KartavyaDesk

Para 2.13 - Contract Termination | KartavyaDesk

Goods Manual

Original Rule Text

a) By mutual agreement: If neither party has performed the contract, no consideration is required for the release. If a party has performed a part of the contract and has undergone expenses in arranging to fulfil the contract, it is necessary for the parties to agree to a reasonable value of the work done as consideration for the value. b) By breach: In case a party to a contract breaks some stipulation in the contract which goes to the root of transaction or destroys the foundation of the contract or prevents substantial performance of the contract, it discharges the innocent party to proceed further with the performance and entitles him to a right of action for damages and to enforce the remedies for such breach as provided in the contract itself. A breach of contract may, however, be waived. c) By refusal of a party to perform: On a promisor’s refusal to perform the contract or repudiation thereof even before the arrival of the time for performance, the promisee may at his option treat the repudiation as an immediate breach putting an end to the contract for the future. In such a case the promisee has a right of immediate action for damages.

What This Means

Para 2.13 of the Manual for Procurement of Goods, 2017, deals with how a contract can be brought to an end. It outlines three main ways this can happen: by mutual agreement, by breach of contract, or by one party refusing to perform their part of the deal. Understanding these scenarios is crucial for government employees involved in procurement, as it dictates how to handle situations where a contract needs to be terminated. This rule aims to protect the interests of the government while ensuring fair treatment of contractors.

Essentially, the rule explains the circumstances under which a contract can be legally ended and what rights and responsibilities each party has in those situations. If both parties agree to end the contract, or if one party significantly violates the terms, or if one party refuses to fulfill their obligations, the contract can be terminated. The rule also addresses the consequences of such termination, including the possibility of legal action for damages. It affects all government departments and agencies involved in procuring goods, as well as the suppliers and contractors they work with.

This section is important because it provides a framework for managing contractual relationships and resolving disputes. It ensures that government procurement processes are conducted fairly and transparently, and that the government's interests are protected in the event of a contract dispute or termination. Knowing these rules helps prevent legal complications and ensures accountability in government dealings.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Contracts can be terminated by mutual agreement if neither party has fully performed.
  • •A breach of contract by one party allows the innocent party to terminate and seek damages.
  • •If a party refuses to perform, the other party can treat it as a breach and end the contract.
  • •The innocent party has the right to take legal action for damages resulting from a breach.
  • •A breach of contract can be waived by the innocent party, allowing the contract to continue.

Practical Example

The Ministry of Textiles entered into a contract with 'Silk Weavers Ltd.' for the supply of 10,000 silk sarees for a government gifting program, valued at ₹50 lakhs. After delivering 2,000 sarees, Silk Weavers Ltd. informed the Ministry that they were unable to supply the remaining sarees due to unforeseen circumstances and requested termination of the contract.

Based on Para 2.13, the Ministry can either agree to terminate the contract by mutual agreement, compensating Silk Weavers Ltd. for the sarees already delivered, or treat the refusal as a breach of contract. If the Ministry chooses the latter, they can terminate the contract, procure the remaining sarees from another supplier, and claim the difference in cost (if any) from Silk Weavers Ltd. as damages. The Ministry must document all communication and actions taken to ensure transparency and compliance with procurement rules.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What happens if both parties agree to cancel a contract before any work is done?▼
If neither party has performed any part of the contract, no consideration (payment) is required for the release. The contract can be cancelled by mutual agreement without any financial implications.
What constitutes a 'breach' that allows termination?▼
A breach is a violation of a critical term that goes to the core of the agreement, fundamentally undermining the contract's purpose or preventing its substantial performance. Minor deviations may not be sufficient grounds for termination.
If the supplier refuses to perform, can we immediately find another supplier?▼
Yes, according to Para 2.13(c), you can treat the refusal as an immediate breach and terminate the contract. You then have the right to procure the goods from another supplier and potentially claim damages from the original supplier.
What does 'waiving' a breach mean?▼
Waiving a breach means that the innocent party chooses to overlook the violation and continue with the contract. However, this doesn't prevent them from addressing future breaches. It's a decision that needs careful consideration.
How do we determine the 'reasonable value of work done' if we terminate by mutual agreement after partial performance?▼
The reasonable value should be based on the actual work completed, expenses incurred, and market rates for similar services. It's advisable to have a documented assessment and agreement on the valuation to avoid disputes.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 2.13 of the Manual for Procurement of Goods, 2017, under what condition is no consideration required for the release of a contract terminated by mutual agreement?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

Need help understanding this rule?

Ask Niti — your AI assistant for Goods Manual and other government rules