National Management Programme

(NMP)
1

LEGAL ASPECTS OF BUSINESS

(LAB)

Prof. Parul Gupta

PhD (Faculty of Law-JMI, New Delhi), LL.M., PGDBM

Dr. Parul Gupta

 SESSION 4
2

 Tenders and Its’ Types

 Swiss Challenge Method of
Tendering,
 Standard Form Contracts,
 Letter of Intent &
 Memorandum of Understanding
 Quiz One – Session 1 to 3
Dr. Parul Gupta
 Tender and Its’ Types
3

Tender – An Invitation to Offer

A letter from one party to another
acknowledging or expressing willingness
and ability to do business

Types
 Open Tenders
 Select /Invited/ Limited Tenders

 Multi Stage Tenders

 Negotiated/ Single Tenders

Dr. Parul Gupta

 Tender
4

Issue of Tender

 Expressions of Interest (EOI)

 Request for Information (RFI)

 Request for Proposal (RFP)

 Request for Quotation (RFQ)

 Request for Tender (RFT)

Dr. Parul Gupta

 Tendering Process
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1. Tender process is determined

2. Request for tender (RFT) is prepared
invitation to tender, request for proposal (RFP), expression of interest (EOI), and call for

bids etc .
 Tender Request Documents
 Description of the goods and services to be procured
 Conditions of tender
 Evaluation criteria
 Submission content and format
 Process rules and information
 Conditions of Contract

Dr. Parul Gupta

 Tendering Process
6

3. Tenders are invited

4. Suppliers respond
5. Evaluation and selection
6. Notification and debriefing
7. Contracts established and managed

In Canada- Contract A & Contract B

Dr. Parul Gupta

 Swiss Challenge Method of Tendering
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 An innovative method adopted by governments for
awarding contracts.
 Suo motu unsolicited Proposals

 Solicited Proposals at the behest of the

Government

 Two parties in this method

1. Original Proponent
2. Challengers
 The original proposer shall have the opportunity to take up
the project on highest offer, and in the event he refuses, the
highest bidder shall have right to implement the project.

Dr. Parul Gupta

 Swiss Challenge Method of Tendering
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Case 5.1: Ravi Development Vs Shree Krishna

Prathishthan and Others

Discussion Point
 Was the award of project to Developers,
legal?

Take Away

Dr. Parul Gupta

 Swiss Challenge Method of Tendering
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 The Supreme Court provided broad parameters to be followed by

the state/authority for smooth implementation of SCM
 The state/authority should publish in advance the nature of SCM
and particulars;
 publish the nature of projects that can come under such method;

 mention/notify the authorities to be approached

 mention/notify the various fields of the projects

 set rules regarding time limits on the approval of the project and
respective bidding;
 the rules should be followed after a project has been approved by
the respective authorities;
 all persons interested in such developmental activities should be
given equal and sufficient opportunity to participate in such
venture and there should be healthy inter-se competition amongst
such developers.

Dr. Parul Gupta

 Bid Security/Earnest Money
Deposit (EMD)
10

A bid security is an amount of money that

may be calculated as a percentage of the
budget estimate of a procurement
requirement or a percentage of a bidder’s
bid price.
 Required of firms that submit offers in
response to an invitation for bids
 Used by the client as a protection against
bidders withdrawing their bids prior to the
end of their bid validity period, or for
refusing to sign the contract.
Dr. Parul Gupta
 Bid Security/Earnest Money Deposit
(EMD)
11

 The bid security must be surrendered

to the client if the bidder:

 (i) withdraws their bid before the end of

the bid validity period,
 (ii) fails to sign the contract after the
notification of award, or
 (iii) fails to provide a performance
security, if required.

Dr. Parul Gupta

 Bid Security/Earnest Money Deposit
(EMD) – Legal Position
12

“An offer can be withdrawn before its

acceptance”

Case 5.2:National Highways Authority

of India v. Ganga Enterprises

Discussion Point
Whether the forfeiture of security deposit is
contrary to rights provided by Indian Contract
Act?
Dr. Parul Gupta
 Earnest Money Deposits (EMD)
13

 To ensure that a Bidder does not submit a Dummy

Bid or back out at time of freezing the contract, the
company inviting the tenders collects some
refundable fee from each bidder, which is called
EMD.
 EMD is returned when all Bids are opened & tender
is awarded.
 After Bid is opened, if a Bidders refuses to take the
contract, than his EMD is forfeited.
 If the bidder enters into the contract then EMD
operates as part payment and is adjusted against
final payment.
Dr. Parul Gupta
 Earnest Money Deposits (EMD)
14

Case5.3: Shree Hanuman Cotton Mills & Ors

v. Tata Air-Craft Ltd.

Discussion Point
Could the EMD be considered as part
payment?

Take Away
Dr. Parul Gupta
 Earnest Money Deposits (EMD)
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Case: Shree Hanuman Cotton Mills & Ors v. Tata Air-Craft Ltd.
For a deposit by a purchaser to be treated as earnest money the 'following
conditions must be satisfied.

(i) it must be given at the moment at which the contract is

concluded;
(ii) it represents a guarantee that the contract will be fulfilled
or, in other words, 'earnest' is given to bind the contract;
(iii) it is a part of the purchase price when the transaction is
carried out;
(iv) it is forfeited when the transaction fails by reason of the
default or failure of the purchaser; and
(v) unless there is anything to the contrary in the terms of the
contract, on default committed by the buyer, the seller is
entitled to forfeit the earnest.
Dr. Parul Gupta
 Performance Security
16

 It is an amount guarantee for the

performance of a contract
 It is not a part of the purchase price and can
not be adjusted towards the final purchase
price.
 It can not be forfeited unless a damage is
proved to have happened due to the breach of
contract.
 Without full proof of loss, forfeiture of
security deposit will amount to penalty.

Dr. Parul Gupta

 Letter of Intent (LOI)
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 A letter of intent is generally an agreement to

agree.
 It outlines the terms between parties who
have not formalized an agreement into a
contract.
 Letters of intent are generally not binding
and unenforceable.
 Such letters indicate an intention to do
something at a later date. They may also be
called statements of purpose.

Dr. Parul Gupta

 Standard Form Contract
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 Standard contracts are contracts which are drafted

by one party and signed by another party without
any modification or change.

 These contracts are criticized for killing the

bargaining power of the weaker party and open up
wide opportunity for exploitation.

 In the case of commercial contracts courts have

repeatedly held that contracts even if entered into
the standard format, are meant to be performed
and not to be avoided.
Dr. Parul Gupta
 Standard Form Contract
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Unenforceability of SFC

 If it is shown that consent is obtained by fraud,

mistake or duress a consent given by party to a
contract is vitiated and SFC can not be enforced.
 An unfair and unreasonable contact or an unfair
and unreasonable clause in a contract, entered
into between parties who are not equal in
bargaining power, will not be enforced.

Dr. Parul Gupta

 Remedies in Standard Form Contract
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1. Reasonable Notice
Hender v. Steve
2. Notice should be contemporaneous with the
contract
Olley v. M C Ltd.
3. Fundamental breach of contract
Alex v. Railway Executive
4. Unreasonable terms
M Siddalingappa v. T Nataraj

Dr. Parul Gupta

 21

QUIZ ONE
SESSION 1 TO 3

Dr. Parul Gupta

 NEXT SESSION
22

SESSION 5

 Void Agreements
 Wagering Agreements
 Contingent Contracts

Dr. Parul Gupta

 23

Dr. Parul Gupta