Tenders and Contracts – Explained – Part of the Contractify series

Business, General, Sales

Tenders are a very efficient and transparent (hopefully) way for companies/governments to get the best bids by allowing competition and having a strict qualification criteria in order to filter out the companies/firms that might not be aligned in terms of experience, size, qualification, turnover etc. The margins are very fair and having fulfilled government contracts adds to the credibility of the company.

The tender process can be little tricky for first timers and it is very easy to get overwhelmed by it all. Here in this article we would be discussing the legal side of tenders. We would be covering “how to apply for a government tender” in a separate article all together.

A tender is in the same category as that of a quotation of prices. Till the time the order is placed, the contract does not arise. So please keep in mind, that there is difference between acceptance of a tender and placing of order, where in the latter only does a contract arise.

Another point to be noted is that despite your successfully getting the tender, there could be certain cases in which you might not get orders and hence no contracts get made – this is completely acceptable.

No obligation to accept tender or lowest tender

A party inviting tenders does not necessarily have to accept the tender, nor is it bound to accept the lowest tender. But the Government or any of its agencies cannot pick up and choose arbitrarily. Hence there are other criteria’s that are taken into consideration and bids are broken into technical bids/financial bids etc.

Article 14 of the Constitution

Equality before law The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth. This article is extremely important as based on this, the Government, its agencies, or others cannot practice favoritism and favor one party over the other without sound and logical reasoning.

Liability for failure to consider a tender

It is the responsibility of the inviting authority to consider a tender that is submitted and fits the qualifications mentioned in the criteria, i.e. the submission is a valid one. In case your valid submission is not considered then the court can penalize the guilty officers as this is against the principles of fairness and also in contradiction of Article 14.

Refund of EMD (Earnest Money Deposit)

In case the opening and acceptance of the tender is postponed then, the tendered is entitled to withdraw his tender and is entitled to a refund of the EMD. In case the EMD is not refunded in due course of time, then an interest is applicable on the EMD. In case the tender is rejected in the pre-qualifying stage then the forfeiture of the EMD without a show-cause notice is illegal.

Non-Compliance with Requirements

In case the tender inviting authority changes the requirements and given the tenderer’s an opportunity to make changes to the tender to change the quotations. The tenderer to whom the contract is awarded refuses to comply with the supply order. In this case the authority is well within its rights to cancel the contract as well as the order.


Blacklisting a contractor happens when the tenderer is unable to perform any part of the contract. Hence while applying for tenders, there is a condition that the vendor/contractor/tenderer should not have been blacklisted before. The power of blacklisting lies in the hands of the party that is allocating the contracts.

Hopefully with this article some of your questions around contract laws with respect to tenders would have been cleared. To get more details you can get in touch with us at contactus@dignitasdigital.com

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