Para 6.11.2 - Contract Termination | KartavyaDesk
Original Rule Text
6.11.4 Termination of Contract for Procuring Entity’s Failure or Convenience After placement of the contract, there may be an unforeseen situation compelling Procuring Entity to cancel the contract. In such a case, a suitable notice has to be sent to the contractor for cancellation of the contract, in whole or in part, for its (Procuring Entity’s) convenience, inter alia, indicating the date with effect from which the termination will to become effective. This is not Procuring Entity’s legal right– the contractor has to be persuaded to acquiesce. Depending on the merits of the case, the contractor 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. If termination occurs because of Procuring Entity's convenience or a fundamental breach on his part, the engineer will certify the value of works executed, value of any materials lying at site, reasonable cost of removal of equipment, repatriation of project staff, cost of protecting and securing the works and deducting from it: (i) pending advances; (ii) other recoveries; and (iii) taxes as due.
What This Means
Para 6.11.2 of the Works Manual deals with situations where the government (the 'Procuring Entity') needs to cancel a contract after it's already been awarded. This might happen due to unforeseen circumstances or simply because the government's needs have changed. It's important to understand that the government doesn't have an automatic right to cancel; they need to negotiate with the contractor to get them to agree to the termination.
If the contractor agrees to the cancellation, they may be entitled to compensation. This compensation is meant to cover the work they've already done, materials they've purchased, and any other reasonable costs they've incurred as a result of the contract. The exact amount of compensation is determined through mutual agreement. The tender document and the resulting contract should include provisions outlining how such terminations and compensations will be handled.
Finally, the rule specifies what the engineer in charge needs to consider when calculating the final payment to the contractor if the termination is due to the Procuring Entity's convenience or a fundamental breach on their part. This includes valuing completed work, materials on site, and costs related to removing equipment and repatriating staff, while also deducting any advances, recoveries, and taxes owed.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •The Procuring Entity (government) may need to cancel a contract after it's awarded.
- •Cancellation requires negotiation and agreement with the contractor; it's not an automatic right.
- •The contractor may be entitled to compensation for work done, materials, and other costs.
- •Tender documents and contracts should include provisions for termination and compensation.
- •The engineer must certify the value of work and materials, and deduct advances, recoveries, and taxes.
Practical Example
The Department of Irrigation awarded a contract to M/s AquaConstruct for building a canal. After six months, due to a change in government policy, the project was deemed no longer necessary. The Department contacted AquaConstruct and explained the situation. After negotiations, AquaConstruct agreed to terminate the contract. The engineer assessed the value of the completed work at ₹50 lakhs, the materials on site at ₹10 lakhs, and the cost of removing equipment at ₹5 lakhs. They also deducted pending advances of ₹15 lakhs and taxes of ₹2 lakhs. The final compensation paid to AquaConstruct was ₹48 lakhs, as mutually agreed upon.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Does the government have the right to unilaterally terminate a contract?▼
What costs can a contractor claim if a contract is terminated for the Procuring Entity's convenience?▼
What deductions are made from the contractor's final payment in case of termination?▼
Where should the provisions for contract termination be included?▼
Who is responsible for certifying the value of work done and materials on site?▼
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 6.11.2 of the Works Manual, when a Procuring Entity wishes to terminate a contract for its convenience after it has been awarded, what is the primary requirement?
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