Understanding contractual obligation
It is advisable to understand interests of either party during the bidding process so as to have both parties fulfil their obligations. Illustration by Danny Barongo
What you need to know:
- Contract is something a person is legally forced to do through having signed an understanding with another party. Here, each of the parties is expected to fulfill their contractual obligations. Joseph Bahingwire writes.
Mr Adam Byarugaba, a commercial lawyer in Kampala, says failure of either of the parties to meet their contractual obligations leads to breach of the contract which in most cases leads to termination of the contracts. This may also end in court cases that are usually costly to both parties.
“The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement,” he says.
A contract is an agreement between individuals or organisations with specific terms in which there is a promise to do something in return for a valuable benefit so that value for money is achieved.
Mr Byarugaba adds that it is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competent persons, equitably made, are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed, usually even if the contract appears to be improvident or a bad bargain, as long as it did not result from fraud or un due influence.
Mr Bajurizi Jamil, another business law expert in Kampala, says the binding force of a contract is based on the fact that it demonstrates a meeting of minds of two parties in good faith.
“A contract, once formed, does not contemplate a right of a party to reject it. Contracts that were mutually entered into between parties with the capacity to contract are binding obligations and may not be set aside due to the impulse of one party or the other unless a statute provides to the contrary,” he adds.
He adds that to ensure contractual obligation, the actual work done should be measured during the performance of the contract and be reconciled upon its completion.
“Payment should be made for the final contract price, which is the total of the actual quantity of work performed,” he adds.
According to the PPDA Act 2003, a procuring and disposing entity may place a contract with price adjustment provisions for a procurement requirement that will not be completed within 18 months from the placement of a contract, in accordance with regulation 245. This can help the bidders to adhere to their contractual obligations.
Payment structure
According to the Act a payment structure and amount of payment for each procurement requirement should be determined by best practices.
A payment structure may include, advance payments and stage payments which shall be linked to specific deliverables stated in percentage terms of the defined amount.
