Friday, 16 November 2018

Contract Management, Project Management Managing Project & Legal Perspective

                                      
November 16, 2018

Scope of Contract/Project Management

Framework

  • Legally Sound Contracts
  • Material Management
  • Purchase orders for stores, spares or equipments
  • Rate Contract - Floating Tender
  • Service Contract
  • Annual Maintenance Contract
  • Works Contract
  • Consultancy Contract
  • Amendments to Contract
  • Managing of Contract
  • Post- Contract Management
  • What is “Breach”
  • Remedies for Breach

STATUTORY PROVISIONS GOVERNING PURCHASE TRANSACTION

  • The Indian Contract Act, 1872
  • The Indian Sale of Goods Act, 1930
  • Arbitration and Conciliation Act, 1996
Government Contracts, including those for Defense Procurement, are governed by the same law, which are applicable to private sector.

CONSTITUTIONAL PROVISIONS FOR GOVERNMENT CONTRACTS

All contracts shall be made by an authority empowered to do so by or under the orders of the President in terms of Article 299 (1) of the Constitution of India.All the contracts and assurances of property made in the exercise of the executive power of the Union shall be executed on behalf of the President. The words “for and on behalf of the President of India” should follow the designation appended below the signature of the officer authorized in this behalf.

MATERIAL MANAGEMENT

What is 'Material Management'?
It is an integrated approach to manage Supply Chain Management of the entire needs, procurement, flow and optimizing cost of materials needed for the organization. Purchasing Companies should know legal aspects affecting the Purchase of materials to avoid legal risk, otherwise the entire material management will be derailed.

PURCHASE ORDER IS AN AGREEMENT

What is Agreement?
“Agreement” means voluntarily creating relationship between the Parties which creates Rights and Obligations.
“A” agrees to sell his House to “B” for Rs. 20 Lakhs.

FIRST LEGAL SCRUTINY BEGINS WITH P.O.

P.O. is final conclusion of purchase contract unless you have a separate formal contract.

LEGAL ANALYSIS

  • Inviting Quotation
  •  Negotiation on Price & Quality
  • Amendment to Quotation
  • Receive Proforma Invoice
  • Placing Purchase Order
  • Accept Delivery & Invoice.
  •  Payment as per Invoice.
  •  Dispute

IMPORTANCE OF VALID CONTRACT AND WHY ?

For valid contract, certain fundamental conditions to be satisfied.

FUNDAMENTALS OF LEGALLY ENFORCEABLE CONTRACT

  • Offer and Acceptance.
  •  Legal Capacity of Parties.
  • Free Consent.

LEGAL IMPLICATIONS

  • Proposal is foundation of Contract.
  • Distinction between Offer & Invitation to Offer
  • Purchaser to ensure Proposal from Supplier
  • Supplier is entitled to change quotation before P.O.
  • Purchase by Floating Tender.
  • P.O. to conform strictly to Quotation.
  • Any variation is a New Proposal.

WHO IS AUTHORIZED TO SIGN FOR SUPPLIER COMPANY?

  • By Power of Attorney, by Agent, by Employees.
  • Implied authorization warranted by the position held.
  • Goods within ordinary course of Business.
  • Under Common Seal.

PSU’s FORMAT OF PURCHASE TRANSACTIONS

  • Expression of Interest/Floating enquiry.
  • RFP (Request For Proposal) / Tender.
  • Proposal/Bid/Quotation.
  • L-1 Bid.
  • Contract.
  • Purchase Order.

GOVERNMENT/DEFENCE TENDER

  • Doctrine of Public Interest and Principle of Equality.
  • Object is: Arms-length Transaction.
  •  Public Sector Tender V/s Private Sector Tender
  •  Meaning of Bribe.
  • Perjury.
  • Article 14 – Equality before the Law.
  • Non-discrimination.
  •  Transparency.
  • Fairness.
  •  Limited Tender v/s Public Tender
  • Invite Expression of Interest
  • Float Limited Tender
  • Two formats of Bid:
          - Techno Commercial Bid- Scope of  Supply

          - Price Bid.
  • Negotiate only on Technical Bid before opening price bid.
  • Supplementary Price Bid only to meet increase/decrease in scope of supply.
  • Don’t allow decrease in the price.
  • Bidders to be present at opening of tender even limited tender.
  •   Don’t allow decrease in the price.
  •  Bidders to be present at opening of tender even limited tender.
  •   Bidders to be present at opening of tender even limited tender.
  • Don’t alter the procedure/scope without intimation to all.
  • Risk purchase:                                                                                                              Reservation of right to procure the ordered  material at the risk of the supplier.
  •  Guarantee & Warranty, Decide Period.
  •   Validity of Bid beyond opening of Tender
  • Arbitration under Arbitration Act.
  • In case of PSU supplier Arbitration by Department of Public Enterprise.

BOUNCING OF CHEQUE

  • Section 138 of the Negotiable Instruments Act, 1881.
  • Buyer has to pay the invoices, either by Demand Draft or Cheque.
  • If the Cheque bounces back, what is the remedy?
  • Buyer can be prosecuted under Section 138 of the Negotiable Instruments Act by the Supplier.

Conditions to be satisfied for prosecution:

  •  Cheque is returned unpaid by the Bank.
  • Cheque was returned because of the insufficiency of funds in the Bank.
  •  Cheque was issued to discharge any liability already accrued.
  • Cheque should be presented to Bank within 3 months from the date of cheque.
  •  Supplier must demand payment within 15 days from the date of receipt of Notice.
  •  Bouncing of cheque is not a cognizable offence by Police. It becomes cognizable only when the Supplier decides to prosecute.
  • Prosecution is to be filed within 1 month from the date of cause of action.
  • Cause of action arises only when Buyer fails to pay within 15 days from the date of receipt of notice.
  • Even if payment has been stopped by Buyer, if it is found that he did not have sufficient funds, Buyer can succeed in prosecution.
  • Punishment is imprisonment upto two years or with fine upto two years or with fine upto twice the amount of Cheque or with both.
  •  Latest Supreme Court Judgment is Reliance Case
                - Post dated Cheques are treated as valid Cheques
                - Stop Payment of post dated Cheques amounts to an offence
  • Besides the remedy under the criminal law, you can also file a civil suit for recovery of the amount.
  • Both the remedies can be pursued simultaneously.

WHAT IS BREACH OF CONTRACT?

  • Actual Breach
  • Anticipatory Breach

REMEDIES FOR BREACH

  • Rescind the contract
  • Rescind the contract.
  • Sue for Damages.
  • Specific Performance.
  • Injunction

LIQUIDATED AND UNLIQUIDATED DAMAGES Vs. PENALTY

UNLIQUIDATED DAMAGES

  • Ordinary Damage.
  • Special Damage.
  • Exemplary Damage.
  • Nominal Damage.

PASSING OF OWNERSHIP IN PURCHASE CONTRACT

  • Distinction between Sale and Agreement to Sell.
  • Where Risk falls?

SALE Vs. CONTRACT FOR LABOUR AND WORK

CONDITIONS AND WARRANTIES

IMPLIED CONDITIONS AND WARRANTIES

  • Caveat Emptor.
  • Merchantable Quality.
  • Merchantable Title.

ACQUISITION OF GOODS BY NON-OWNERSHIP        

  • Hire/Hire Purchase/ Loan

HIRE PURCHASE

  • Hirer has option to purchase by payment of last rent.
  • Property to pass only upon payment of last rent.
  • Right of termination before passing of property.

SALE BY INSTALLMENTS

  • Ownership.
  • Consequence of Default of any Installment.
  • Deliberate misrepresentation by shopkeepers.

RIGHTS OF UNPAID SELLER

  • An unpaid seller's right against the buyer personally are:
         - A suit for price.
         - A suit for damages.
         - Stoppage of goods in transit.
         - Exercise Lien on the Goods

GENERAL TERMS AND CONDITIONS OF PURCHASE CONTRACT

  • Pre-printed general conditions.
  • Separate commercial terms.
  • Other Conditions: 
           -P.O. to override conflicting conditions of Proforma / Final Invoice.
  • Disclaim QUANTUM MERIT- State Purchaser not liable to pay for more than what is ordered.
  • Product Liability.
  • Right to reject goods for quality.
  • Force Majeure Clause.
  • Containers/ Packing cases free of charge or no obligation to return.
  • Right to rescind if initial supply fails.
  • Excise gate pass.
  • Acceptance of goods not to pre-empt other liabilities.
  • Principal to Principal basis.
  • Alternate Dispute Resolution. 
  • Right of Termination.
  • Limited right to use Supplier’s Trade Mark also as your own Trade Mark.
  • Non-compete Clause.
  • Obligation to survive termination of the Agreement.
  • Choice of Law.
  • Not Liable for IPR violation by Supplier.
  • Passing of Title-When to take place
  •  Indemnity Clause.
  • Right of First Refusal.







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