Wednesday, March 8, 2017

Contra- Proferentem .. Think before you draft contracts

CVC website provides quite a bit of material on Public Procurement. Came across this little nugget "Doctrine of Contra- Proferentem in Contracts Management (Nirmal Goel, Technical Examiner, CVC)"  which would be very useful for government officials who tend to think that putting ambiguous conditions on the private sector entities would protect them. The basic principles as mentioned in this paper are worth remembering:

  • "when a contract provision can be interpreted in more than one way, the Court will prefer that interpretation which is more favourable to the party who has not drafted the agreement (or simply that interpretation which goes against the party who has inserted / insisted on inclusion of the alleged ambiguous clause in the agreement). "
  • "Another underlying philosophy behind this doctrine is that one should not be rewarded for his own fault. Contra- Proferentem places the cost of losses on the party who was in the best position to avoid the harm"

Advice for government tenders is also very useful :
  • "Unconditional tenders are unavoidable necessity in Government contracts. In such scenario, it becomes an added responsibility on the part of NIT framers, checkers and approvers to read, re-read and re-re-read the various provisions of the tender document and ensure that its various provisions are clear, explicit and unambiguous. For carrying out this responsibility, a) the latent, hidden or implied meanings to contract clauses are to be avoided; b) the contract conditions need to be realistic; c) all information required for working out rates by prospective bidders needs to be given in the tender document; d) technical specifications and mode of measurements should be clear; and e) the tender document should take care of various contingent event. Since many of the construction disputes are repetitive in nature, one should take lessons from them and prescribe proper provision in the tender documents to deal with them. "
  •  Besides above discussion, this doctrine has got vigilance connotation also. Many a times, ambiguous provisions are interpreted in favour of contractors. In such case, the Vigilance Organization first dispute the ambiguity itself and try to assert that there has been an attempt to create ambiguity when there was none and then tries to search malafide angle in such interpretation especially when such an interpretation has resulted into passing of undue benefits to the contractor or has caused loss of public money. So by carefully preparing tender documents, NIT framers, its checkers and approvers can protect their officials from unnecessary vigilance scrutiny also

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