A legally binding agreement is one in which two parties freely decide to do or not to do something in exchange for a fee. This type of agreement is known as a contract. A legally enforceable agreement is referred to as a contract in Section 2(h) of the Indian Contract Act.
Contracts in which the federal government or a state government is a party are known as government contracts. Because of this, all contracts with the federal government or the state governments are made in the names of the President or the Governor, respectively.
Government Contracts as Quasi-Contracts
Furthermore, quasi-contracts include contracts with the government. Quasi-contracts are defined in Section 70 of the Indian Contract. "If someone gives something to someone else legally or performs anything for him without meaning to do it gratuitously and that other person gains something from it, the recipient is obligated to reimburse the giver for the item in question or to restore it to its original state."
Applying the quasi-contract standards to government contracts has the advantage of preventing exploitation for improper gain for both the contracting party and the government. Additionally, it states that any gains made from the contract must be returned to the original owner. According to section 65 of the Indian Contract Act, the government is also able to recoup any benefits that it may have granted to the opposing party in cases of void agreements. It states: Anyone who has benefited from an agreement or contract that is later shown to be invalid must return it to the source of the advantage or pay the recipient compensation.
Government Contract Benefits
Government contracts are necessary to improve the efficiency and accountability of governmental operations. For the sake of the country's development, the government enters into contracts with a great number of domestic and foreign parties; as a result, it becomes vital to have the government name the contract rather than any particular individual.
Eligible Agreement: Impact
The contract is binding on the parties and is enforceable by the Government if Article 299(1)'s stipulations are followed. The terms and conditions of the contract, rather than the requirements of the Constitution, control the relationship between the parties to a legal and legitimate contract, which is entered into between the Government and each private party. According to Article 299(2), neither the Governor nor the President may be held personally accountable for any agreement made to carry out the requirements of the Constitution or any law about the Indian government. Additionally, it shields the parties to any such contract from personal culpability when they make or carry out the agreement on behalf of the governor or the president.
In compliance: Impact
Article 299(1)'s requirements are binding rather than advisory, and compliance with them is required. They are included not just for aesthetic purposes but also to shield the government against unapproved contracts. The Government must be shielded from accountability if a contract is unauthorized or exceeds its jurisdiction to prevent the waste of public monies. Consequently, if any of the previously mentioned terms are broken, the contract is illegal and cannot be enforced by the government.
Before, the Supreme Court held that the Government could accept culpability by ratifying the contract, even if it was not enforceable, and that a suit could not be brought against it for noncompliance with Article 299(1).
However, the Supreme Court decided in Mulamchand v. State of M.P. that if a contract did not comply with the constitutional stipulations, it was void in legal terms, and ratification was not necessary. Consequently, the Indian Contract Act, 1872's S. 230(3) would not apply to such a contract, and the government officer could not be held personally liable for its breach.
The three requirements of a written contract, its execution by an authorized agent, and its expression in the President's name must all be met for the government to be held legally liable. The Apex Court had already adopted the strict stance that compliance with these conditions is required. Regarding the required conditions of Article 299(1), the Court has adopted a more permissive stance in recent times.
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