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Legal Aspects of Public Procurement

Legal Aspects of Public Procurement. Portland State University ISQA 440, Governmental Procurement. What is a Contract?. A contract is an agreement between two parties that creates an obligation to perform a particular duty. A legally enforceable contract requires: An Offer

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Legal Aspects of Public Procurement

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  1. Legal Aspects of Public Procurement Portland State University ISQA 440, Governmental Procurement

  2. What is a Contract? Acontract is an agreement between two parties that creates an obligation to perform a particular duty. A legally enforceable contract requires: • An Offer • An Acceptance • Consideration • Obligation of both Parties • Legal Capacity to enter into a Contract • Lawful Subject Matter

  3. Offer and Acceptance: “A Meeting of the Minds” • A legally recognized offer and an acceptance creates a “meeting of the minds’, or mutual assent, between the parties. • Mutual Assent requires the presence of the following factors: 1. Both parties must exhibit a “contractual intent” [words spoken in jest or frustration will lack the requisite intent] 2. The terms of the offer must be clear and definite; 3. The acceptance must be clearly communicated.

  4. The Requirement for Clear and Definite Terms • Required Clarity: For terms to be legally valid, a reasonable person must be capable of readily understanding them. • Four primary areas in determining definite terms: 1. the parties; 2. time for performance (term or service schedule); 3. the price; 4. the subject matter or scope of service.

  5. Consideration: The Importance of the “Bargained Exchange.” • Consideration must be mutual. Both parties must receive something of value. • Involvement of money is not required.

  6. Competent Parties • Must have legal capacity to enter into a Contract • No Minors • No Intoxicated Persons • No Persons with diminished mental capacity • No Aliens • No Felons

  7. Subject Matter must be Legal • Can not be proscribed by law • Restraint of Trade imposes illegal and unreasonable burden on commerce by hindering competition • Commission of a Crime • Illegal Objectives • A person may not legally contract a right they do not have

  8. Mutuality of Obligation • Both parties must be bound to a promise or neither party is bound • A promise to perform an act that one is legally bound to do does not quality • Most states do not recognize moral obligations as Mutuality as there is no acceptable method of determining it

  9. Statute of Frauds • Formal Requirements; Statute of Frauds. • (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.

  10. What Authority Defines a Contract? Sources of Contract Law • Common Law– Court made case law governing contracts (primary law for service contracts) – From English Common Law, the Magna Carta, Prince John, Robin Hood, etc. • Uniform Commercial Code (UCC) • Warranty of Merchantability • Warranty for Particular Purpose

  11. Model Procurement Code • Established by American Bar Association with help from others (i.e. NIGP, NASPO) • Established in 1979, updated in 2000 • Serves as a model for public agencies to establish their own procurement code • Recognized nationally as a standard for what a code should include

  12. Anti-Competitive Practices Laws • Sherman Act (1890) • Prohibited restraint of trade • Clayton Act (1914) • Prohibits exclusive deals and tying arrangements • Robinson Patman Act (1936) • Prohibited price discrimination • Federal Trade Commission Act (1914) • Prohibits unfair competition

  13. Types of Authority • Express authority exists when a statute or code indentifies officials to take certain actions, such as sign contracts • Delegated authority occurs when a procurement official authorizes another to exercise authority on their behalf • Implied authority involves activities that are logical extensions of a person’s position, even if they are not explicitly authorized

  14. Procurement Legislation • Public procurement is limited to what is authorized by law, while the private sector can do what the law does not prohibit • Public procurement professionals should be involved with the legislative process • Influence changes, seek enabling legislation, and provide expert testimony

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