No matter how big or small, local governments enter into hundreds of contracts throughout the course of the year. Whether you contract using strategic contracting procedures or the default contracting procedures [Chapter 6 of the Local Government Regulation], basic contract principles will apply.
In this series, Kaden Boriss will re-acquaint you with these basic contract principles.
Today's topic: Agreement
There are four key elements needed to establish any contract:
(1) Agreement; (2) Consideration; (3) Intention to be legally bound; (4) Certainty of terms.
Classically, agreement is reached by one person making an offer and another party accepting that offer. For an agreement (necessary to create a binding contract), the acceptance needs to be in the same terms as the offer.
If an "acceptance" differs in any material way from the offer, no contract is created. The "acceptance" becomes a counter offer.
The most obvious form of offer for local government is a tender. If Council's "acceptance" differs in any way from the tender, it becomes a counter-offer.
Top Tip:
Council should maintain control of the tender process. If a preferred tender has an unacceptable term, Council should invite the tenderer to withdraw the qualification (ie. change its offer). If Council counter-offers, Council has ceded control of the process of acceptance to the tenderer. Council may wish to accept another tender (eg. due to a delayed response from the preferred tenderer).
If another tender is accepted (without Council effectively withdrawing its counter-offer) Council is exposed to the preferred tenderer accepting Council's offer. Council would then have two contractors for the one contract. Risk profile: Catastrophic!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
