Meaning of Government Contract, Formation, Jurisdiction, Express And Implied Formation
Meaning of Government Contract, Formation, Jurisdiction, Express And Implied Formation

 

Introduction

The government through the instrumentality of laws inculcates various habits and cultures on the citizens. The most paramount habit or culture usually sought to be imbibed by the government on the masses through laws is orderliness which includes having or living within a minimum standard which in essence negates arbitrariness.

On the attainment of orderliness, which may likely pose a threat to the orderliness in the society is the quest to earn a living (which may lead to illegalities).

As it appears, the government after conscious efforts has been made to imbibe orderliness in the citizen, will turn around to arbitrarily confer rights, privileges, contracts and business opportunities.

Thus, owing to the attendant monetary benefits to be realized from such exercise made in arbitrariness the overriding public morals declines as everyone will rise to its greatest might to secure a slot in the largesse to be shared by the government.

This topic is not focused on the legitimate or illegitimate means of earning a living but a rather growing trend and apparently the quickest way of amassing wealth in India, which is award of Contract by the government in India.

Government contract will be effectively discussed under the following headings:

  1. Definition of a Contract and Government Contract
  2. Essential Ingredients of a Contract
  3. The Status of Government Contract in India and other common law Jurisdiction
  4. Formation of Government Contract in India
  5. Express Formation of Contract
  6. Implied Formation
  7. The Guiding Principles of Government Contract
  8. Contractual Liability in the Government contract
  9. The Jurisdiction of the Court over Contracts

 

Definition of a Contract and Government Contract

By virtue of the Contract Act of 1872, Contract refers to agreements, promise or sets of promises which the law recognizes and will enforce at the instance of the innocent party against the erring party in the event of a breach.

Flowing from the above definition of contract generally, Government contract simply refers to a contract of any form which the central or state government is a party to. It is immaterial that the government or its agency is the promisor or the promise.

Essential Ingredients of a Contract

Before a contract is said to be in existence there are some elements or ingredients which must be conjunctively present before it can be said that a valid contract is existing between two parties. These ingredients are briefly highlighted below:

Offer and Acceptance

There must be a valid and unequivocal offer (which must be accepted by the promisee) from the promisor to the promisee in a contract for there to be a contract. The requirement of offer and acceptance between the parties to a contract is for the intention of the parties to contract to be known.

Intention to create a Legal Obligation

Beyond the stage of making an offer by a promisor and the acceptance of the said offer by the promise it must be clear that the parties intend to be bound by whatever they have agreed between them at the stage of offer and acceptance.

For in the case of Balfour v. Balfour, the Court had posited in the course of determining whether there was an intention to create legal relation between spouses held that domestic promises are not enforceable in law.

Legal Capacity

The law describes some classes of persons as persons under legal disability. Legal disability can be by way of age (infants), infirmity of the mind, illiteracy, blind etc.

Where it is found that parties to a contract are not under any of the legal disabilities imposed by law or have taken step to dispense with the such legal limitation, the law will recognize the promises so entered with such persons as a valid contract and enforce same.

The absence of Undue Influence

Where it is found that a party to a contract entered into such contract by virtue of threat, undue influence and coercion i.e against his free will the law will not uphold and recognize such contract.

Legality

It must be stated that the object of any contract must be legitimate as the law will not sanction any form of contract which is rooted in illegality.

Consideration

Contracts must be backed by valid and lawful consideration on the part of the promise in order to be entitled to the benefits of the contact.

Formality

Some transactions by their very nature has some formalities which must be complied with while entering into any form of contract on such venture. An example given is the case of all contracts relating to land which the law generally mandates that the same must be reduced in writing.

The law does not command the impossible as such a contract must be capable of being performed or enforced in law for it to be valid.

The Status of Government Contract in India and other Common Law Jurisdiction

The Contract Act of 1872 appears silent on the form which contracts must take in India. Whilst the Constitution of India by virtue of Article 299, had stipulated the forms which a government contract must fulfill.

With the then feudal system applicable in England, the crown or the feudal lords cannot be sued until the immunity was subsequently watered down.

The Apex court of India, the supreme court had in the case of State of Bihar v Majeed AIR 1954 SC 786 held that the government contracts notwithstanding the benefits are one and the same with the ordinary contract between a private person as such government contracts are within the purview of the Contract Act of 1872.

Formation of Government Contract in India

One may ask how do the activities of the government and an individual or a private company or firm culminate into a government contract?

In line with the spiritual law as enacted under Article 299 of the Constution of India, government contracts must be formal i.e clearly reduced into writing. The contract between the government cannot be implied as was held in the case of K. P. Chowdhary v State of Madhya Pradesh.

The Supreme Court of India had in the case of Bhikaraj Jaipuria v Union of India ruled that any government contract consummated in violation of the provisions of Section 299 of the India Constitution is void, unenforceable and of no legal effect whatsoever as permitting any of such contract will be unconstitutional.

The court had however in Ram Lal v State of Punjab, AIR 1966 Punj 436, admitted that there are some contracts which will be nearly impossible to be consummated and consequently enforced under the strict adherence to Article 299 of theĀ  Indian Constitution.

The Guiding Principles of Government Contract

There are principles which govern the contractual relationship to be created or already in created in a government contract. These guiding principles are:

Reasonability and Fairness

The dictates of a democratic dispensation is that the actions of the government in this case pertaining to the award of government contract must be done in fairness and reason. The guiding principle of fairness if well observed operated in favor of both the promisor and the promise in a government contract.

Overriding public interest

The award of government contract ought to be in the interest of the general public likewise where there is need to deviate from any standard of selecting an awardee of government contract must be shown to have been done in the overriding public interest.

Equality and Non-arbitrariness

Government contracts should be awarded in consideration of granting equal opportunities to the citizens seeking such contract as opposed to the random selection of successful bidder of a government contract. In fact, clear and known criteria for the selected must be followed in the selection of successful bidder of a government contract.

Contractual Liability in the Government Contract

Contracts, including government contract, creates various rights and privileges which tends to enjoy more attention than the liabilities which may arise in the event of a breach of any of the conditions imposed in the contract.

On the authority of Section 299(2) of the Indian Constitution, the President, Governor, their agents and privies are immune to any liability which may accrue from the consummation of the contract pursuant to the dictates of the Constitution.

The court had relying on the authority of Section 70 of the Contract Act held that where the government enters into a contract in violation of the provisions of Section 299(1) of the India Constitution, the government may be held liable to compensate the party.

The Jurisdiction of the Court over Contracts

The doctrine of separation of power dictates that the various arms of government that is, the executive, the judiciary and the legislature shall work exclusively within their respective constitutional mandate while attaining the aims and fundamental objective of India.

In the same manner, the law established the respective arms of government to function as a watchdog over one another, this particular is the basis of the jurisdiction of the court over contracts particularly government contracts.

It was earlier highlighted that the pursuit of the government contract for the obvious reasons of the fastest way of enrichment has led to irregularities, disorderliness, and arbitrariness. The law through the court has a bounden duty to check the excesses arising from the government contracts.

The court through the instrumentality of judicial review and invocation of various prerogative writs example is the writ of mandamus, the writ of prohibition can interrogate the actions of the government whether an administrative or legislative action of the government with the aim of bringing them in the right footing with the law.

The court cannot acquiesce to a wrongful or unlawful procedure adopted by the administrative body in the award of government; accordingly, the court is left with no other option but to impose legality on the other arms of government by striking down any of their action which contravenes the law.

Conclusion

Government contract in its very best approach is the same to the contracts which are known to all and sundry. But the enviable position being enjoyed by this form of contract is in no doubt the amount of monetary and other fringe benefits flowing therefrom.

It is important to re-echo that while the government had laid down the minimum code of conduct of the citizens by imposing orderliness from inception, the same government should not in a blink of the eye destroy the value system which took productive years to establish.

Again, it is emphasized that though the benefit of government contract may be instant, weighty and overwhelming, however when the law through the courts rise to the occasion to prevail over the participants to engage in government contract based on the dictates of the law, the weight of the law will lean heavily on the defaulters.

It is suggested while affirming that the laws guiding the award of a government contract are not radically different from the laws applicable to the general contract, that enforceability against corrupt practices is the key to water down the unfair attention which government contract is enjoying.

 

 

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