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NATIONAL LAW UNIVERSITY ODISHA, CUTTACK

IIND SEMESTER (2013-2014)


Project topic on

LEGAL OVERVIEW OF TENDERS AND CONTRACTS

SUBMITTED BY- ANTIM AMLAN (2013/BA.LLB/007)

GUIDED BY- ASST. PROF RANGIN PALLAV TRIPATHY

TABLE OF CONTENTS

TABLE OF CONTENTS

LIST OF ABBREVIATIONS _____________________________ II


INDEX OF AUTHORITIES ____________________________ IV
HYPOTHESIS ________________________________________ VI
RESEARCH QUESTIONS _____________________________ VI
INTRODUCTION _____________________________________VII

[I] DEFINATION OF TENDERS ___________________________10


[II] TYPES OF TENDERS AND CONTRACTS UNDER INDIAN CONTRACT ACT
[II. 1. A.] Government Tender _________________________ 11

[II. 2.]Private Tender or Public Tender Contract Act,


section-38 ____________________________________12
[III] VALIDITY OF TENDERS ___________________________12
[III. 1.] Acceptance of a valid tender in contract law ____13
[IV] ISSUANCE OF TENDER NOTICE IS AN INVITATION TO APPLYCONTRACT ACT, 1872 _______________________________14
[V] TENDER BID- ARTICLE 14- SECTION 2(D) OF INDIAN CONTRACT ACT,
1872 __________________________________________14
CONCLUSION ________________________________________15

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


PAGE| I

LIST OF ABBREVIATIONS

LIST OF ABBREVIATIONS
ABBREVIATIONS

EXPANSIONS

SECTION

AC

APPEAL CASES

AIR

ALL INDIA REPORTER

ALL

ALLAHABAD

ANR

ANOTHER

ART

ARTICLE

BOM

BOMBAY

CAL.

CALCUTTA

CO.

COMPANY

CPC

CODE OF CIVIL PROCEDURE, 1908

DEL

DELHI

ED.

EDITION

GOVT.

GOVERNMENT

HONBLE

HONOURABLE

L.A

LAND ACQUISITION

LTD.

LIMITED

M.P.

MADHYA PRADESH

NGO

NON-GOVERNMENTAL ORGANISATION

NO.

NUMBER

O.

ORDER

ORI

ORISSA

ORS

OTHERS

P.

PAGE

PP.

PAGES

PSU

PUBLIC SECTOR UNDERTAKING

PVT.

PRIVATE

R.

RULE

SC

SUPREME COURT
LEGAL OVERVIEW OF TENDERS AND CONTRACTS
PAGE| II

LIST OF ABBREVIATIONS

SCC

SUPREME COURT CASES

SCR

SUPREME COURT REPORTER

SUPL.

SUPPLEMENTARY

U/

UNDER

UOI

UNION OF INDIA

V.

VERSUS

VOL.

VOLUME

CO.

COMPANY

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


PAGE| III

INDEX OF AUTHORITIES

INDEX OF AUTHORITIES
CASES.
i.
ii.

Kastens v. Ruland, 94 N.J.Eq. 451, 120 A. 21, 22


Walker v. Houston, 215 Cal. 742, 12 P.2d 952, 953, 87 A.L.R. 937

iii.

Tata Cellular v. Union of India, AIR 1996 SC 11: (1994) 6 SCC 651

iv.

Mukul Kumar v. Divisional Railway Manager, Northern railways, Allahabad, AIR


1995 All 72 (DB)

v.

State of Maharashtra v. Saifuddin Mujjaffarali Saifi, AIR 1994 Bom 48

vi.

Sailesh Kumar Rusia v. State of Uttar Pradesh, AIR 1995 All 237

vii.

Secretary of state v. Madho Ram, 10 Lah 493: AIR 1929 Lah 114

viii.

Secretary, United Order and Supply Co-op v. Shiba Prasad Banerjee, AIR 2009 Cal
258

ix.

Cambatta Aviation Ltd. v. Cochin International Airport ltd., AIR 1999 Ker 368

x.

A-one Granites v. State of Uttar Pradesh, (2001) 3 SCC 537

xi.

Rajendra Road Lines v. Indian Oil Corpn, AIR 2003 All 77

xii.

Antex Printers v. Dr. Ram Manohar Lohia, AIR 2002 All 236: (2002) 2 AWC 1053

xiii.

Punjab State Electricity Board, Patiala v. Abnash Textile trading agencies, Ambala
City, AIR 1986 P&H 323

xiv.

Raja Baikunath v. Benode Behari, 29 CLJ 256: 51 Ind Cas 13

xv.

Manickan Chettiar v. State of Madras, AIR 1971 Mad 221

xvi.

Sivaram v. Subbier, AIR 1922 Mad 28

xvii.

Ganga v. Manmatha, 18 CWN 84: 18 IC 442; Sitaram v. Ram Rao, AIR 1931 Nag 91

xviii.

Narain Das v. Abinash, AIR 1922 PC 347

xix.

Nanu v. Manchu, 14 Mad 49

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


PAGE| IV

INDEX OF AUTHORITIES

xx.

Administrator-General of Madras v. Jagirdhar, 4 MLT 335

xxi.

Shiam Sundar v. Munshi Mushaheb, 2 Pat 418

xxii.

Goraknath Upadhaya v. State of Madhya Pradesh, AIR 2004 MP 65

xxiii.

S.P Natrajan v. Chief Engineer, Highways and Rural Works Deptt., Chennai, AIR
1999 Mad 458

xxiv.

National Radio and Electric Co. Ltd. v. Union of India, AIR 2003 Del 308

xxv.

Delhi Development Authority v. Ravindra Mohan Agarwal, (1999) 3 SCC 172

1. STATUTES.
CONSTITUTION OF INDIA (1950)
INDIAN CONTRACT ACT (1872)

2. Books
Durga

Das

Basu,Constitutional

Law

of

India,8th

Edition

reprint

2009,LexisNexis,Butterworths Wadhwa.
Durga Das Basu,Shorter Constitution of India,14th Edition reprint 2011,Vol 1
,LexisNexis,Butterworths Wadhwa.
Justice J.D Kapoor and Dr. H.K. Saharay,Laws relating to Tenders and
Government Contracts, 3rd Edititon 2012, Universal Publishing Co., New
Delhi.
Blacks Law Dictionary (9th ed. 2009)
JACK BEATSON FBA ET AL., 1 ANSON'S LAW OF CONTRACT (28th ed. OUP
Oxford 2010).
SIR FREDERICK POLLOCK ET AL., 1 POLLOCK & MULLA ON INDIAN CONTRACT
AND SPECIFIC RELIEF ACTS (14th ed. 1986).

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


PAGE| V

INDEX OF AUTHORITIES

HYPOTHESIS

Tenders are intrinsically associated with Contracts Law; Tenders and Contracts are the Sine
qua Non of the Indian Contract Act, 1872.

RESEARCH QUESTIONS
1) Defination of Tenders and Contracts
2) Types of Tenders and Contracts under Indian Contract Act
3) Private Tenders and public tenders
4) Validity of Tenders
5) Acceptance of Valid tenders
6) Invitation- Notice of Tenders
7) Tender Bid- with respect to Indian Contract Act and Indian Constitution

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


PAGE| VI

INTRODUCTION

INTRODUCTION
[TENDERS]
TENDER- An offer of money; the act by which one produces and offers to a person holding a
claim or demand against him the amount of money which he considers and admits to be due,
in satisfaction of such claim or demand, without any stipulation or condition.1
It was clearly defined in the case of Walker v. Houston that, The offer of performance, not
performance itself, and, when unjustifiably refused, places other party in default and permits
party making tender to exercise remedies for breach of contract.2
Blacks Law Dictionary defines Tender as, A valid and sufficient offer of performance;
specific, an unconditional offer of money or performance to satisfy a debt or obligation <a
tender of delivery>.3
The Tender may save the tendering party from a penalty for non-payment or nonperformance or may, if the other party unjustifiably refuses the tender, place the other party
in default.4 A tender is a formal offer to complete a project or venture for an agreed price.

Tenders contrast to requisitions for research sponsorship in one paramount respect. In the
event that the supporter acknowledges a starting tender proposal, then a binding contract
quickly starts to be on effect. This implies that the inquirer will be legitimately bound to
deliver the project as depicted in the first submission, incorporating the procedures, turning
points, and points of project itself. The seeker will likewise immediately be bound by the
price cited and the terms and states of agreement that go with the call for tender.

Tenders are very much a part of Contracts. However, the relationship between Tenders and
contracts can be construed while going through the following pages.

Kastens v. Ruland, 94 N.J.Eq. 451, 120 A. 21, 22


Walker v. Houston, 215 Cal. 742, 12 P.2d 952, 953, 87 A.L.R. 937
3
Blacks Law Dictionary (9th ed. 2009)
4
Ibid.
2

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


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INTRODUCTION

[CONTRACTS]
The law of contract is the establishment whereupon the superstructure of current business is
assembled. It is regular information that in business transactions, frequently, guarantees are
set aside a few minutes and the performance accompanies later. In such a circumstance, if
either of the gatherings were allowed to backpedal on its guarantee without bringing about
any liability, there might be unlimited confusions and it might be difficult to bear on
exchange and commerce.

Henceforth the law of contract was established which sets out the legitimate principles
identifying with guarantees: their shaping, their performance, and their enforce-ability.
Demonstrating the object of the law of contract, Sir William Anson watches: "The law of
contract is proposed to guarantee that what a man has been directed to anticipate that should
come will pass; that what has been guaranteed to him ought to be performed." 5

The law of contract is material to the business group, as well as to others. Each one of us
enters into various contracts practically consistently, and more often than not, we do so
without actually acknowledging what we are doing from the purpose of law. An individual at
times understands that when he endows his bike to the technician for repairs, he is entering
into contract of bailment or when he purchases a Packet of cigarettes, he is making a contract
of the sale of goods; or again when he heads off to the silver screen to see a film, he is
making yet an alternate contract etc.

Also, the law of contract outfits the foundation for alternate limbs of Commercial Law. The
authorizations identifying with sale of goods, negotiable instruments, insurance, partnership
and insolvency are all established upon the general rule of contract law. That is the reason;
the investigation of the law of contract goes before the investigation of all other sub-divisions
of Commercial Law.
INDIAN CONTRACT ACT, 1872 is the sine qua non of Commercial law in India. Not just
the large scale trades but the day to day transactions wont be possible without the act.6

JACK BEATSON FBA ET AL., 1 ANSON'S LAW OF CONTRACT (28th ed. OUP Oxford 2010).
SIR FREDERICK POLLOCK ET AL., 1 POLLOCK & MULLA ON INDIAN CONTRACT AND SPECIFIC RELIEF
ACTS (14th ed. 1986).
6

LEGAL OVERVIEW OF TENDERS AND CONTRACTS


PAGE| VIII

INTRODUCTION

The Indian Contract Act has been basically divided into following parts:(i) Basic Principles of Contract (Sections 1 to 75)
(ii) Indemnity and Guarantee (Sections 124 to 147)
(iii) Bailment (Sections 148 to 181)
(iv) Agency (Sections 182 to 238)
In Law Dictionary, 9th Edn, Black has given the meaning of contract as an agreement
between two or more persons which creates an obligation to do or not to do a particular
thing.7
Its essentials are competent parties, subject-matter of a legal consideration, mutuality of
agreement and mutuality of obligations.
Contract is a bilateral between two or more parties. Every contract passes several stages
beginning with the state of negotiations during which the parties discuss and negotiate
proposals and counter proposals as also the consideration resulting financially in the
acceptance of the proposals.
In this research paper, the Indian Contract Act has been specifically commented upon and
various topics in the act have been dealt with. I have attempted to define the authentic
meanings of Tenders and Contracts and interpreted Indian Contract Act, 1872 to specify the
relationship of tenders and contracts.

Supra 3
LEGAL OVERVIEW OF TENDERS AND CONTRACTS
PAGE| IX

[I] DEFINATION OF TENDERS

A tender is an offer. It is something which invites and is communicated to notify acceptance.


Requisites of a Valid Tender:8
1) It must be unconditional
2) Must be made at the proper place
3) Must conform to the terms of obligations
4) Must be made at the proper time
5) Must be made at the proper form
6) Person by whom the tender is made must be able and willing to perform his obligation
7) There must be reasonable opportunity for inspection
8) Tender must be made to the correct person
9) It must be full of amount.
It is true that the tender notice did not mention that no tender will be considered valid if it is
not accompanied with the documents mentioned therein but the tender notice also mentioned
that there may be other particular and details of the contract which have to be obtained from
the office. Submission of the documents cannot be treated as a condition precedent.9
On completion of tender and communication of its acceptance to the contractor, a valid and
legal contract comes into force.
Its similarity with contracts is in the sense that, filing of a tender is in the form of lodging a
proposal and acceptance of the tender and the rates mentioned therein is the acceptance of the
tender which brings into existence the concluded contract between the parties. However, it
must be emphasized that a very important question arises as to whether and in what
circumstances a contract between the parties can be implied. The Contract can be implied and
it is very clear from section 9 of the Indian Contract Act, but it is the fundamental principle of
law that the court should not make contract for the parties. It follows that a clear case must be
made out before doing so.10

Tata Cellular v. Union of India, AIR 1996 SC 11: (1994) 6 SCC 651
Mukul Kumar v. Divisional Railway Manager, Northern railways, Allahabad, AIR 1995 All 72 (DB)
10
State of Maharashtra v. Saifuddin Mujjaffarali Saifi, AIR 1994 Bom 48
9

SUBMITTED ON BEHALF OF THE PETITIONERS

PAGE | XVIII

Since the tenders, the source of the contract between the parties had not transformed into a
contract, even if the proposal and counter-proposal are assumed to be constituting an
argument, it is contingent contract and by operation of Section 32 of the Act, the counter
proposal respondent cannot be enforced.11
For example, Tenders were invited for the sale of cinema houses. The time limit for
submitting tenders was fixed by advertisement inviting tenders and booklet regarding sale of
cinema houses. The authority invited tenders strictly following the time limit for filing
tenders, accordingly rejecting tenders belatedly submitted.
It was held that, in this instant case decision of authority could not be said to favor any
person. The court refused to interfere with order rejecting tender which was submitted late.12

[II] TYPES OF TENDERS AND CONTRACTS UNDER INDIAN CONTRACT


ACT

A tender is merely an offer to supply certain classes of goods at certain prices during a fixed
period, and so long as the offer remains open the person who gives the tender is bound to
supply the goods at those prices when called to do so. He may at any time withdraw his offer
upon proper notice to the other party, and upon such withdrawal his liability to supply all or
any goods not already ordered terminates.13

[II. 1. A.] GOVERNMENT TENDER


Specific provision in tender notice states that all tenders shall be ruled by Rule 47 of West
Bengal Financial Rules. The circular of State Govt., clearly shows that exemption is granted
to co-operative societies to enable them to compete with Pvt. Tenderers. Thus, for the
promotion of the Co-operative movement in the state, the state government adopted such a
policy.14
11

Indian Contract Act, 1872


Sailesh Kumar Rusia v. State of Uttar Pradesh, AIR 1995 All 237
13
Secretary of state v. Madho Ram, 10 Lah 493: AIR 1929 Lah 114
14
Secretary, United Order and Supply Co-op v. Shiba Prasad Banerjee, AIR 2009 Cal 258
12

SUBMITTED ON BEHALF OF THE PETITIONERS

PAGE | XVIII

[II. 2.] PRIVATE TENDER OR PUBLIC TENDER CONTRACT ACT, SECTION-38


In a public tender a sole agency was appointed for establishment and management of ground
handling of aircraft operating into and out of international airports. While floating the
tenders, a letter inviting final offer stating that offers should reach on or before a specified
time on a specified date issued. The letter also directed that while sending the offer a bank
guarantee with forfeiture clause should be attached. The tenderers were also requested to
furnish list of equipment and audited statement of accounts for the past three years from
parties. The court held that it cannot be said letter was not a public tender.15

[III]

VALIDITY OF TENDERS

In case of a tender or a governmental contract public notice is mandatory. 16 The right of the
parties to have recourse to legal action is not excluded by the agreement. The parties are only
required to have their disputes adjudicated by having the same referred to arbitration.
In a case, the tender was invited by Indian Oil Corporation for transportation of LPG
cylinders from one place to another. The near relative employers of corporation, responsible
for award of contract were not permitted to quote. The father of partner of petitioner firm was
working in the corporation. The petitioner did not disclose said fact in its tender. It was held
that the rejection of tender of firm was valid.17
In another case of Antex Printers v. Dr. Ram Manohar Lohia, it was held that refusal to
accept tender of petitioner as improper.18
The tender was invited by the Electricity Board, Patiala. The security amount deposited by A
was accepted by the Board, and the purchase order was issued to A. It was held that the
contract between A and Board is completed. The fact that no regular document was executed
showing the entering into the agreement of parties would be immaterial.19

15

Cambatta Aviation Ltd. v. Cochin International Airport ltd., AIR 1999 Ker 368
A-one Granites v. State of Uttar Pradesh, (2001) 3 SCC 537
17
Rajendra Road Lines v. Indian Oil Corpn, AIR 2003 All 77
18
Antex Printers v. Dr. Ram Manohar Lohia, AIR 2002 All 236: (2002) 2 AWC 1053
19
Punjab State Electricity Board, Patiala v. Abnash Textile trading agencies, Ambala City, AIR 1986 P&H 323
16

SUBMITTED ON BEHALF OF THE PETITIONERS

PAGE | XVIII

[III. 1.]

ACCEPTANCE OF A VALID TENDER IN CONTRACT LAW

Tender must be in accordance with the terms of the contract. Where the plaintiff called upon
the defendant to perform a contract different from the real agreement between them, he
cannot claim performance thereof. In a contract of reconveyance of immovable property, the
vendors tendered more than what they were entitled to offer and claimed conveyance of share
in excess of what they were entitled to claim. The refusal of the vendees to accept the offer
was held to be fully justified.20
A tender accepted by an authority empowered in that behalf by the government concludes a
contract even if the contemplated agreement has not come into existence as a stamped
paper.21
A tender of goods priced higher than at the contract price cannot be performance of the
contract.22
Under Section 38, Indian Contract Act, the tender must be unconditional.23 Conditional
tender is not equivalent to payment. Sending the cheque for smaller amount than the amount
claimed by creditor along with a letter to the effect that it was in full settlement does not
amount to discharge of the entire debt, nor does it amount to payment of any condition.24
So a tender is not good when it is coupled with a demand that a creditor should produce
certain deeds,25 or with a threat of future legal proceedings for its refund, or with a condition
requiring the legal representative of deceased debtor to produce succession certificate.26
However, ready and willing to pay a party may have been, there will not be tender in law
unless there is following outside the court an unconditional deposit.
In Government Contract, the public notice is mandatory.27
The party inviting tender has a right to change the policy or the criteria of selection
subsequent to the notice inviting tender but before its confirmation.
Therefore, a conditional and invalid tender may be validated by withdrawing the condition.28

20

Raja Baikunath v. Benode Behari, 29 CLJ 256: 51 Ind Cas 13


Manickan Chettiar v. State of Madras, AIR 1971 Mad 221
22
Sivaram v. Subbier, AIR 1922 Mad 28
23
Ganga v. Manmatha, 18 CWN 84: 18 IC 442; Sitaram v. Ram Rao, AIR 1931 Nag 91
24
Narain Das v. Abinash, AIR 1922 PC 347
25
Nanu v. Manchu, 14 Mad 49
26
Administrator-General of Madras v. Jagirdhar, 4 MLT 335
27
Supra 16
28
Shiam Sundar v. Munshi Mushaheb, 2 Pat 418
21

SUBMITTED ON BEHALF OF THE PETITIONERS

PAGE | XVIII

[IV]

ISSUANCE OF TENDER NOTICE IS AN INVITATION TO APPLY-

CONTRACT ACT, 1872

In case of Government tenders, it is duty of authority issuing the tender to either issue a
corrigendum or publish a tender notice which was printed to lead the public to a conclusion.
The govt. authority while entertaining and dealing with tenders have to safeguard two things,
firstly, the revenue of state and, secondly, the interest of the public upon which the
investment has been endowed. This can be done by them by giving contract to the highest
bidder provided he fulfills the eligibility qualifications.29

[V] TENDER BID- ARTICLE 14- section 2(d) of Indian Contract Act, 1872

Where there is any work costing more than a crore of rupees, there should be a condition of
pre-qualification in respect of contract and only on satisfying these pre-conditions, the
contractor would be allowed to take part in the tender proceedings. 30
In this case of S.P Natrajan v. Chief Engineer, Highways and Rural Works Deptt, the
petitioner have not registered their names in terms of the advertisement inviting tenders, and
as such as, they are not entitled to take part in the tender proceedings.
The Contract was awarded to respondent in view of the fact that it was Govt. of India
Undertaking. Price bid of petitioner was exorbitantly high and that ensuring most competitive
price would be beneficial for the Government. The decision satisfies the test of Wednesbury
Principle reasonableness. It is not arbitrary biased or actuated by mala fide and hence liable
to be interfered with. The Government must have freedom of contract.31
The acceptance is not complete till communicated. Mere noting on the file of acceptance of
the auction bid not enough. The knowledge of the bidder about such noting is inconsistent.32

29

Goraknath Upadhaya v. State of Madhya Pradesh, AIR 2004 MP 65


S.P Natrajan v. Chief Engineer, Highways and Rural Works Deptt., Chennai, AIR 1999 Mad 458
31
National Radio and Electric Co. Ltd. v. Union of India, AIR 2003 Del 308
32
Delhi Development Authority v. Ravindra Mohan Agarwal, (1999) 3 SCC 172
30

SUBMITTED ON BEHALF OF THE PETITIONERS

PAGE | XVIII

CONCLUSION

Additionally numerous significances of Tender, in the dictionary, it is to make an offer to


do work. Thus, a works tender is the offer for administration or supply or both, by an org for
completing the work. The stores tender is offer for supply of material.

When the qualified tenderer is built as worthy, as assessed by a tender panel and
acknowledged by the tolerant power, the bidder is prompted in like manner, by issue of,
unconditional/condition(s) concurred between the tenderer and the bidder through Letter of
Acceptance.
Accordingly, Contracts has served as the foundation of all emerging Commercial and
business laws. The terms of a contract should be interpreted and their legal effect determined
as a whole.33 The Contract is a commercial document and must be interpreted in a manner to
give efficacy to the contract rather than to invalidate it. A contract is an agreement
enforceable by law which offers personal obligations, which the law projects and enforces
against the parties to the agreement. The legal personal rights and personal obligations arising
out of a contract, depend upon the general law, but are created by the act of the Contracting
(involved) parties only. The rights and process of dispute resolution in these works is solely
served by Indian Contract Act, 1872 and its allied laws only.
Hence, whenever Tenders and Contracts will be put to discourse, Indian Contract Act will be
an indispensable part of it.

33

Miller v. Robertson, 45 S Ct 73: 226 US 245 (1924)

SUBMITTED ON BEHALF OF THE PETITIONERS

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