Governement contract under Article 299 of constitution and Contractual liability of government
Government Contracts under Article 299 of the Constitution and Contractual Liability of Government
1. Article 299 of the Constitution of India: Overview
Article 299 deals with the power of the Government of India and the State Governments to enter into contracts and how such contracts are executed.
Text of Article 299:
All contracts made in the exercise of the executive power of the Union or of a State shall be expressed to be made by the President or the Governor, as the case may be, and all such contracts and assurances shall be executed on behalf of the President or the Governor by such persons and in such manner as he may specify or authorize.
Key Points:
Contracts entered by the government are expressed to be made by the President or the Governor.
The authority to execute contracts is delegated to officers/authorities by the President or Governor.
This article ensures the validity and enforceability of contracts made by government agents.
Ensures contracts bind the government and the contracting party.
2. Contractual Liability of the Government
The government can enter into contracts like a private individual, but with certain procedural safeguards.
Liability arises when the government breaches contractual obligations.
Government contracts are subject to ordinary principles of contract law.
However, some special privileges or immunities may apply depending on the contract’s nature and public interest.
Government cannot evade contractual obligations merely on the ground of sovereign immunity if it has explicitly or implicitly entered into a contract.
3. Features of Government Contracts under Article 299
Must be expressly made by or on behalf of the President/Governor.
Contractual documents must be executed by authorized representatives.
Government officials acting beyond authority may not bind the government.
Contracts are governed by ordinary contract law principles (offer, acceptance, consideration, etc.).
Disputes related to contracts can be adjudicated by courts or tribunals unless barred by statute.
4. Important Case Laws on Government Contracts and Contractual Liability
⚖️ 1. Union of India v. United Commercial Services, AIR 1975 SC 1861
Facts:
The government entered into contracts with a service provider which later the government tried to repudiate.
Held:
The Supreme Court held that the government is bound by its contracts like any private party and must honor them unless there is a valid legal ground for repudiation.
Principle:
Sovereign immunity does not exempt the government from contractual liability.
⚖️ 2. State of West Bengal v. Associated Contractors, AIR 1969 SC 773
Facts:
Dispute regarding the execution of contracts entered into by the government and its breach.
Held:
The Court held that contracts by the government must be performed with utmost good faith and fairness, and the government is liable for breach.
Principle:
The government’s contractual obligations carry special responsibility due to public interest.
⚖️ 3. M.C. Chockalingam v. Union of India, AIR 1979 SC 213
Facts:
Contractor challenged government’s refusal to perform contractual obligations.
Held:
The Supreme Court emphasized that government contracts are subject to ordinary contract principles, and the government can be held liable for breach.
⚖️ 4. M/s. Kanaiyalal Maneklal v. Union of India, AIR 1964 SC 449
Facts:
Contract was signed by a government agent beyond the authority delegated.
Held:
The contract was held not binding on the government as the agent exceeded authority.
Principle:
Authority to execute contracts is crucial; unauthorized acts do not bind the government.
⚖️ 5. Union of India v. G. Ganayutham, AIR 1997 SC 1125
Facts:
Contractor claimed compensation for breach of government contract.
Held:
The Court held government liable for damages due to breach and that government contracts attract contract law remedies.
5. Summary Table of Case Laws
| Case | Principle Established |
|---|---|
| Union of India v. United Commercial Services | Government bound by contracts like private parties |
| State of West Bengal v. Associated Contractors | Government must act in good faith in contracts |
| M.C. Chockalingam v. Union of India | Contractual liability of government under ordinary contract law |
| Kanaiyalal Maneklal v. Union of India | Contracts by unauthorized agents do not bind government |
| Union of India v. G. Ganayutham | Government liable for damages on breach of contract |
6. Additional Important Aspects
a) Authority to Contract
Government officers must have express or implied authority to enter contracts.
Otherwise, contracts may be declared void or unenforceable.
b) Sovereign Immunity
Indian Constitution and case law reject absolute sovereign immunity for contracts.
Government can be sued for breach like any other party.
c) Dispute Resolution
Many government contracts provide for arbitration clauses.
Courts maintain jurisdiction to adjudicate disputes unless otherwise barred.
7. Conclusion
Article 299 of the Indian Constitution provides the constitutional basis for government contracts, ensuring contracts are entered into by authorized persons on behalf of the government. The government’s contractual liability is governed by the same principles as those applicable to private parties, ensuring fairness and accountability.
The judiciary has repeatedly upheld that the government cannot shirk its obligations under contracts on the basis of sovereignty or status and must perform its contractual duties in good faith.
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