Para 1.12 - Agency Law | KartavyaDesk
Original Rule Text
1.14. The Law of Agency – applicable to Procurement of Nonconsultancy services Legally speaking service provider would be an Agent of the Procuring Entity acting as a ‘Principal’ –, to carry out the service on its behalf. Such a relationship is covered by The Law of Agency (Section 182 to section 238, of the Indian Contract Act, 1872) and hence there exists a Principal and Agent relationship between Procuring Entity and the service provider. As per this law, the Procuring Entity is vicariously legally and financially liable for actions of its Agents. For example, a violation of certain labour laws in deputing staff for Procuring Entity’s contract by the service provider may render the Procuring Entity legally and financially answerable for such violations, under certain circumstances. There is a need to be aware of such eventualities. Model tender Documents take care of this aspect.
What This Means
Para 1.12 of the Manual for Procurement of Non-Consultancy Services highlights a crucial legal relationship: the 'Principal-Agent' relationship between the government department (Procuring Entity) and the service provider. Think of it like this: when you hire a company to provide a service, that company acts on your behalf, just like an agent. This relationship is governed by the Indian Contract Act, 1872. Because of this relationship, the government department can be held responsible for the actions of the service provider.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •The service provider acts as an 'Agent' of the Procuring Entity (government department).
- •This relationship is governed by the Law of Agency under the Indian Contract Act, 1872.
- •The Procuring Entity (government) can be legally and financially liable for the actions of the service provider.
- •Violation of labor laws by the service provider can make the Procuring Entity answerable.
- •Model Tender Documents are designed to address and mitigate these risks.
Practical Example
The Ministry of Rural Development hires 'Shramik Kalyan Services' to provide sanitation workers for a rural employment program. Shramik Kalyan Services, in an attempt to cut costs, fails to pay its workers the minimum wage as mandated by law. Because Shramik Kalyan Services is acting as an agent of the Ministry, the Ministry could be held legally responsible for the wage violations. The workers could potentially sue the Ministry for the unpaid wages, even though the Ministry directly contracted with Shramik Kalyan Services and not the individual workers. The Ministry's tender document should have included clauses to prevent this scenario, such as requiring proof of compliance with labor laws.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What does 'vicariously liable' mean in this context?▼
How can we protect ourselves from liability as a Procuring Entity?▼
Does this rule apply to all types of procurement?▼
What are some examples of non-consultancy services?▼
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 1.12 of the Manual for Procurement of Non-Consultancy Services, which Act governs the Principal-Agent relationship between the Procuring Entity and the service provider?
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