Government Contracts

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Author : shalinibussa
Published on : October 02, 2016

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Government Contracts

Every contract must comply with all requirements of the Indian Contract Act, and a contract with Government is no exception. However, governemnt contracts raise issues and problems which do not, and cannot, arise issues and problems which do not, and cannot, arise in contracts between private individuals. If strict requirments are not prescribed by law for such contracts, clandestine contracts made by public servants may become very common.

Article 299 of the Constituion of India, therefore, prescribes a specific procedure enabling the agents of the governemnt to make conracts in order to bind the government. Art. 299(1) of the Constitution lays down that all contracts made in the exercise of the executive power of the Union or a State shall be expressed to be made by the President or the Governer, respectively. They are to be executed on behalf of the President or Governer by such persons and in such manner as may be prescribed. Art. 299(2) then provides that neither the President not the Governor, nor the person actually executing such a contract becomes personally liable under such a contract.

Prior to India's independence, a similar provision was contained in S. 175 of the Government of India Act, 1935, which provided that such contracts shall be made in the name of the Governer- General, and executed on his behalf in the prescribed manner and by the authorised persons.

The following are thus the three requirements of Art. 299:

The contract must be expressed to be made by, i.e it should be in the name of, the President or the Governor, as the case may be.
It must be executed by a person duly by the President or the Governor; &
Such person must execute the contract the contract on behalf of the President or the Governor in the prescribed manner.

As the above conditions ae cumulative in nature, if any condition is not complied with, the contract will not be enforceable by or against the Government. Nor can any of these conditions be waived by the parties.

It has been held that even when no formal document is executed between the parties, a contract can be spelt out from the correspondence, and if it complies with Art. 299, the contract is enforceable.

Earlier, the courts had taken the view that a contract which does not comply with the above requirements could nevertheless be ratified. However, this view is not legally tenable. As held by the Supreme Court in later cases, a contract which does not fulfill the conditions of Art. 299 is completely void, and therefore, cannot be ratified by tge government.

The Calcutta High Court has observed that if a contract is not made in accordance with the above requirements, it isvoid, and just became some payments were made under such contracts on previous occasions is no ground for holding that paymnts become due under that particular contract also.