2015

ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

SECTION-B, GROUP-10

Submitted By :
Abhishek Khanna (PGP31062)
Atiq-Ul-Haque (PGP31076)
Hiteshwar Gaur (PGP31089)
Rahul Ranjan (PGP31102)
Susmita Haldar (PGP31117)

INDEX
Introduction...........................................................................................................................3

Status of the Problem along with measures adopted.......................................................5

Legal and Regulatory measures........................................................................................14

Effectiveness of Compliance and Enforcement mechanism..........................................24

Role of Judiciary.................................................................................................................26

Role of NGOs/Civil Society Groups ..................................................................................27

Role Legal education and awareness ..............................................................................28

Conclusion...........................................................................................................................32

References...........................................................................................................................33

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Introduction
Contract Management and Negotiation
Contract management or contract administration is the management of contracts made with
customers, vendors, partners, or employees. The personnel involved in Contract
Administration required to negotiate, support and manage effective contracts are expensive
to train and retain. Contract management includes negotiating the terms and conditions in
contracts and ensuring compliance with the terms and conditions, as well as documenting
and agreeing on any changes or amendments that may arise during its implementation or
execution. It can be summarized as the process of systematically and efficiently managing
contract creation, execution, and analysis for the purpose of maximizing financial and
operational performance and minimizing risk.
Common commercial contracts include employment letters, sales invoices, purchase orders,
and utility contracts. Complex contracts are often necessary for construction projects, goods
or services that are highly regulated, goods or services with detailed technical specifications,
intellectual property (IP) agreements, and international trade
Types of Contracts
Contracts under Seal Traditionally, a contract was an enforceable legal document only if it
was stamped with a seal. The seal represented that the parties intended the agreement to
entail legal consequences. No legal benefit or detriment to any party was required, as the
seal was a symbol of the solemn acceptance of the legal effect and consequences of the
agreement. In the past, all contracts were required to be under seal in order to be valid, but
the seal has lost some or all of its effect by statute in many jurisdictions. Recognition by the
courts of informal contracts, such as implied contracts, has also diminished the importance
and employment of formal contracts under seal.
Express Contracts: In an express contract, the parties state the terms, either orally or in
writing, at the time of its formation. There is a definite written or oral offer that is accepted by
the offeree (i.e., the person to whom the offer is made) in a manner that explicitly
demonstrates consent to its terms.
Implied Contracts: Although contracts that are implied in fact and contracts implied in law
are both called implied contracts, a true implied contract consists of obligations arising from
a mutual agreement and intent to promise, which have not been expressed in words. It is
misleading to label as an implied contract one that is implied in law because a contract implied
in law lacks the requisites of a true contract. The term quasi-contract is a more accurate
2 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

designation of contracts implied in law. Implied contracts are as binding as express contracts.
An implied contract depends on substance for its existence; therefore, for an implied contract
to arise, there must be some act or conduct of a party, in order for them to be bound.
A contract implied in fact is not expressed by the parties but, rather, suggested from facts and
circumstances that indicate a mutual intention to contract. Circumstances exist that,
according to the ordinary course of dealing and common understanding, demonstrate such
an intent that is sufficient to support a finding of an implied contract. Contracts implied in fact
do not arise contrary to either the law or the express declaration of the parties. Contracts
implied in law (quasi-contracts) are distinguishable in that they are not predicated on the
assent of the parties, but, rather, exist regardless of assent.
The implication of a mutual agreement must be a reasonable deduction from all of the
circumstances and relations that contemplate parties when they enter into the contract or
which are necessary to effectuate their intention. No implied promise will exist where the
relations between the parties prevent the inference of a contract.
A contract will not be implied where it would result in inequity or harm. Where doubt and
divergence exist in the minds of the parties, the court may not infer a contractual relationship. If, after an agreement expires, the parties continue to perform according to its terms, an
implication arises that they have mutually assented to a new contract that contains the same
provisions as the old agreement.
A contract implied in fact, which is inferred from the circumstances, is a true contract, whereas
a contract implied in law is actually an obligation imposed by law and treated as a contract
only for the purposes of a remedy. With respect to contracts implied in fact, the contract
defines the duty; in the case of quasi-contracts, the duty defines and imposes the agreement
upon the parties.
Executed and Executory Contracts: An executed contract is one in which nothing remains
to be done by either party. The phrase is, to a certain extent, a misnomer because the
completion of performances by the parties signifies that a contract no longer exists. An
executory contract is one in which some future act or obligation remains to be performed
according to its terms.
Bilateral and Unilateral Contracts: The exchange of mutual, reciprocal promises between
entities that entails the performance of an act, or forbearance from the performance of an act,
with respect to each party, is a Bilateral Contract. A bilateral contract is sometimes called a
two-sided contract because of the two promises that constitute it. The promise that one party
3 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

makes constitutes sufficient consideration (see discussion below) for the promise made by
the other.
A unilateral contract involves a promise that is made by only one party. The offeror (i.e., a
person who makes a proposal) promises to do a certain thing if the offeree performs a
requested act that he or she knows is the basis of a legally enforceable contract. The
performance constitutes an acceptance of the offer, and the contract then becomes executed.
Acceptance of the offer may be revoked, however, until the performance has been completed.
This is a one-sided type of contract because only the offeror, who makes the promise, will be
legally bound. The offeree may act as requested, or may refrain from acting, but may not be
sued for failing to perform, or even for abandoning performance once it has begun, because
he or she did not make any promises.
Unconscionable Contracts: An Unconscionable contract is one that is unjust or unduly onesided in favour of the party who has the superior bargaining power. The adjective
unconscionable implies an affront to fairness and decency. An unconscionable contract is
one that no mentally competent person would accept and that no fair and honest person
would enter into. Courts find that unconscionable contracts usually result from the exploitation
of consumers who are poorly educated, impoverished, and unable to shop around for the best
price available in the competitive marketplace.
The majority of unconscionable contracts occur in consumer transactions. Contractual
provisions that indicate gross one-sidedness in favor of the seller include limiting damages or
the rights of the purchaser to seek court relief against the seller, or disclaiming a Warranty
(i.e., a statement of fact concerning the nature or caliber of goods sold the seller, given in
order to induce the sale, and relied upon by the purchaser).
Unconscionability is ascertained by examining the circumstances of the parties when the
contract was made. This doctrine is applied only where it would be an affront to the integrity
of the judicial system to enforce such a contract.
Adhesion Contracts: Adhesion contracts are those that are drafted by the party who has the
greater bargaining advantage, providing the weaker party with only the opportunity to adhere
to (i.e., to accept) the contract or to reject it. (These types of contract are often described by
the saying "Take it or leave it.") They are frequently employed because most businesses
could not transact business if it were necessary to negotiate all of the terms of every contract.
Not all adhesion contracts are unconscionable, as the terms of such contracts do not
necessarily exploit the party who assents to the contract. Courts, however, often refuse to
4 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

enforce contracts of adhesion on the grounds that a true meeting of the minds never existed,
or that there was no acceptance of the offer because the purchaser actually had no choice in
the bargain.
Aleatory Contracts: An aleatory contract is a mutual agreement the effects of which are
triggered by the occurrence of an uncertain event. In this type of contract, one or both parties
assume risk. A fire insurance policy is a form of aleatory contract, as an insured will not
receive the proceeds of the policy unless a fire occurs, an event that is uncertain to occur.
Void and Voidable Contracts: Contracts can be either void or Voidable. A void contract
imposes no legal rights or obligations upon the parties and is not enforceable by a court. It is,
in effect, no contract at all.
A voidable contract is a legally enforceable agreement, but it may be treated as never having
been binding on a party who was suffering from some legal disability or who was a victim of
fraud at the time of its execution. The contract is not void unless or until the party chooses to
treat it as such by opposing its enforcement. A voidable contract may be ratified either
expressly or impliedly by the party who has the right to avoid it. An express ratification occurs
when that party who has become legally competent to act declares that he or she accepts the
terms and obligations of the contract. An implied ratification occurs when the party, by his or
her conduct, manifests an intent to ratify a contract, such as by performing according to its
terms. Ratification of a contract entails the same elements as formation of a new contract.
There must be intent and complete knowledge of all material facts and circumstances. Oral
Acknowledgment of a contract and a promise to perform constitute sufficient ratification. The
party who was legally competent at the time that a voidable contract was signed may not,
however, assert its voidable nature to escape the enforcement of its terms.

Introduction to Contract Iaw

Contracts are the basis of trade & commerce, and so, the corporate worId. When you buy a
candy at the grocery store, or when companies merge, as weII as the Iease of a house and
the hiring of new workers, each and every one of these events is based on contracts. The Iaw
of contracts make sure that the deaIs one induIges into with other peopIe and corporations
are honoured sincereIy. The Iaw aIso is the basis for a Iot of other subjects in Iaw. For
exampIe, corporate Iaws & the insurance Iaw are entireIy based upon the fundamentaI
principIes of agreements which are enforceabIe under Iaw.

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The Indian Contract Act, 1872 (aIso known as the Contract Act) is the governing
contracts in India. The function is defining & amending a few parts of the Iaw pertaining to
contracts. Therefore, the Contract Act cant be considered as an exhaustive and compIete
code of the Indian contract Iaw. But, it can be considered as the beginning point for enIisting
the cruciaI issues and cases that are present. Even though the Contract Act reIates to a
specific issue, it generaIIy is pretty exhaustive on the overaII subject being considered. In
cases where it is unabIe to do so & none other authorities in the statutory Iaw of India are
present, the courts may take into consideration the judgments of the Supreme Court of India,
the sundry High Courts in India, the EngIish Courts, as weII as the eminent jurists on that
particuIar subject. Thus, the Contract Iaw is primariIy about promise enforcement among
peopIe. These promises arent enforced by courts. For the enforcement of such a set of
promises, the courts wiII have to check for the avaiIabiIity of few essentiaI eIements. Now, if
aII of those eIements are prevaIent, the court wouId hoId the agreement as a contract. This
wouId then Iead us to the ques. of what an agreement is. To put it in rather simpIe words, the
formation of an agreement takes pIace when a person offers a proposaI to another & that
other person makes the move to accept the offered proposaI. Such a proposaI generaIIy
contains a promise (or in some cases a set of more than one promise) by the former party
(known as the promisor) to the Iatter party (known as the promisee). In such a situation,
the transmission of the proposaI by one such promisor to another person, the promisee
amounts to an offer by the promisor, and then the acceptance of such an offer by the other
party, i.e. the promisee is referred to as an acceptance. The Indian Iaw imposes some basic
requirements reIating to the communication of an offer as weII an acceptance. Once the
acceptance has been communicated correctIy, another requirement of a vaIid contract is that
certain other criteria be fuIfiIIed. If these criteria are not fuIfiIIed, the reIation between two
parties ceases to be a vaIid contract. When there is the absence of a vaIid contract, neither
of the 2 parties wouId be bound by any agreement as weII as any promises that they might
have made to one other. So, it is of paramount importance to determine if a contract which is
vaIid has been taken pIace between the two parties.

EIements of a vaIid Contract

1. Offer and Acceptance: For the creation of a contract that couId be termed as vaIid, there
has to be a 'IawfuI offer' by a party as weII as a 'IawfuI acceptance' of the IawfuI offer by
another party invoIved.
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2. Intention to Create a IegaI ReIationship: This is a sine-quanon for a vaIid contract. In

the event of is no such intention being there on the part of either of the parties, there is no
vaIid contract between the parties. As a resuIt of this eIement, any sociaI agreement or
domestic agreement does not contempIate any IegaI reIations.
3. IawfuI Consideration: In Iaw, there are many ways to define consideration. In the words
of BIackstone, Consideration can be termed as the recompense given by a party which is
contracting to another party". On the other hand, in the words of PoIIock, "Consideration can
be thought of as the price at which the promise of another person/party is brought."
Consideration is generaIIy known as a quid pro-quo, i.e. an exchange that is more or Iess
equaI.
4. Capacity of parties: The parties entering into an agreement must have the competency
to honour the contract. Even if one of the parties is not in the condition of honouring the
contract, such a contract is an invaIid contract.
According to the Iaw, the foIIowing persons are generaIIy incompetent to enter into a contract.
(a) Minors/ underage peopIe,
(b) Persons who can be termed as having unsound mind, and
(c) Persons who are disquaIified by the Iaw.
5. Free Consent: In the context of Iaw 'consent' refers to the fact that the parties entering into
the contract must have decided upon the exact same thing and that too in the same sense.
Section 14 states that a consent is termed as a free consent in case it is not caused by(1) Force/ Coercion, or
(2) Unnecessary/ Undue infIuence, or
(3) Cheating/ Fraud, or
(4) Mis-representation, or
(5) FauIt/ Mistake.
Thus, an agreement must have been made by free consent of the invoIved parties for it to be
vaIid.

6. IawfuI Object: For an agreement to be vaIid, the object must be vaIid. The object is entireIy
different from consideration. It refers to the purpose or the framework of a contract. Therefore,
when someone Ieases a house to use it as for gambIing, the object of the contract is running
a gambIing house.
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The Object of a contract is taken as unIawfuI if (a) It is debarred/ forbidden by Iaw;

(b) It is of such character that its permission wouId defeat any provision of the Iaw;
(c) It is frauduIent;
(d) It might resuIt in an injury to another person or to the property of another;
(e) It is regarded by court as unethicaI or opposed in some way to pubIic poIicy.

7. Certainty of Meaning: According to Section 29, "Those agreements whose underIying

meanings are not very cIear or are incapabIe of being made cIear are empty/ void."

8. PossibiIity of Performance: If an agreement is not possibIe in itseIf, either physicaIIy or

IegaIIy, then it cannot be enforced at Iaw. For exampIe, if Mr A enters into an agreement with
B to discover treasure through magic, then such an agreements cant be enforceabIe.

9. Not decIared void or iIIegaI: Even though the agreement satisfies aII the conditions
required for a vaIid contract, it shouId not have been decIared empty/ void by any Iaw
presentIy in force. The agreements stated in Sections 24 - 30 of the Act have been expIicitIy
decIared void. For instance, the agreements invoIving restraint of trade, restraint of marriage
or restraint from IegaI proceedings etc.

10. IegaI FormaIities: As per the Iaw, an oraI contract can be termed as perfectIy vaIid,
barring those cases where recognition in writing, registration etc. is necessitated by some
statute. In our country written statement is necessary in cases invoIving saIe, mortgage, and
Iease & gifting of immovabIe property, instruments which are negotiabIe; MOAs and AOAs of
a company and so on. As per the Iaw, registration is necessary in cases of documents which
come under the purview of section 17.
InternationaI Case: BaIfour v/s BaIfour
Facts
Mr. BaIfour (Defendant) and Mrs. BaIfour (PIaintiff) resided in CeyIon and once visited
EngIand on a hoIiday. The pIaintiff stayed in EngIand because of medicaI treatment and so
the defendant accorded to send her a certain amount of money at the end of each month tiII
the time she returned. Iater on, the defendant asked to remain parted & as a resuIt Mrs.

8 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

BaIfour sued Mr. BaIfour for restitution of her conjugaI rights & in return asked for aIimony
equaI to what her husband had earIier agreed to send.
Mrs. BaIfour secured a decree nisi & 5 months Iater was granted the aIimony. So, the Iower
court gave its judgment in favor of Mrs. BaIfour, the pIaintiff and heId that Mr. BaIfour, the
defendants earIier promise to send her money was stiII enforceabIe. The court rendered
that Mrs. BaIfours consent was sufficient consideration to hoId the contract enforceabIe &
the defendant appeaIed.
ProbIems
1. ShouId the parties intend that the agreement between them is IegaIIy binding for it to be an
enforceabIe contract?
2. Under what conditions wiII a court decIine to enforce the agreement b/w spouses?
HoIding and RuIe
1. Yes. Both the parties entering into the agreement must intend that the agreement is IegaIIy
binding so that it can be cIassified as an enforceabIe contract.
2. The court wiII not enforce those agreements b/w spouses which are reIated to daiIy Iife.
Such agreements and contracts b/w husband & wife over those matters which have an
impact on their daiIy Iives arent subject to contractuaI interpretation, even in cases when a
consideration is assumed to be present. UsuaIIy, spouses intend that the basic tenets of the
agreements that they enter into can be varied with deveIoping situations. The court heId
that it was aIready presumed that the parties had entered into the agreement in their
capacities as husband and wife & none intended that another couId be sued upon. As a
resuIt, the court heId that as a matter of pubIic poIicy it couId not resoIve disputes b/w
spouses.
Note
Contracts reIated to the sociaI aspect of marriage wiII not be enforceabIe by the courts.
However, the contracts b/w spouses reIated to business reIationships can be enforced.
Thus, the courts are wiIIing to support settIements of divorce which have been negotiated
as weII as statements of support(written).
IocaI Case:
DeIhi High Court
Haryana TeIecom Itd. vs Union Of India (Uoi) And Others on 11-05-2006
The Deptt. of TeIecom, Union of India which was the respondent herein fIoated a tender for
getting PIJF underground cabIes of 1.66 ICKM. The tender was opened on 22 ApriI 1994. In
this case, the petitioner had submitted his bid in pursuance to the tender enquiry which was
9 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

accepted by the respondent. Orders were pIaced on the petitioner for suppIy of cabIes on a
cash basis & the petitioner was required to submit a bank guarantee (performance) worth INR
85 Iacs as per CIause 4.1 of the bid documents. AccordingIy, the petitioner furnished the
same dated 27 September 1994, issued by State Bank of PatiaIa, Rajapura for the above
amount.
The respondent made the decision to get an additionaI quantity of the said cabIe of 85 ICKM,
as part of the same tender enquiry, but on deferred payment terms & the petitioner who was
1 of the approved bidders, accordingIy was informed about the proposaI of additionaI
aIIocation of 3.79 ICKMs. In this regard of the additionaI suppIy of 4.7 ICKM, the petitioner
was reqd. under CIause 4.1 of the Agmnt. to submit an additionaI performance bank
guarantee worth INR 15.0 Iacs to make the totaI performance bank guarantee of Rs. 1.0 Cr
& the petitioner duIy compIied with it by furnishing the additionaI bank guarantee of Rs. 15.0
Iacs which was issued by Canara Bank, New DeIhi. As part of the ruIing, the petitioner was
reqd. to have distinct agreements so it entered into 3 such separate agreements giving
different scheduIed dates of deIivery.
The dispute arose b/w the parties on account of faiIure of the petitioner to make suppIies &
as a resuIt, the respondent invoked bank guarantees. In PoIIock & MuIIa's Indian Contract
& Specific ReIief Acts, three different cases have been IucidIy discussed, where time can be
considered as the essence of contract:
1. Where the parties have expressIy stipuIated in the contract that the stipuIated time fixed
for performance shouId exactIy be compIied with;
2. Where the nature of the contract or the circumstances of the subject matter indicate that
the pre determined date must be exactIy compIied with; and
3. Where time was originaIIy not the essence, but one party has been guiIty of undue deIay,
then the other party might give notice which requires the contract to be honoured within
reasonabIe time & what reasonabIe time is depends on the type of transaction & on the
compIete reading of the entire contract.
A reading of the cIauses of contract b/w the parties shows that time has certainIy been made
the essence of the contract. It is onIy CIause 19.1 which further stipuIates that shouId deIivery
be made after the contracted deIivery period w/o any prior concurrence of DOT & be accepted
by the consignee, such deIiveries wiII not deprive DOT of the right to recover Iiquidated
damages.
The resuIt is that Award of the SoIe Arbitrator, Shri A.K. Garg, is IiabIe to be set aside & the
respondent is not heId entitIed to recover the amount worth INR 68,31,107/- as was directed
10 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

by the Arbitrator. Under the ruIing, the amount is IiabIe to be refunded back to the petitioner
aIong with interest @ 9% p.a. simpIe interest from recovery date tiII the date of payment.
Parties were Ieft to bear their own costs.

NationaI case: Supreme Court of India

Smt. Sohbatdei vs DevipIaI on 15 February, 1971
Smt. Sohbatdei was the bhumidar of certain pIots of Iands & the owner of a house. The 1st
defendant & his father were the owners of the pIots & the house described. The pIaintiff had
the intention to dispose of these properties. SimiIarIy the 1st defendant & his father wanted
to dispose of their properties referred. As a resuIt, negotiations were carried on b/w the fatherin-Iaw of the pIaintiff and the 1st defendant & his father in reIation to the properties.
An agreement was entered into b/w the 1st defendant & his father on the one hand as weII
as the father-in Iaw of the pIaintiff on her behaIf on the other, as a resuIt of which the 1st
defendant & his father agreed to seII to the pIaintiff the properties comprised in Iist A in the
pIaint for a sum of INR 10,000/- and the pIaintiff got ready to purchase those properties. In
pursuance of the agreement, the pIaintiff was put in possession of Iands as weII as the house.
The pIaintiff soId in JuIy, 1955, her properties shown in Iist B of the pIaint to 3rd parties & out
of the saIe proceeds, paid an amount of Rs. 3,500/-to the first defendant and his father
towards the saIe consideration of Rs. 10,000/-. As per the agreement the pIaintiff was to pay
the baIance of Rs. 6,500/-by January, 1956 and was to get the saIe deed executed in her
favour in the month of January, 1956 on receipt of the baIance consideration.
The pIaintiff has made further averments that out of the proceeds reaIised by her from the
saIe of her properties shown in Iist B, she has paid to the first defendant and his father a sum
of Rs. 787/-as the price of the impIements of husbandry that were in the house and agreed
to be soId to her. The pIaintiff Iater on came to know that the first defendant had soId the suit
properties to the second defendant for a sum of Rs. 11,000/-with faIse recitaIs. The second
defendant had taken the saIe deed with fuII knowIedge of the agreement in favour of the
pIaintiff.
This Ied to criminaI cases and the second defendant was attempting to interfere with
the pIaintiff's possession of the properties.
The first defendant did not contest the suit. On the other hand, the second defendant cIaimed
that the agreement pIeaded by the pIaintiff was faIse and that her cIaim that she was in
possession of the suit properties was aIso equaIIy untrue. On the other hand the second
defendant pIeaded that on the basis of an agreement entered into by him with the first
11 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

defendant and his father, he had agreed to purchase the suit properties for a sum of Rs.
11,000/-. In pursuance of the agreement he aIso paid earnest money as evidence by the
receipt executed by the first defendant dated June 5, 1955, and he was put in possession of
the suit properties. Even regarding the crops on the Iands he paid to the first defendant a sum
of Rs. 1500/-. After paying the baIance consideration, the first defendant had executed a saIe
deed in his favour on November 21, 1955. The second defendant further pIeaded that he was
a bona-fide purchaser for vaIue of the suit properties without notice of any agreement in
favour of the pIaintiff.
7. Both the suits were tried together and evidence was common. It may be mentioned at this
stage that the second defendant raised a pIea that the agreement pIeaded by the pIaintiff
was hit by Section 29 of the Contract Act and as such was void.
The triaI Court rejected aII the contentions of the second defendant. It was heId that the
oraI contract of saIe pIeaded by the pIaintiff was true and that. she was in possession of the
house and the Iands in pursuance of the contract. The payment of Rs. 3,500/-towards the
saIe consideration was heId to be true. It was further heId that the second defendant was not
a bona-fide purchaser as he had notice of the prior contract between the pIaintiff and the first
defendant. In this view it was heId that the saIe deed executed in his favour on November 21,
1955 is not binding on the pIaintiff. The TriaI Court further heId that Section 29 of the Contract
Act has no appIication and that the cIaim of the pIaintiff is not barred by Section 41 of the
Transfer of Property Act.
To concIude Section 29 of the Contract Act has no appIication to the facts of this case. The
triaI Court and the District Court have concurrentIy found on aII other points in favour of the
pIaintiff, and the High Court has not differed from these findings. The pIaintiff's suit has been
dismissed by the District Court and the High Court onIy on the ground that the agreement
pIeaded by the pIaintiff is void Under Section 29 of the contract Act.

From the perspective of NGOs:

The Basic Documentation required for NGOs to compIy with the Ietter and spirit of Iaw1. First get a PAN. After registration of NGO with State Charity Commissioner or CoIIector
or Society Registrar, first thing is to appIy for PAN of NGO. Yes, it is mandatory.
2. Registration under section 12A of the Income Tax Act CommonIy known as 12A
certificate, this registration is NOT mandatory. Purpose of getting this registration u/s. 12A is
12 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

to get exemption from Income Tax on the Income of the trust, if aII the conditions Iaid down
in this section are fuIfiIIed.
3. Registration under section 80G of the Income Tax Act Again, this is NOT a mandatory
one. However to give benefit of 50% or 100% exemption on donation to our donors, it is perrequisition to get the registration u/s. 80G of Income Tax Act. It is indirectIy benefited to
NGOs to raise funds.
4. Registration under FCRA Act (Foreign Contribution Registration Act) If there are
possibiIities to receive Foreign Funds for projects of NGO, a registration with FCRA
department, Ministry of Home Affairs is compuIsory. Without FCRA registration, NGO
cannot receive any foreign donation or grants.
5. Getting a TAN during the working of NGO at any point of time, if NGO become IiabIe to
deduct tax from source, it has to first appIy for TAN. Iike PAN, TAN appIication can be made
onIine thought
6. Getting a Service Tax Registration OnIy when NGO is providing services Iike consuItancy
work or research activity etc. and if gross revenue from such activity cross the basic
exemption Iimit of service tax, then NGO has to first appIy for Service Tax Registration
number. You can appIy for it onIine.
7. Yes, a ProfessionaI Tax Number is required ProfessionaI Tax is a IiabiIity of NGO to
deduct from the saIary of empIoyee and deposited to Government. ProfessionaI Tax is
State Government Iook out and thus different states of India having different ruIes for
ProfessionaI Tax.
8. Retirement Benefit if appIicabIe (necessary registrations) Retirement benefits Iike
Provident Fund, Gratuity, and ESIC etc. Is appIicabIe to NGO when it grows up and having
empIoyees more than prescribed Iimit in these acts. Summary Many of the registrations
mentioned supra are need-based and shouId be done as and when they become appIicabIe
to your organisation.
Now, coming to the contracts encountered in organisations. The first contract we wiII
discuss in brief is the contract with the empIoyees:
Contracts of empIoyment
Key points

A contract of empIoyment is an agreement between an empIoyer and empIoyee and is the

basis of the empIoyment reIationship.

13 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

Most empIoyment contracts do not need to be in writing to be IegaIIy vaIid, but it is better if
they are.

A contract 'starts' as soon as an offer of empIoyment is accepted. Starting work proves that
you accept the terms and conditions offered by the empIoyer.

Most empIoyees are IegaIIy entitIed to a Written Statement of the main terms and
conditions of empIoyment within two caIendar months of starting work.

An existing contract of empIoyment can be varied onIy with the agreement of both parties.
This was just to give a brief idea about the empIoyment contracts. The main contracts
management probIem arises in construction companies especiaIIy in procurement
processes. Hence, we shouId discuss the same in detaiI.

A) What is the process of procurement and tendering?

Procurement is the process of buying goods, works or services. For instance, in terms of
PPP, procurement comprises the process of buying the basic infrastructure and services.
This may, for exampIe, invoIve the acquisition of operation and management services for a
basic service such as water suppIy. Procurement is often carried out by the process of
tendering, rather than buying products directIy from a seIIer.
A company or organisation (the promoter, cIient or empIoyer) wishing to obtain goods or
services wiII first specify its requirements. SubsequentIy, it wiII open the bidding in a
process known as tendering. Interested companies can then submit their proposaIs to the
cIient (often a IocaI government) to meet these requirements. The government offering the
tender wiII then evaIuate the bids to decide which offer best suits its requirements. The
company that has been successfuI in the tender process wiII perform the work by contract.
The underIying objectives of procurement and tendering are concerned with ensuring
competition, which is viewed as a key factor in achieving the twin objectives of:

accountabiIity in the spending of pubIic money; and

transparency in the steps of the decision-making processes..

Parties to procurement
In relation to the actual contract, there is a need to focus on who is involved in a contract
and what each of these actors various obligations are. The most commonly used
engineering contracts recognise a triangle of actors: promoter; engineer; and contractor.

The promoter/client, otherwise known as the employer, specifies, authorises and pays for
the work to be undertaken.

14 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

The engineer acts as an agent on behalf of the employer. The duties of the Engineer
include:
evaluation of tenders;
supervision of the work of the contractor;
confirmation of whether or not the work as has been completed to specification; and
mediation between the employer and the
contractor in case of dispute.

The contractor (the bidder) successfully bids for a contract and carries out the work
required.
Procurement objectives
A typical case involves an urban government letting a contract to a private sector company
for the construction of infrastructure improvements. The municipality is the promoter; it has
planned and designed the work, and is paying for it to be implemented. The urban
government promoter appoints an engineer, who is usually in the full-time employment of
the relevant government department. In accordance with the procedures laid down, a
private sector contractor is then appointed to do the actual construction work.
The engineer has the important role of ensuring that the interests of the promoter are met,
and that the contractor is duly paid for his/her efforts. The promoter wants the best value for
money and the contractor wants to secure a good profit; whilst this dichotomy can involve
an enormous range of complex and contentious issues, satisfying the various interests often
comes down to ensuring that a triangle of objectives are met:

Cost: has the work been completed within the costs agreed in the contract?

Quality: has the work been carried out in accordance with what was specified?

Time: has the work been completed satisfactorily within the time specified?
The traditionally accepted objectives of procurement procedures and contract documents
are to ensure that works are executed at the minimum cost that is consistent with the need
to achieve a product of acceptable quality within an acceptable timeframe. Procurement
procedures and contract documents do this by reducing uncertainty, which in turn is done
by:

clearly defining who is liable to take any risk that cannot be eliminated from the project; and

Providing information on the work to be carried out so that all concerned are clear about
what has to be done and what their role is in doing it.
The role of the engineers in urban government is to ensure that objectives relating to cost,
quality and time are achieved. The objective which is most difficult to assess, and causes
most concern, is the quality of the finished work. The reality is that neither the engineers as
15 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

supervisors nor the government as promoters are primary stakeholders with a strong
motivation for ensuring that adequate work practices and standards are maintained.
B) What are the procedures for procurement?
An open and competitive procurement procedure begins with the promoters description of
its requirements and an invitation to suppliers to indicate their interest in the contract and
their professional capacity to fulfil it. The promoter then identifies potential suppliers and
invites them to submit bids. After the bidding phase, most procurement systems require a
public declaration of the competitors names and their bid prices and, ultimately, of the
successful bidder.
There is a wide variety of procurement procedures available for use in tendering when it
comes to PPP arrangements. Many of these procedures have become prescriptive in
nature. Many local governments follow standard procurement procedures drawn up by the
International Federation of Consulting Engineers (FIDIC).
However, most commonly PPP contracts are awarded as the result of some form of
competitive bidding procedure. Designing a competitive bidding process and getting the
best possible result is easiest when the product or service required is a fairly standard one
and the technical outputs can be defined with reasonable certainty in the bidding
documents. Particular attention, therefore, should be paid to providing good quality
information to potential bidders and to the detailed design of the bidding process.
A competitive bidding process generally consists of:

1. public notification of the governments intention to seek a private partner for the provision
of, for example, water and sanitation services, including prequalification or a request for
expressions of interest from private companies;

2. distribution of bidding documents and draft contracts to potential bidders;

3. a formal process for screening potential bidders and finalising a list of qualified bidders;
and

4. a formal public process for presenting proposals, evaluating them, and selecting a
winner.
Different procedures for procurement include invitation to tender; and request for proposals
(one- and two-stage processes).
Invitation to tender
Generally, an invitation to tender is issued when the promoter knows exactly what it wants
and how it wants to achieve its goals. Most often, the tender is issued and the lowest bidder
is awarded the contract.
16 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

Although this approach reduces the cost involved in developing a PPP, it may limit the
promoters opportunities to view other, more efficient and/or more cost-effective options for
delivery of the service.

Request for proposals

A request for proposals (RFP) is usually used when the promoter knows what it wants to
achieve, but would like prospective partners to use their experience, technical capabilities
and creativity to identify how the project objectives can best be met.
One of the main differences between an RFP and an invitation to tender is that in an RFP
the promoter is looking for value (that is, operating efficiency, cost-saving measures,
innovations and so on), rather than the lowest bid.
The request for proposals can be issued through either:

a one-stage; or

a two-stage process.
The decision between having a single or a two-stage procedure for requesting proposals will
depend on the nature of the contract, on how precisely the technical requirements can be
defined and whether output results (or performance indicators) are used for selection of the
contractor or concessionaire. If it is deemed both feasible and desirable for the contracting
authority to formulate performance indicators or project specifications to the degree of
precision or finality necessary, the selection may be structured as a single-stage process. In
that case, after having concluded the pre-selection of bidders, the contracting authority
would proceed directly to issuing a final request for proposals.
One-stage process
A one-stage RFP may be appropriate for a local government in the following circumstances:

parties are known to the local government to have the capability to be successful partners;

only a limited number of suppliers have the resources and capabilities to be a successful
partner;

the project must be implemented under a tight timeframe; and/or

the local government is not able to spend a large amount of funds on the process.

Two-stage process
The promoter should use the two-step process in the following situations:

17 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

the project is large and complex or of a special nature;

the required proposal will be time-consuming and expensive for the proponent to prepare;

qualified firms would not take the time and expense of preparing a response to an RFP if
there were too many other firms submitting;

there is an advantage to initially inviting a large number of firms and then narrowing the field
to those most qualified; and/or

the RFP process will involve the divulgence of information that is sensitive or even
confidential (with a limited number of firms receiving the RFP, the number of people with
access to this information can be limited and monitored).
The two-stage RFP process involves an initial stage that screens potential partners.
Generally, this first stage involves the issuance of a Request for Expressions of Interest
(RFEI) or a Request for Qualifications (RFQ). This screening allows the project team and
the evaluation committee a chance to consider a wide range of proponents initially and then
to narrow the field to those most qualified.

Request for Expressions of Interest (RFEI)

The RFEI is intended to provide the promoter with sufficient information to draft a clear RFP
in cases when the local government has identified its objectives, but may not have fully
defined the project or service to be delivered. The use of an RFEI can assist in two ways:

it reduces the time and expense involved in evaluating a larger number of proposals; and

it improves the quality of proposals.

In this sense, the RFEI is used to gain information to help in drafting the RFP.
Request for Qualifications (RFQ) or Pre-qualification
A RFQ is used in situations where the promoter and the project team have a more defined
project, but do not know if there are any private sector partners with the resources,
experience or interest to undertake the project. It is a step within a contract awarding
procedure in which the party inviting the tenders selects the companies to participate in
competitive bidding for the contract. To this end, potential participants in the competition are
requested to submit information on their companies.
The RFQ document is more specific than the RFEI document. In traditional government
procurement it consists of the verification of certain formal requirements, such as adequate
proof of technical capability or prior experience in the type of PPP, so that all bidders who
meet the pre-selection criteria are admitted automatically to the tendering phase. Bidders
18 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

should be required to demonstrate that they possess the professional and technical
qualifications, financial and human resources, equipment and other physical facilities,
managerial capacity, reliability and experience necessary to carry out the project.
Qualification requirements should cover all phases of an infrastructure project, including
financing, management, engineering, construction, operation and maintenance, where
appropriate.
Based on the pre-qualification results, a shortlist is drawn up of the companies eligible to
compete. The bidders answer the RFQ with Expressions of Interest.
The RFQ process is used as a "shortlisting" method to pre-qualify selected potential
partners who will then receive the RFP. It is not designed to gain answers as to how the
project will be completed.
Depending on the pre-qualification requirements set out in the documents, different groups
of companies will be selected. One recent trend is that pre-qualification requirements laid
down by promoters such as local governments have started to include not only the price
and quality of the service they wish to procure, but also requests to address poverty,
upgrade welfare and/or create employment opportunities. Often the bidding companies
need to prove their recent experience with a previous assignment similar in nature and
outcomes.
Thus, the purpose of this stage is to enable the contracting authority to formulate its
requirements in a manner that enables a final competition to be carried out on the basis of a
single set of parameters. Put simply, this is an opportunity to ensure that in the final
evaluation, the contracting authority is able to compare "apples to apples" rather than
"apples to oranges."
Often local small businesses or community-based organisations are best suited to resolve a
particular service delivery problem. In such cases, it is important not to leave them out of the
bidding process. One of the means through which this can be achieved is to simplify the
tender documents. Obviously, pre-qualification, drafted without taking these potential
bidders into account, could serve as an obstacle to the effective and innovative solutions to
the existing problems. Meanwhile, the pre-qualifications can still be an effective mean predefine the bidders for the RFP, when the criteria are correctly specified and weighted
according to their value to the PPP project.

Simplification of tender documentation

19 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

The system of tender submission should not require too many forms of supporting
information, which could be unnecessarily complicated for small businesses to complete
satisfactorily. Besides, the administrative burden for smaller businesses in dealing with
tender form requirements for government bodies is disproportionately greater and more
expensive than for larger companies.
Thus, the tender submission of documentation should be rationalised and simplified as far
as possible to make it easier for small contractors to deal with the paperwork involved.
However, this simplification of the documentation should not influence negatively the
essence of the contract and the contractual obligations.
Levels of competitive bidding
Competitive bidding can take place between local/national entities, or between interested
international companies.
National competitive bidding (NCB) is utilised when:

domestic production or construction facilities are available at reasonable cost, are efficient
and adequate in terms of prompt delivery;

the government has specifically requested the adoption of local competitive bidding;

the local competitive bidding does not preclude participation by foreign bidders; and/or

the advantages of international competitive bidding are clearly outweighed by the

administrative or financial burden involved.
NCB may also be the most efficient and economical way of procuring goods, services or
works which, by their nature or scope, are unlikely to attract foreign competition. In this
case, the promoter does not expect foreign bidders to be interested because:

the contract values are small;

works are scattered geographically or spread over time;

works are labour-intensive; and/or

the goods or works are available locally at prices below those of the international market.
Publication of a general procurement notice in international journals is not necessary for
NCB, and advertising may be limited to the local press or official gazettes.

C) What is procurement documentation?

The procurement documentation will depend on the type of contract that has been selected.
In most cases, the following documentation will be required:

1. Invitation to tender letter

20 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

2. Instructions to bidders

3. Bid data sheet

4. Standard forms for technical and financial proposals

5. Terms of reference

6. Draft contract

7. Form of tender

8. Specification

9. Drawings

10. Bills of quantities and schedule of rates

1. Invitation to tender letter
A brief letter inviting pre-qualified firms or consortia to submit technical and financial bids for
the PPP arrangement.
2. Instructions to bidders
This document provides bidders with the general guidelines and formal rules governing the
tender process. The rules of tender add clarity and transparency in order to clarify bidders
questions prior to the beginning of the formal tender process. It is usually preferable to
submit the financial and technical proposals in separate sealed envelopes; evaluation
should be a two-stage process, with only the bidders that are qualified technically
proceeding to the financial evaluation. This process should be outlined clearly in the
instructions to bidders.
3. Bid data sheet
The bid data sheet provides clarifications on the general information contained in the
instructions to bidders, including: scheduling, submission deadlines, evaluation procedures,
logistic support, regulations and so on. Bidders may be required to include in their technical
proposal elements such as:

an understanding of local conditions;

an understanding of the requirements of the contract;

information on the equipment and technologies to be used;

a schedule of activities to reach any performance targets;

information on the experience and skills of key management and technical staff to be
assigned; and

staffing and staff development plans.

21 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

There are several alternative selection criteria that may be used to evaluate financial
proposals:

lowest tariff or volumetric fee;

value of investments to be made by the bidder, given a pre-set tariff;

fixed fee;

incentive compensation for the achievement of pre-defined targets; or

a combination of the above.

4. Standard forms for technical and financial proposals
In order to ensure that bids are both responsive to the terms of reference (TOR) and easy to
compare and evaluate, the tender documents commonly include a set of standard forms
that all bidders must use in submitting their proposals. These typically include:

bid forms and price schedules;

a bid security form;

a form of contract agreement;

performance security forms; and

a bank guarantee form for advanced payment.

5. Terms of reference (TOR)
The terms of reference may include general background information on the service area
and sector, as well as the specific scope of work of the private operator. This document
protects the government at a later stage during the transaction closing process by supplying
much of the information required by the bidder. It thus prevents bidders from claiming that
they did not have knowledge of certain circumstances during the bid or negotiation phases.
Much of the work in the closing of a transaction can be done more efficiently if the
information provided in the terms of reference has been properly researched, assessed and
written. Bidders also appreciate a full TOR, as it enables them to assess quickly the
potential merits of a project from their home offices.
6. Draft contract
A draft contract may be included in the tender documents; if so, it will greatly reduce the
time required carrying out negotiations with the preferred bidder. A draft contract is an
extremely detailed legal document, which covers the following:

it ensures that all of the many legal protections are met, including representations,
warranties, indemnifications, terms and all applicable laws and regulations;
22 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

it ensures that all proposals address all aspects of the project that are important to the
government, such as financial structures, social guarantees, investment guarantees and so
on;

it ensures all investors submit proposals in the same format to make them clearly
comparable for evaluation purposes; and

it makes the tender process, the proposal evaluation process and especially the negotiation
process most efficient.
The draft contract is extremely important if negotiations are to begin with baseline conditions
that are acceptable to the government. If contractors are allowed to propose their own
agreements and conditions first, it is much more difficult to later negotiate and change an
agreement.
In addition to the above, tender documents for PPP arrangements commonly include as
annexes:
7. Specification
The specification defines the standard of workmanship and materials required by the
government for completion of the project. It may include a description of the works, site
conditions, access to the site, site establishment, supply of materials and so on. The
contractor is obliged to meet these specifications. The statement of specification must be
precise and unambiguous in interpretation. A specification may set out how all the work may
be done, or just certain aspects, leaving the rest to the contractors experience.
8. Drawings
A list of drawings showing the title, number of the drawing and revision number should be
provided with the invitation to tender letter or with the specifications. Maps should show the
proposed location for works, possible pipeline routes, crossings and so on.
9. Bills of quantities and schedule of rates
A bill of quantities specifies the quantity of materials and the labour input that the work will
incur. It may be in just one document or divided into several documents to suit sections of
work. It is normal procedure to include sections on Method of Measurement or Notes on
Pricing.
These sections will enable the bidder to define what exactly is to be included in the
individual rates and prices. Standard documents have been published providing guidelines
on measurement methods, but these may not be adequate for every possible situation or
work item. Thus, there is always a need for some modifications to standard methods.
Standard methods that have been used, the edition and any amendments that have been
23 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

made must always be specified. These instructions should be included in the Notes on
Pricing. It is preferable to supply a bill of quantities rather than a schedule of rates. It is
more difficult for the government to evaluate whether the bidders pricing is fair and
reasonable if quantities have not been specified. Inclusion of a schedule of rates with a
tender for a lump-sum contract is justified where the rates are purely for evaluating any
variations in the work that may arise.
D) What are the rules of fair procurement?
Procurement and tendering should be conducted in a fair, open and transparent manner.
The most important and broadly accepted principle underlying a modern procurement
system is open competition unrestricted, universal access to the procurement market. In
addition, the procurement process the selection of bidders, tendering procedures and the
award of contracts should be open to public examination and review, thus making it a
transparent process.
A transparent procurement system ensures that all qualified suppliers have equal access to
all elements of the system, including:

methods of procurement;

legislation;

evaluation criteria and technical specifications;

rights and responsibilities of government as a buyer; and

due process.
To promote transparency, the procurement process should be made open to public
scrutiny. The transparency of the process is further reinforced when contract awards, and
the overall procurement process itself, is subject to the scrutiny of national parliaments,
external audit bodies and the media.
Procurement should be based on rules guaranteeing fair and non-discriminatory
conditions of competition. An essential element is procedures by which aggrieved bidders
can challenge procurement decisions and obtain redress if decisions are made that are
inconsistent with the established rules.
One of the mechanisms used to promote fair procurement is establishing selection panels to
evaluate the proposals. The evaluation stage is most often closed to the public. Thus, this
stage requires the most effort to ensure that the process is fair, open and transparent. For
this reason, many governments have established a selection panel to evaluate the
proposals that is separate and independent from the project team and the government.
24 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

There are a number of different ways that a selection panel may be appointed. In all cases,
there should be a close examination of all members of the independent evaluation panel to
ensure that no conflict of interest will arise. It is unacceptable to include in the panel:
professionals who have assisted the government in the preparation of RFQ, RFEI or RFP
documents; individuals who will be making the final decision; or individuals who will be
managing or administrating the projects.
Once the municipality has chosen a private sector bid, and the contract has been signed,
the promoter should publish the names of all the organisations that submitted bids along the
name of the winning organisation.
Firms that were not successful in their bid may request a debriefing to learn why they did
not win. At this debriefing, each firm may learn the positive and negative points of its
proposal and may learn the main reason as to why it did not win.
Confidential information such as companies' overhead costs and the like should not be
divulged to competitors or the public.
Finally, the main terms of the contract must be published (length, plans for expansions and
so on).
Likewise, if the municipality has decided not to engage the private sector but rather to
restructure the public provider, the main details of the restructuring plan must be published
such as plans for expansions, benchmarks and deadlines for quality and coverage
improvements, changes in tariffs and so forth.
The procurement systems should be protected against abuse, fraud and corruption. Many
mechanisms can help anticipate and resolve these problems, though there are no easy
solutions
Role of Legal Education and Awareness
Our society depends upon free exchange in the marketplace at every stage. The interactions
in the market all the times depend upon voluntary agreements between individuals or other
legal persons. Such voluntary agreements can never become binding without a legal
contract.
The origin of the contract law can be traced from the development of common law and it is
also alleged to be an offspring of tort law, as both contracts and torts give rise to obligations.
The difference between them lies in the fact that the tort obligations are imposed by law; on
the other hand contracts are a medium through which people willingly create commitment
between themselves.
25 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

Contract law is based on a number of Latin legal principles, out of which consensus ad idem
is the most important, which means a meeting of the minds between the parties i.e. an
agreement among them. It is said to be a part of private law because it does not bind the
state or persons that are not parties to the contract. Thus, contracts are voluntary and require
an exercise of the will of the parties. But not all agreements are contracts e.g. Non-business
agreements, religious agreement, or charitable agreements etc.
A company is built around law and in order to generate profits and smooth functioning of
business, compliance toward law has to be at utmost priority. By training managers to be
more aware of their legal responsibilities to the company, it can reduce its exposure to costly
and time-consuming litigation. Contractual violations has one of the biggest share in the
litigation expenditure of a company and hence the managers need to be aware of contractual
laws to take well informed decisions.
Legal awareness toward contract law would cover the following aspects:

Apply procedures to ensure accurate and efficient tender preparation

Recognise the significance of contract terms and conditions relative to the administration of
the project

Identify common pitfalls and how to avoid them

Set up appropriate monitoring and recording procedures

Use these procedures to identify early warnings of commercial disputes and ensure correct
action is taken

Process commercial issues for speedy resolution

Examine the suitability and efficiency of their current record keeping and monitoring systems
in house
Legal awareness and education allows a business as well as consumers to avoid possible
malpractices. It helps to generate lot of hidden benefits for the firm. A manager well versed in
the field of contract management can manage contracts over their entire lifecycle from their
inception to anticipated termination or renewal. This entails creation, negotiation, storage,
scheduling of important contractual events, and enforcement, throughout all of which
processes various business units of any corporation should collaborate and break down
informational silos. To date this process has often been performed manually and
painstakingly, giving rise to serious risks of error. This has led many companies to migrate to
software solutions that can pull data from and push data to their back-end, legacy enterprise
26 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

resource planning (ERP) systems. Migration is a matter of managerial necessity,

transforming mere contracts into sources of revenue, as well as reducing both costs and
corporate risk.
Roles and Responsibilities of a Contract Manager
Contract Managers role is important, they are as follows:
Value for money through satisfactory contractor performance, including the achievement
of contract milestones;
The connection that exist between Internal and external stakeholders are managed
effectively
The contractual obligations and satisfied by both the parties
Overheads for services and products specified in the contract
The required outputs are achieved
Disputes are eluded by regular monitoring of performance and open communication
Risks are being managed effectively. This is a continuing process where risks is being
identified at different stages in the lifespan of an agreement.
The responsibilities of the Contract Manager can be many and varied depending on
the intricacy of the contract. They are as follows:
A well-defined contract management plan should be established
Swotting of the contract management procedure (including the Contract Management
Plan) are done on a regular basis;
Providing connexion between internal supervisors, operators, and the contractor to identify
and resolve issues as they arise;
Observing the contractors performance against contract responsibilities;
The contractors are provided with advice and information regarding advances, where such
advances are likely to affect the products/services provided
Deciding whether the presented projects should continue, and undertaking a procurement
process for additional stages which meet the principle of obtaining value for money;
Enabling and negotiating contract variations and amendments in line with approved
Delegations (in consultation with the Procurement Unit when required);
Providing accurate and timely reporting to senior management responsible for the project,
highlighting significant performance issues or problems;

27 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

 Certifying insurance policy terms and conditions provide adequate protection and that
policies are maintained throughout the contract period;
Ensuring all products provided and are certified as meeting the specifications before the
supplier is paid;
Maintaining adequate records (paper and/or electronic) in sufficient detail to provide an
audit trail;
Managing contract change procedures;
Resolving disputes as they arise;
Initiating curative action in the event of contract breach; and
Conducting post contract reviews
Contract Manager Skills
The skills regarding Contract Manager include:
Strategic skills (understanding Government policies and directions and organisational
goals)
Project management
Communication and liaison, including the ability to network within the organisation and
with industry peers;
People management;
Negotiation;
Conflict resolution;
Record keeping and file management;
Decision-making (and ability to exercise delegated authority)
Research and analytical skills;
Professionalism; and
Accounting, broadcasting, legal and/or technical knowledge.
Authority to Manage the Contract
The Contract Manager should have authority to manage the contract to ensure the project
runs smoothly and that services are undisturbed. This authority requires judgement to
ensure all parties are treated equally. They will generally have limited or no delegation to
approve variations that involve added cost. Finance related variations should be managed
in accordance with approved Departmental delegations.
Ethics and Fair Dealing
28 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

The Contract Manager must sustain the ethical standards outlined in the Code of Ethics for
the South Australian Public Sector.
Contract Management Risk
Planning for and managing risks are essential tasks of the Contract Manager. The risk
management process should be initiated early in the procurement process so that the final
contractual arrangements reflect the risk management strategies adopted for the project.
Risks related to the procurement should be identified and documented through the
acquirement planning, tendering/assessment and contract development process. Some of
the most common risks allied with managing a contract includes:
The disappointment of either party to fulfil the conditions of the contract;
Insufficient administration of the contract;
Unauthorised changes to the contract;
The failure to meet the planned objectives of the procurement;
The loss of intellectual property;
Changing scope;
Changing technology;
Fraud;
Breaches of confidentiality, intellectual property and security and privacy provisions;
Unethical conduct or conflicts of interest; and
Specific risks which may impact the departments operational and tactical objectives (eg.
Child protection).
These risks should be monitored and minimised where possible throughout the period. New
risks may also be identified and documented during this period. The Contract Manager
should prepare a risk management plan commensurate with the cost and complexity of the
procurement that identifies, analyses, evaluates and proposes treatment of the risks. This
will form a main component of the Contract Management Plan. Appropriate professional
advice should be sought at an early stage where a legal or government issue arises.
Several factors conspire to make it difficult to assess whether a good job has been
done. These are as follows:

Business that do not have clear strategies or guidance on acceptable or unacceptable deal
terms

29 |ROLE OF LAW IN CONTRACT MANAGEMENT AND NEGOTIATION

Senior management who decide, on grounds of appropriateness, to go ahead with a pact

even if it dont fulfil with the policies or guidance (if they exist) or against the
recommendation of the contract manager. For example, because the CEO wants to hit a
sales expedition, or may be because a university wants to keep a powerful professor happy
Organisations where the contract managers are responsible for the contracts, not with
senior management, so contracts do not get usually reviewed at a senior level.
Hefty amount of work for the contract manager that make it impossible to undertake a
thorough review and processing of all contracts
Contracts sections that dont have the ability to hire outside professionals to fill in the gaps
of knowledge and expertise within the department

Most of the problems has only one answer that is planning. They are as follows:
1. Someone in senior management will have responsibility for managing the contracts
managers and setting basic rules. They dont need to be a contracts expert, but they need
to take seriously their responsibilities in this area, and ensure they have the required
knowledge to oversee this area of specialisation. They need to be someone with real
person in the organisation (probably not someone who has been moved sideways to ease
them out of another role) and they should generally support and back up their contract
managers in internal negotiations.
2. The organisation will have written guidelines on preferred and objectionable terms. Those
procedures will be understood by both contracts managers and senior management, and
will usually be followed. There might be cases where they are not abided by, but that
should be the exception rather than the law.
3. If the workload of the contract manager is too heavy to give full attention to all contracts, the
organisation must either (a) promptly recruit the necessary number of managers and/or (b)
institute a triage system, under which contracts are risk-evaluated and allocated to different
types of contract review (or no review at all, if that is considered appropriate). High worth
and high risk contracts should be given whatever requirement they need, including
peripheral legal and regulatory support if required. The risk assessment should always be
studied periodically, and polished if necessary, but the evaluator should be given some
space to make mistakes.
4. The terms of signed contracts should be reviewed periodically to inform (a) whether the
guidelines are being followed, (b) whether the guidelines should be revised, and (c) the
performance of the contract managers against those guidelines
5. Contracts managers should have regular reviews of their performance, as mentioned in
point 1 above. Reward and encouragement should be given to the best practise.
6. When resourcing contracts departments, a sufficient proportion of the resourcing should go
into the above areas, rather than just the front-line firefighting.

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Conclusion :
After going through what contract management in law is and various cases pertaining
to contract management and court decides justice based on those law , we can
conclude that the knowledge of contract management in law is very crucial to carry out
business in any corporate environment and without this , it is highly likely that any
corporate body will face issues and difficulties in handling issues related to contract .
Business, government and organizations need to understand intricacies involved in
contractformulation, interpretation,review,negotiation,performance,enforcement & the
remedies in case of breach. Parties need to know the strengths, weaknesses, risks and
missing terms before signing an agreement.
We also learned that Contact Management is necessary :
To ensure expectations created by promise
To develop confidence that rights existing today will be enforced tomorrow
To protect and enforce contractual rights
To regulate the behavior of other parties
To ensure that freedom of contract is not misused
We also understood why do contracts fail ?
1. Multiplicity of agencies
2. Delays
3. Lack of clarity in decision making
4. Lack of adequate preparation and violation of procedures
5. Oversight in incorporation of relevant clauses
6. Violation of laid down guidelines
Suggested Remedies :
1. Adequate focus at the time of drafting tender document
2. Clarity of purpose
3. Legal safeguards to be incorporated
4. Vendors interests also should be safeguarded
5. Responsibility centers to be identified
6. Preparation of estimates for contracts is an area, which needs special emphasis. A
well-defined scope of work and a realistic market rate estimate can prove to be a
vital input for successful execution of a contract with high standards of quality.

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References:
1. https://www.wikipedia.org/
2. http://indiankanoon.org/feeds/
3. http://www.decd.sa.gov.au/docs/documents/1/ContractManagementGuideli.pdf
4. https://ipdraughts.wordpress.com/2013/10/06/what-is-the-primary-role-of-a-contractmanager/

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