Para 9.8.2 - Contract Termination | KartavyaDesk
Original Rule Text
and also the extent to which the contractor’s performance under the contract is terminated and the date with effect from which such termination shall become effective. 2. Such termination shall not prejudice or affect the rights and remedies accrued and/ or shall accrue after that to the Parties. 3. Unless otherwise instructed by the Procuring Entity, the contractor shall continue to perform the contract to the extent not terminated. 4. All warranty obligations, if any, shall continue to survive despite the termination. 5. Determining the contract by Procuring Entity for its convenience is not its legal right – and the contractor must be persuaded to acquiesce. Depending on the merits of the case, the supplier may have to be suitably compensated on mutually agreed terms for terminating the contract. Suitable provisions to this effect should be to be incorporated in the tender document as well as in the resultant contract. 6. The Goods and incidental Works/ Services that are complete and ready in terms of the contract for delivery and performance within thirty days after the contractor’s receipt of the notice of termination shall be accepted by the Procuring Entity as per the contract terms. For the remaining Goods and incidental Works/ Services, the Procuring Entity may decide: a) To get any portion of the balance completed and delivered at the contract terms, conditions, and prices and/ or b) To cancel the remaining portion of the Goods and incidental Works/ Services and compensate the contractor by paying an agreed amount for the cost incurred by the contractor, if any, towards the remaining portion of the Goods and incidental Works/ Services.
What This Means
Para 9.8.2 of the Manual for Procurement of Goods, 2017, deals with how a government department (the 'Procuring Entity') can terminate a contract with a supplier. It's important to understand that the government can't just terminate a contract whenever it feels like it ('convenience'). The supplier needs to agree to the termination. If the supplier agrees, they might need to be compensated for any losses they incur due to the termination. This compensation should be agreed upon by both parties.
This rule also outlines what happens after the contract is terminated. The supplier must continue to fulfill any parts of the contract that haven't been terminated, unless told otherwise. Any warranties on goods already delivered remain valid. The government must accept goods that are ready for delivery within 30 days of the termination notice. For goods not yet ready, the government can either ask the supplier to complete them or cancel the order and compensate the supplier for costs already incurred.
Essentially, this section aims to ensure fairness and transparency when a contract is terminated by mutual agreement, protecting both the government's interests and the supplier's rights. It emphasizes negotiation and compensation to avoid disputes and maintain good relationships with suppliers.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Termination requires the contractor's agreement; it's not a unilateral right of the Procuring Entity for convenience.
- •The contractor may be entitled to compensation for termination, to be mutually agreed upon.
- •Existing warranty obligations survive the termination of the contract.
- •Goods ready for delivery within 30 days of termination notice must be accepted.
- •The Procuring Entity can choose to have remaining goods completed or cancel them with compensation for incurred costs.
Practical Example
The Ministry of Textiles had a contract with 'WeaveWell Industries' for supplying 10,000 meters of specialized fabric for uniforms. Due to a change in uniform design, the Ministry no longer needed the fabric. They couldn't simply cancel the contract. Instead, they negotiated with WeaveWell. WeaveWell had already produced 6,000 meters. They agreed to terminate the contract if the Ministry accepted the 6,000 meters and paid for the raw materials WeaveWell had already purchased for the remaining 4,000 meters, amounting to ₹5,00,000. The Ministry agreed, ensuring WeaveWell wasn't unfairly penalized. The 6,000 meters were accepted, and ₹5,00,000 was paid as compensation. The contract was terminated amicably.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Can the government terminate a contract simply because they found a cheaper supplier?▼
What happens to the warranty on goods already delivered if the contract is terminated?▼
If the contract is terminated, does the supplier have to stop working immediately?▼
What if the supplier refuses to agree to the termination?▼
How is the compensation amount determined for terminating the contract?▼
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 9.8.2 of the Manual for Procurement of Goods, 2017, under what condition can a Procuring Entity terminate a contract for its convenience?
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