CONTRACTS AND CONSTITUTION-LAW OF CONTRACTS

1. 1 CONTRACTS AND CONSTITUTION-LAW OF CONTRACTS K.N. VENKATA RAMAN PROCUREMENT CONSULTANT

2. 2 CONTRACT MANAGEMENT CONTRACTS; AND ITS MANAGEMENT

3. 3 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 OTHERS IS AN AGREEMENT;

4. 4 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;

5. 5 ESSENTIALS OF A VALID CONTRACT A VALID CONTRACT IS ONE WHICH IS ENFORCEABLE AND BECOMES BINDING ON THE PARTIES; THERE MUST BE A PROPOSAL AND ACCEPTANCE OR MEETING OF MINDS; AGREEMENT MUST BE BETWEEN PARTIES COMPETENT TO CONTRACT; PARTIES MUST GIVE THEIR FREE CONSENT; AGREEMENT MUST BE SUPPORTED BY CONSIDERATIONS WHICH MUST BE LAWFUL;

6. 6 ESSENTIALS OF A VALID CONTRACT (CONTD) OBJECT OF AGREEMENT MUST BE LAWFUL; AGREEMENT MUST NOT HAVE BEEN EXPRESSELY DECLARED VOID BY ANY LAW IN FORCE IN THE INDIA; AGREEMENT MUST BE CERTAIN AND NOT VAGUE OR INDEFINITE; LEGAL FORMALITIES (STATUTORY REQUIREMENTS OF MAKING IN WRITING, IN PRESENCE OF WITNESSES OR REGISTERED OR SIGNED BY AUTHORIZED PERSONS) MUSST BE COMPLIED WITH;

7. 7 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 TO PERFORM ITS OBLIGATION; THERE MUST BE REASONABLE OPPORTUNITY FOR INSPECTION; MUST BE MADE TO THE PROPER PERSON; MUST BE FOR FULL AMOUNT;

8. 8 OVERVIEW OF CONTRACT LAW LAW OF CONTRACTS MAY BE DESCRIBED AS THE ENDEAVOUR OF PUBLIC AUTHORITIES TO ESTABLISH A POSITIVE SANCTION FOR THE EXPECTATION OF GOOD FAITH WHICH HAS GROWN UP IN THE MUTUAL DEALINGS OF MEN; IN CIVIL LAW OR THE LAW OF THE STATE OR THE LAND, LAW SIGNIFIES A COMMAND FROM A SUPERIOR AUTHORITY PRESCRIBING A COURSE OF ACTION, DISOBEDIENCE WHICH WOULD ENTITLE PUNISHMENT; THE OBJECT OF THE LAW OF CONTRACTS IS TO REGULATE THE DEALINGS BETWEEN INDIVIDUALS/ PARTIES;

9. 9 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 THOSE OBLIGATIONS WHICH HAVE THEIR SOURCE IN AGREEMENT;

10. 10 OVER VIEW OF CONTRACT LAW (CONTD) BROAD CLASSIFICATION OF LAW- PUBLIC AND PRIVATE; PUBLIC LAW DEALS WITH THE ADMINISTRATIVE POWERS OF STATE AND ALSO CERTAIN RELATIONS BETWEEN THE STATE AND THE INDIVIDUAL; PRIVATE LAW DEALS WITH THE RIGHTS OF SUBJECTS INTERSE; INDIAN CONTRACT ACT 1872;

11. 11 GOVERNMENT AND PRIVATE CONTRACTS MOST OF THE MAJOR INFRASTRUCTURE PROJECTS IN OUR COUNTRY FOR THE PRESENT ARE BEING EXECUTED BY GOVERNMENT AND HENCE MOST OF THE CONTRACTS ARE PUBLIC CONTRACTS GOVERNED BY PUBLIC LAW; MAJOR PART OF THE GOVERNMENT EXPENDITURE IS THROUGH THE PROCUREMENT OF GOODS, SERVICES AND CONSTRUCTION ACTIVITY;

12. 12 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

13. 13 CONSTITUTION AND CONTRACTS ARTICLES 298, 299, 14 AND 19

14. 14 ARTICLE 298, POWER TO CARRY ON TRADE ETC. Under this article, Executive power of the Union and States extends to carrying on of any trade, disposal of property and making of contracts for the same I.e. Public Procurement; For such PP, the Government does not require any additional powers, it can have by entering to contracts; The power to enter into contracts for PP is therefore expressly vested in the Government under this Article.

15. 15 ARTICLE 299: CONSTITUTIONAL REQUIREMENTS OF A GOVERNMENT CONTRACT ALL CONTRACTS MADE IN THE EXERCISE OF THE EXECUTIVE POWER OF THE UNION OR STATE BE EXPRESSED TO BE MADE BY THE PRESIDENT OR GOVERNOR OF STATE AND ALL SUCH CONTRACTS AND ALL ASSURANCES OF PROPERTY MADE IN THE EXERCISE OF THAT POWER SHALL BE EXECUTED ON BEHALF OF PRESIDENT OR GOVERNOR BY SUCH PERSONS AND IN SUCH MANNER AS HE MAY DIRECT OR AUTHORIZE;

16. 16 ARTICLE 299: CONSTITUTIONAL REQUIREMENTS OF A GOVERNMENT CONTRACT (CONTD) NEITHER PRESIDENT NOR GOVERNOR SHALL BE PERSONALLY LIABLE IN RESPECT OF ANY CONTRACT OR ASSURANCE MADE OR EXECUTED FOR PURPOSE OF CONSTITUTION OR ANY ENACTMENT RELATING TO GOI IN FORCE NOR SHALL ANY PERSON MAKING OR EXECUTING ANY SUCH CONTRACT OR ASSURANCE ON BEHALF OF ANY OF THEM BE PERSONALLY LIABLE IN RESPECT THEREOF; IN ORDER THAT PUBLIC FUNDS MAY NOT BE DEPLETED BY CLANDESTINE CONTRACTS MADE BY ANY AND EVERY PUBLIC SERVANT THERE SHOULD BE DEFINITE PROCEDURE ACCORDING TO WHICH CONTRACTS MUST BE MADE.

17. 17 EQUALITY OF OPPORTUNITY IN THE MATTER OF GOVERNMENT CONTRACTS ARTICLE 19(1)(G) CONFERS ON ALL CITIZENS A FUNDAMENTAL RIGHT TO PRACTICE ANY PROFESSION (INCLUDES TAKING AND EXECUTING GOVT CONTRACTS) CARRY ON ANY OCCUPATION, TRADE OR BUSINESS; FAIRPLAY IN ACTION MUST BE THE BASIS OF THE POLICY OF THE STATE- ART 14 APPLIES ALSO MATTERS OF GOVERNMENT POLICY AND IF THE POLICY OR ANY ACTION OF GOVERNMENT EVEN IN CONTRACTUAL MATTERS FAILS TO SATISFY THE TEST OF REASONABLENESS IT WOULD BE UNCONSTITUTIONAL; BASIC REQUIREMENTS OF ART 14 IS FAIRNESS IN ACTION BY STATE;

18. 18 SUMMARY OF GENERAL PRINCIPLES EMBODIED IN CONSTITUTION PROFESSION OF DOING GOVT CONTRACTS IS A FUNDAMENTAL RIGHT UNDER CONSTITUTION; PERSONS PRACTICING GOVT CONTRACTS CANNOT BE TREATED ARBITRARILY OR CAPRICIOUSLY; GOVT CANNOT LIGHTLY BRUSH ASIDE A CONTRACTOR WHOSE TENDER IS THE LOWEST; REASONS FOR REJECTIONS SHOULD BE REASONABLE, COGENT AND ACCEPTABLE WITHOUT ARBITRARINESS OR DISCRIMINATION;

19. 19 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;

20. 20 PRINCIPLES OF PUBLIC PROCUREMENT (CONTD) PP INCLUDES PROCUREMENT BY GOVERNMENT AND BY STATUTORY BOARDS AND NON-MINISTERIAL BODIES; PP MUST FOLLOW PRESCRIBED COMPETITIVE PROCEDURES AND THE RULES GIVE A MAJOR WEIGHT TO FAIRNESS AND EQUITY; PP IS ALSO SUBJECT TO OVERSIGHT BY LEGISLATURE AND AUDIT (IN ADDITION TO INTERNAL ACCOUNTABILITY MECHANISMS); MISTAKES IN PP CAN HAVE VAST POLITICAL REPERCUSSIONS OWING TO THE FOCUS THAT THE MEDIA AND THE PUBLIC PLACE ON THE SUBJECT;

21. 21 PRINCIPLES OF PUBLIC PROCUREMENT (CONTD) A KEY PRINCIPLE OF GOOD GOVERNANCE PRESUPPOSES CONSISTENT PRINCIPLES AND REGULATIONS FOR PROCUREMENT; INFORMATION AND DOCUMENTATION ON THESE RULES SHOULD BE WIDELY AVAILABLE AND THE RULES SHOULD BE ENFORCED FAIRLY AND CONSISTENTLY; THERE SHOULD BE A WELL UNDERSTOOD SYSTEM FOR REGISTERING AND RESOLVING COMPLAINTS SPEEDILY;

22. 22 PRINCIPLES OF PUBLIC PROCUREMENT (CONTD) THERE SHOULD BE A WELL FUNCTIONING SYSTEM FOR DISPUTE RESOLUTION AND CHECKS ON THE ARBITRARY BEHAVIOUR OF PROCUREMENT ENTITIES AND ON THE INCONSISTENT EXERCISE OF DISCRETIONARY POWERS IN CONTRACT AWARD, ENFORCEMENT AND MANAGEMENT;

23. 23 PRINCIPLES OF PUBLIC PROCUREMENT (CONTD) ACCOUNTABILITY AND TRANSPARENCY ARE VITAL TO PROCUREMENT MANAGEMENT; LACK OF OVERSIGHT MECHANISM TO ENSURE ACCOUNTABILITY UNDERMINES THE CAPACITY OF GOVERNMENTS TO SECURE THE CONFIDENCE OF CONTRACTORS AND SUPPLIERS IN THE PUBLIC PROCUREMENT PROCESS AND THE TRUST OF CITIZENS IN THE PROPER USE OF PUBLIC FUNDS;

24. 24 PRINCIPLES OF PUBLIC PROCUREMENT (CONTD) TRUST AND CONFIDENCE CAN BE ESPECIALLY ERODED BY SECRECY IN PROCUREMENT TRANSACTIONS AT THE LOCAL LEVELS (ALTHOUGH A DEGREE OF CONFIDENTIALITY IS ESSENTIAL TO PROTECT BUSINESS PRIVACY AND THE LEGITIMATE INTERESTS OF INDIVIDUAL BIDDERS) TRANSPARENCY REDUCES UNCERTAINTY AND INHIBITS CORRUPTION IN PROCUREMENT BY ASSURING EQUALITY OF ACCESS TO INFORMATION FOR ALL BIDDERS BEFORE, DURING AND AFTER THE BIDDING PROCESS; THE SYSTEM SHOULD ALSO PROTECT THE INTERESTS OF THE CITIZENS;

25. 25 PRINCIPLES OF PUBLIC PROCUREMENT (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 FOR ALLEGATIONS OF CORRUPTION AND GOVERNMENT INEFFCIENCY;

26. 26 KET ELEMENTS OF PUBLIC PROCUREMENT CLEAR, COMPREHENSIVE AND TRANSPARENT LEGAL FRAMEWORK; CLEAR CUT FUNCTIONAL RESPONSIBILITIES AND ACCOUNTABILITIES FOR PROCUREMENT FUNCTION; EFFICIENT INSTITUTIONAL FRAMEWORK; ROBUST MECHANISM FOR ENFORCEMENT OF POLICY, RULES AND REGULATIONS; WELL TRAINED PROCUREMENT STAFF

27. 27 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;

28. 28 EQUALITY OF OPPORTUNITY IN PUBLIC PROCUREMENT MERE COMPLIANCE TO THE INDIAN CONTRACT ACT IS NOT ENOUGH IN CASE OF GOVERNMENT CONTRACTS, BUT THEY MUST ALSO SATISFY ARTICLE 14 AND 19 ARTICLE 14: EQUALITY BEFORE LAW- THE STATE SHALL NOT DENY TO ANY PERSON EQUALITY BEFORE THE LAW OR THE EQUAL PROTECTION OF THE LAWS WITHIN THE TERRITORY OF INDIA; HENCE TO SATISFY ARTICLES 14 &19 IN GOVERNMENT CONTRACTS THE PROCESS OF PROCUREMENT SHOULD BE FAIR &REASONABLE, FAIRNESS IN ACTION BEING THE BASIC REQUIREMENT;

29. 29 EQUALITY OF OPPORTUNITY IN PUBLIC PROCUREMENT (CONTD) TAKING GOVT CONTRACTS IS A PROFESSIONAL OCCUPATION TO WHICH EVERY ONE HAS A FUNDAMENTAL RIGHT; PP HAS TO BE OPEN FOR ALL WHO ARE ELIGIBLE; SC HAS HELD �TODAY THE GOVERNMENT IN A WELFARE STATE IS THE REGULATOR AND DISPENSOR OF SPECIAL SERVICES AND PROVIDER OF A LARGE NUMBER OF BENEFITS,JOBS,CONTRACTS,LICENSES,QUOTAS, MINERAL RIGHTS ETC. THE GOVT POURS FORTH WEALTH, MONEY,BENEFITS, SERVICES, CONTRACTS, QUOTAS AND LICENSES�..�

30. 30 PROCUREMENT LAW TO REGULATE PUBLIC PROCUREMENT OF GOODS, CONSTRUCTION AND SERVICES SO AS TO PROMOTE THE OBJECTIVES OF: MAXIMIZING ECONOMY AND EFFICIENCY IN PROCUREMENT; FOSTERING AND ENCOURAGING PARTICIPATION IN PROCUREMENT PROCEEDINGS BY SUPPLIERS AND CONTRACTORS, ESPECIALLY WHERE APPROPRIATE, PARTICIPATION BY SUPPLIERS AND CONTRACTORS REGARDLESS OF NATIONALITY AND THEREBY PROMOTING INTERNATIONAL TRADE;

31. 31 PROCUREMENT LAW (CONTD) PROMOTING COMPETITION AMONG SUPPLIERS AND CONTRACTORS FOR THE SUPPLY OF THE GOODS,CONSTRUCTION OR SERVICES TO BE PROCURED; PROVIDING FOR THE FAIR AND EQUITABLE TREATMENT OF ALL SUPPLIERS AND CONTRACTORS; PROMOTING THE INTEGRITY OF, AND FAIRNESS AND PUBLIC CONFIDENCE IN THE PROCUREMENT PROCESS; AND ACHIEVING TRANSPARENCY IN THE PROCEDURES RELATING TO PROCUREMENT;

32. 32 VOLUME OF PROCUREMENT VOLUME OF PROCUREMENT IS VERY HIGH; SO ARE THE STAKES; GOK ANNUAL PROCUREMENT WAS ASSESSED AS ABOUT RS.13,000/- CRORES IN 2001; IRREGULARITIES IN PROCUREMENT, MALPRACTICES/ CORRUPTIVE PRACTICES IN PROCUREMENT ARE A COMMON AUDIT OBJECTION; VIGILANCE CASES; SOME EVEN LEAD TO FALL OF GOVERNMENT;

33. 33 THE UNCITRAL MODEL PROCUREMENT LAW THE UNCITRAL MODEL LAW ON PROCUREMENT OF GOODS, CONSTRUCTION AND SERVICES WAS ADOPTED BY THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW (UNCITRAL) AT ITS TWENTY-SEVENTH SESSION; THE COMMISSION HAS ALSO ISSUED A GUIDE TO ENACTMENT OF THE UNCITRAL MODEL LAW ON PROCUREMENT OF GOODS. CONSTRUCTION AND SERVICES (A/CN.9/403)

34. 34 PROCUREMENT LAW (CONTD) MANY COUNTRIES HAVE A PROCUREMENT LAW; SOME COUNTRIES INCLUDING INDIA HAVE CODES AND MANUALS; HOWEVER THESE ARE ISSUED BY ADMINISTATIVE MINISTRIES /DEPARTMENTS AND COULD BE CHANGED/REVISED RATHER EASILY; MAY LEAAD TO INCONSISTENCIES; THE REVISION/MODIFICATION OF THE LAW/ACT REQUIRES THE APPROVAL OF PARLIAMENT/ASSEMBLY WHICH IS RATHER TOUGH/DIFFICULT; IT WILL ENSURE CONSISTENCY;

35. 35 PROCUREMENT LAW (CONTD) IN INDIA PROCUREMENT PROCEDURES ARE CONTAINED IN THE GENERAL FINANCIAL RULES (GFR) WHICH HAS BEEN REVISED IN 2005; TAMIL NADU IS THE FIRST STATE IN INDIA WHICH HAS ENACTED A PROCUREMENT LAW; IT IS NAMED THE TAMIL NADU TRANSPARENCY IN TENDERS ACT, 1998 AND RULES 2000; KARNATAKA IS THE SECOND STATE IN INDIA WHICH HAS ENACTED A PROCUREMENT LAW; IT IS NAMED THE KARNATAKA TRANSPARENCY IN PUBLIC PROCURMEENT ACT 1999 AND RULES 2000; KARNATKA HAS ALSO MANDATED STANDARD TENDER DOCUMENTS;

36. 36 PROCUREMENT LAW (CONTD) OTHER STATES SUCH AS ANDHRA PRADESH, ORISSA, PUNJAB ARE PROPOSING TO ENACT SIMILAR PROCUREMENT LAWS;

37. 37 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; EMPLOYEES�S STATE INSURANCE ACT, 1948; FACTORIES ACT, 1948;

38. 38 OTHER LEGISLATIONS THAT AFFECT CONTRACTS (CONTD) KARNATAKA SALES ACT, 1957; CONTRACT LABOUR (REGULATION AND ABOLITION) 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.