUREMENT

PUBLIC PROCUREMENT IS

ACQUISITION OF GOODS, SERVICES

AND PUBLIC WORKS IN A TIMELY

MANNER THAT RESULTS IN BEST

VALUE TO THE GOVERNMENT AND

PEOPLE


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CONSTITUTION AND CONTRACTS

ARTICLES 298, 299, 14 AND 19


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ARTICLE 298, POWER TO CARRY ON

TRADE ETC.

Under this article, Executive power of the Unionand States extends to carrying on of any trade,

disposal of property and making of contracts forthe same I.e. Public Procurement;

For such PP, the Government does not require anyadditional powers, it can have by entering tocontracts;

The power to enter into contracts for PP istherefore expressly vested in the Governmentunder this Article.


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ARTICLE 299: CONSTITUTIONAL

REQUIREMENTS OF A GOVERNMENTCONTRACT (CONTD)

NEITHER PRESIDENT NOR GOVERNOR SHALL BEPERSONALLY LIABLE IN RESPECT OF ANY CONTRACTOR ASSURANCE MADE OR EXECUTED FOR PURPOSEOF CONSTITUTION OR ANY ENACTMENT RELATINGTO GOI IN FORCE NOR SHALL ANY PERSON MAKINGOR EXECUTING ANY SUCH CONTRACT ORASSURANCE ON BEHALF OF ANY OF THEM BEPERSONALLY LIABLE IN RESPECT THEREOF;

IN ORDER THAT PUBLIC FUNDS MAY NOT BEDEPLETED BY CLANDESTINE CONTRACTS MADE BY

ANY AND EVERY PUBLIC SERVANT THERE SHOULDBE DEFINITE PROCEDURE ACCORDING TO WHICHCONTRACTS MUST BE MADE.


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EQUALITY OF OPPORTUNITY IN THE

MATTER OF GOVERNMENT CONTRACTS

ARTICLE 19(1)(G) CONFERS ON ALL CITIZENS AFUNDAMENTAL RIGHT TO PRACTICE ANYPROFESSION (INCLUDES TAKING AND EXECUTINGGOVT CONTRACTS) CARRY ON ANY OCCUPATION,TRADE OR BUSINESS;

FAIRPLAY IN ACTION MUST BE THE BASIS OF THEPOLICY OF THE STATE- ART 14 APPLIES ALSOMATTERS OF GOVERNMENT POLICY AND IF THEPOLICY OR ANY ACTION OF GOVERNMENT EVEN INCONTRACTUAL MATTERS FAILS TO SATISFY THE

TEST OF REASONABLENESS IT WOULD BEUNCONSTITUTIONAL; BASIC REQUIREMENTS OF ART14 IS FAIRNESS IN ACTION BY STATE;


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SUMMARY OF GENERAL PRINCIPLES

EMBODIED IN CONSTITUTION

PROFESSION OF DOING GOVT CONTRACTS IS AFUNDAMENTAL RIGHT UNDER CONSTITUTION;

PERSONS PRACTICING GOVT CONTRACTSCANNOT BE TREATED ARBITRARILY ORCAPRICIOUSLY;

GOVT CANNOT LIGHTLY BRUSH ASIDE ACONTRACTOR WHOSE TENDER IS THE LOWEST;REASONS FOR REJECTIONS SHOULD BE

REASONABLE, COGENT AND ACCEPTABLEWITHOUT ARBITRARINESS OR DISCRIMINATION;


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PRINCIPLES OF PUBLIC PROCUREMENT

PUBLIC PROCUREMENT SYSTEM CAN

BE SAID TO BE WELL FUNCTIONING

IF IT ACHIEVES THE OBJECTIVES OF

TRANSPARENCY, COMPETITION,

ECONOMY AND EFFICIENCY

FAIRNESS AND ACCOUNTABILITY;


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(CONTD)

PP INCLUDES PROCUREMENT BY GOVERNMENTAND BY STATUTORY BOARDS AND NON-MINISTERIAL BODIES;

PP MUST FOLLOW PRESCRIBED COMPETITIVEPROCEDURES AND THE RULES GIVE A MAJORWEIGHT TO FAIRNESS AND EQUITY;

PP IS ALSO SUBJECT TO OVERSIGHT BYLEGISLATURE AND AUDIT (IN ADDITION TOINTERNAL ACCOUNTABILITY MECHANISMS);

MISTAKES IN PP CAN HAVE VAST POLITICALREPERCUSSIONS OWING TO THE FOCUS THATTHE MEDIA AND THE PUBLIC PLACE ON THESUBJECT;


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(CONTD)

A KEY PRINCIPLE OF GOOD GOVERNANCEPRESUPPOSES CONSISTENT PRINCIPLES

AND REGULATIONS FOR PROCUREMENT; INFORMATION AND DOCUMENTATION ON

THESE RULES SHOULD BE WIDELYAVAILABLE AND THE RULES SHOULD BEENFORCED FAIRLY AND CONSISTENTLY;

THERE SHOULD BE A WELL UNDERSTOODSYSTEM FOR REGISTERING ANDRESOLVING COMPLAINTS SPEEDILY;


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(CONTD)

THERE SHOULD BE A WELLFUNCTIONING SYSTEM FOR DISPUTE

RESOLUTION AND CHECKS ON THEARBITRARY BEHAVIOUR OFPROCUREMENT ENTITIES AND ONTHE INCONSISTENT EXERCISE OF

DISCRETIONARY POWERS INCONTRACT AWARD, ENFORCEMENTAND MANAGEMENT;


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(CONTD)

ACCOUNTABILITY AND TRANSPARENCYARE VITAL TO PROCUREMENTMANAGEMENT;

LACK OF OVERSIGHT MECHANISM TOENSURE ACCOUNTABILITY UNDERMINESTHE CAPACITY OF GOVERNMENTS TOSECURE THE CONFIDENCE OFCONTRACTORS AND SUPPLIERS IN THEPUBLIC PROCUREMENT PROCESS ANDTHE TRUST OF CITIZENS IN THE PROPERUSE OF PUBLIC FUNDS;


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(CONTD)

TRUST AND CONFIDENCE CAN BE ESPECIALLYERODED BY SECRECY IN PROCUREMENTTRANSACTIONS AT THE LOCAL LEVELS

(ALTHOUGH A DEGREE OF CONFIDENTIALITY ISESSENTIAL TO PROTECT BUSINESS PRIVACY ANDTHE LEGITIMATE INTERESTS OF INDIVIDUALBIDDERS)

TRANSPARENCY REDUCES UNCERTAINTY ANDINHIBITS CORRUPTION IN PROCUREMENT BY

ASSURING EQUALITY OF ACCESS TO INFORMATIONFOR ALL BIDDERS BEFORE, DURING AND AFTERTHE BIDDING PROCESS;

THE SYSTEM SHOULD ALSO PROTECT THEINTERESTS OF THE CITIZENS;


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(CONTD)

SOUND PP POLICIES AND PRACTICES ARE

THUS AMONG THE ESSENTIAL ELEMENTS

OF GOOD GOVERNANCE; GOOD PRACTICES REDUCE COSTS AND

PRODUCE TIMELY RESULTS;

POOR PRACTICES LEAD TO WASTE AND

DELAYS AND ARE OFTEN THE CAUSE FORALLEGATIONS OF CORRUPTION AND

GOVERNMENT INEFFCIENCY;


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KET ELEMENTS OF PUBLIC

PROCUREMENT

CLEAR, COMPREHENSIVE ANDTRANSPARENT LEGAL FRAMEWORK;

CLEAR CUT FUNCTIONALRESPONSIBILITIES ANDACCOUNTABILITIES FOR PROCUREMENTFUNCTION;

EFFICIENT INSTITUTIONAL FRAMEWORK;

ROBUST MECHANISM FOR ENFORCEMENTOF POLICY, RULES AND REGULATIONS;

WELL TRAINED PROCUREMENT STAFF


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ESSENTIALS OF GOOD PUBLIC

PROCUREMENT

ECONOMY: BY OPEN COMPETITION;

EFFICIENCY: BY EFFECTIVE

PROCESSES;

FAIRNESS: BY NON-DISCRIMINATION;

TRANSPARENCY:

BY OPENNESS; ACCOUNTABILITY: BY ADHERENCE

TO PROCUREMENT LAW OR ACT;


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EQUALITY OF OPPORTUNITY IN

PUBLIC PROCUREMENT

MERE COMPLIANCE TO THE INDIAN CONTRACT ACTIS NOT ENOUGH IN CASE OF GOVERNMENTCONTRACTS, BUT THEY MUST ALSO SATISFYARTICLE 14 AND 19

ARTICLE 14: EQUALITY BEFORE LAW- THE STATESHALL NOT DENY TO ANY PERSON EQUALITYBEFORE THE LAW OR THE EQUAL PROTECTION OFTHE LAWS WITHIN THE TERRITORY OF INDIA;

HENCE TO SATISFY ARTICLES 14 &19 INGOVERNMENT CONTRACTS THE PROCESS OFPROCUREMENT SHOULD BE FAIR &REASONABLE,FAIRNESS IN ACTION BEING THE BASICREQUIREMENT;


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EQUALITY OF OPPORTUNITY IN

PUBLIC PROCUREMENT (CONTD)

TAKING GOVT CONTRACTS IS A PROFESSIONALOCCUPATION TO WHICH EVERY ONE HAS AFUNDAMENTAL RIGHT;

PP HAS TO BE OPEN FOR ALL WHO ARE ELIGIBLE; SC HAS HELD TODAY THE GOVERNMENT IN A

WELFARE STATE IS THE REGULATOR ANDDISPENSOR OF SPECIAL SERVICES ANDPROVIDER OF A LARGE NUMBER OFBENEFITS,JOBS,CONTRACTS,LICENSES,QUOTAS,

MINERAL RIGHTS ETC. THE GOVT POURS FORTHWEALTH, MONEY,BENEFITS, SERVICES,CONTRACTS, QUOTAS AND LICENSES..


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PROCUREMENT LAW

TO REGULATE PUBLIC PROCUREMENT OFGOODS, CONSTRUCTION AND SERVICES SO AS TOPROMOTE THE OBJECTIVES OF:

MAXIMIZING ECONOMY AND EFFICIENCY INPROCUREMENT;

FOSTERING AND ENCOURAGING PARTICIPATIONIN PROCUREMENT PROCEEDINGS BY SUPPLIERSAND CONTRACTORS, ESPECIALLY WHERE

APPROPRIATE, PARTICIPATION BY SUPPLIERS ANDCONTRACTORS REGARDLESS OF NATIONALITYAND THEREBY PROMOTING INTERNATIONALTRADE;


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PROCUREMENT LAW (CONTD)

PROMOTING COMPETITION AMONG SUPPLIERSAND CONTRACTORS FOR THE SUPPLY OF THEGOODS,CONSTRUCTION OR SERVICES TO BE

PROCURED; PROVIDING FOR THE FAIR AND EQUITABLE

TREATMENT OF ALL SUPPLIERS ANDCONTRACTORS;

PROMOTING THE INTEGRITY OF, ANDFAIRNESS AND PUBLIC CONFIDENCE IN THE

PROCUREMENT PROCESS; AND ACHIEVING TRANSPARENCY IN THE

PROCEDURES RELATING TO PROCUREMENT;


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VOLUME OF PROCUREMENT

VOLUME OF PROCUREMENT IS VERYHIGH; SO ARE THE STAKES;

GOK ANNUAL PROCUREMENT WASASSESSED AS ABOUT RS.13,000/- CRORESIN 2001;

IRREGULARITIES IN PROCUREMENT,MALPRACTICES/ CORRUPTIVE PRACTICESIN PROCUREMENT ARE A COMMON AUDITOBJECTION; VIGILANCE CASES; SOMEEVEN LEAD TO FALL OF GOVERNMENT;


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THE UNCITRAL MODEL

PROCUREMENT LAW

THE UNCITRAL MODEL LAW ONPROCUREMENT OF GOODS, CONSTRUCTIONAND SERVICES WAS ADOPTED BY THEUNITED NATIONS COMMISSION ONINTERNATIONAL TRADE LAW (UNCITRAL) ATITS TWENTY-SEVENTH SESSION; THECOMMISSION HAS ALSO ISSUED A GUIDE TOENACTMENT OF THE UNCITRAL MODEL LAWON PROCUREMENT OF GOODS.CONSTRUCTION AND SERVICES (A/CN.9/403)


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MANY COUNTRIES HAVE A PROCUREMENT LAW;

SOME COUNTRIES INCLUDING INDIA HAVECODES AND MANUALS;

HOWEVER THESE ARE ISSUED BYADMINISTATIVE MINISTRIES /DEPARTMENTSAND COULD BE CHANGED/REVISED RATHEREASILY; MAY LEAAD TO INCONSISTENCIES;

THE REVISION/MODIFICATION OF THE LAW/ACTREQUIRES THE APPROVAL OFPARLIAMENT/ASSEMBLY WHICH IS RATHERTOUGH/DIFFICULT; IT WILL ENSURECONSISTENCY;


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IN INDIA PROCUREMENT PROCEDURES ARECONTAINED IN THE GENERAL FINANCIAL RULES(GFR) WHICH HAS BEEN REVISED IN 2005;

TAMIL NADU IS THE FIRST STATE IN INDIAWHICH HAS ENACTED A PROCUREMENT LAW; ITIS NAMED THE TAMIL NADU TRANSPARENCY INTENDERS ACT, 1998 AND RULES 2000;

KARNATAKA IS THE SECOND STATE IN INDIAWHICH HAS ENACTED A PROCUREMENT LAW; IT

IS NAMED THE KARNATAKA TRANSPARENCY INPUBLIC PROCURMEENT ACT 1999 AND RULES2000; KARNATKA HAS ALSO MANDATEDSTANDARD TENDER DOCUMENTS;


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OTHER STATES SUCH AS ANDHRA

PRADESH, ORISSA, PUNJAB ARE

PROPOSING TO ENACT SIMILARPROCUREMENT LAWS;


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OTHER LEGISLATIONS THAT AFFECT

CONTRACTS

THE INDIAN CONTRACT ACT, 1872;

WORKMEN COMPENSATION ACT,1923;

THE INDUSTRIAL DISPUTES ACT,1947;

EPF AND MISCELLANEOUS PROVISIONS ACT,1932;

THE INDIAN PARTNERSHIP ACT, 1923;

THE SALE OF GOODS ACT,1930;

PAYMENT OF WAGES ACT, 1936;

MINIMUM WAGES ACT,1936; EMPLOYEESS STATE INSURANCE ACT, 1948;

FACTORIES ACT, 1948;


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OTHER LEGISLATIONS THAT AFFECT

CONTRACTS (CONTD)

KARNATAKA SALES ACT, 1957;

CONTRACT LABOUR (REGULATION ANDABOLITION) ACT, 1976;

MATERNITY BENEEFIT ACT, 1961; CHILD LABOUR (PROHIBITION AND REGULATION

ACT, 1986;

PAYMENT OF GRATUITY ACT,1972;

THE PUBLIC LIABILITY INSURANCE ACT, 1991;

ENVIRONMENTAL (PROTECTION) ACT, 1986; THE ARBITRATION AND CONCILLIATION ACT,

1996; ETC.

Introduction Contracts Management

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