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Date of contract expiry

(Querist) 14 January 2014 This query is : Resolved 
In contracts, generally a LOA ( letter of award) of the contract is issued to the successful bidder prior to the formal signing of contract which takes place about 1-2 months after the LOA is issued.

Based on the LOA the contractor mobilizes his resources however the final contract is signed between the parties after the contractor submits the PBG ( performance bank guarantee) which usually takes 1-2 months as stated above.

The question are:

1. If the validity of the contract is (say) six months, should we count the contract expiry date from the date of issue of LOA or the from the date of formal signing of the contract?

2. What is the legal implication of the LOA date?
Guest (Expert) 14 January 2014
Neither the LOA nor the PBG, but on the date of signing of the contractual agreement between both the principal and the contractor, unless a specific date of start of the job is mentioned in the contract agreement.

LOA is merely indicative of the acceptance of the tender and approval of contract in favour of the contractor, subject to fulfillment of other formalities of the contract before start of the job.
Dr J C Vashista (Expert) 15 January 2014
The terms and conditions mentioned in the contract will explain whether LOA or PBG date will determine the period.
Very well explained by Sh. PS Dhingra I have similar view.
Murali Krishna (Expert) 15 January 2014
In many government tenders, it is a term that even in absence of a formal agreement entered into between parties, Letter of Acceptance (LOA) shall be treated as agreement for all purposes. The Supreme Court also upheld such a term. Hence, find out terms and conditions of the tender and GCC.
Rajendra K Goyal (Expert) 15 January 2014
The same is valid from the date of signing of the formal agreement unless agreed / specified otherwise.
Guest (Expert) 15 January 2014
Mr. Murali,

I wonder, if there is no formal agreement in Government contracts! For my knowledge, would you please provide some link of SC judgment in a Government contract case where agreement would not have been entered in to by the tendering authority?

Further, the querist has nowhere mentioned that agreement was not entered in to with the contractor. The querist is a Superintending Engineer in some organisation. You are also a Government employee and would be knowing whether in Government contracts, any work can start without signing of an agreement. So far as I understand, in each and every civil engineering contract agreement is entered in to without fail.

Also, he has very clearly made a mention in his query about formal signing of contract. Do you think that signing of a contract can be considered as some document other than an agreement?

Also tenders usually do not contain the actual starting and expiry date of a project. Normally, only a period of contract in terms of years, months or days is specified in a tender document.

Now with reference to your reply, a question to ponder upon by you is, suppose date of expiry of contract is given in the tender, there is no agreement, letter of award is delayed abnormally due to some administrative or technical reasons and the date, as per tender document, expires by the time the LOA is issued. What would be the position in that case?
Murali Krishna (Expert) 15 January 2014
Mr. Dhingra, please once again read my reply. I did not say, that there need not be formal agreements in govt. contracts. Don't read things which are not said.

I said "it is a term that even in absence of a formal agreement entered into between parties, Letter of Acceptance (LOA) shall be treated as agreement for all purposes". You can go through the tender forms. The Supreme Court upheld such a term holding that in the absence of formal agreement, term in the LOA can be treated as agreement. Here, I desist from giving citation for, instead of looking at ratio decidendi, people make arguments on extraneous matters, which require further explanation.

As far as the question to ponder, I really feel it is silly (no offence intended) because logic of efflux of time, applies here, unless parties agree to further extend the time. Further, in govt. tenders, normally, it is a term that once the tender is opened, offer should be kept open for ninety days.

Guest (Expert) 15 January 2014
Mr. Murali,

Your own reply, "In many government tenders, it is a term that even in absence of a formal agreement entered into between parties, Letter of Acceptance (LOA) shall be treated as agreement for all purposes. The Supreme Court also upheld such a term. Hence, find out terms and conditions of the tender and GCC," was not relevant to the context of the query. It clearly reveals that you had not read the question of the querist properly before making a reply.

Further, you have not provided the link of the SC judgment, which you made a mention.

About my query, you are free to treat that as silly for your self satisfaction, but that was with particular context of your own silly reply as was quite irrelevant to the context of the query, when you very well know that in Government contracts the date of commencement and completion of project is specified either in the agreement or in the work order, not in the tender document.
Murali Krishna (Expert) 15 January 2014
Mr.Dhingra, I leave it to your wisdom.
Guest (Expert) 15 January 2014
Mr. Murali,

Won't you provide me the link of your referred SC judgment, or you desire to leave that also on my wisdom?
Devajyoti Barman (Expert) 15 January 2014
nothing to add anymore.
T. Kalaiselvan, Advocate (Expert) 15 January 2014
In the melee between two experts, whether it is confirmed that what is the date that is to be counted whether LOA or actual date of signing, has not been finalised (?)In my opinion the LOA is a mere acceptance and approval of tender/contract, the date may be counted from the date of signing the agreement, please refer to the conditions laid down in the LOA/agreement
S DEB (Querist) 15 January 2014
I thank all the participants for expressing their views. It is clear that the contract signing date is of prime importance unless a specific date is mentioned in the contract.

Thanks once again.
Guest (Expert) 15 January 2014
You are welcome.


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