The government contact has become more significance in these days. Government
will have to enter into contact with private organizations in order to carry out
welfare activities. Government contract is that where one party is either
central government/state government. The contact act defines the contract as "an
agreement which is enforceable by law "
(1). But in that Act now-where mentioned
/defined about government contract. The contract must fulfill the essential
requirement of section 10 of Indian contract Act,1872:
- There should be free consent,
- Parties must be competent to enter into contract,
- Contract should be for lawful consideration and for lawful object,
Article 294: all property and assets which immediately were vesting with majesty
for the purpose of the government dominion of India and government of each
governors province shall such property and assets
vest respectively in the Union and state. and all rights, liabilities and
obligations of government of the dominion of India and governor's province which
is arising out of contract shall be the government of India and of corresponding
The union and state shall carry out any trade or business and for
that purpose, it can acquire, dispose or hold any property and can enter into
All contracts made in exercise of the executive power of the union
or state shall be expressly made by the president or by the governor of the
state, and all such contracts and the assurance of property shall be executed on
behalf of the president or governor of the state and they shall not be made
personally liable for in respect of contract or assurance made for the purpose
of the constitution nor shall any such individual person executing contract or
assurance on behalf of them shall be made personally liable.
The government of India and government of state may be sued subjects
to the provisions made by the act of parliament and legislature of state or by
virtue of powers conferred by this constitution.
Requirements of government contractSection 299 speaks about requirements to be fulfilled when entering into a
contract. these are mandatory in nature.
In New marine coal company v. union of India
- Contract to be expressly to be made by the president of India or
governor of the state.
Karam shi v. State of Bombay (2)
In this case appellant enter into contract with minister of PWB irrigation
of land. The contract was repudiated as it was not expressly made in the
name of governor of the state. the court dismissed the case by saying that
mandatory requirement of section 299 was not complied while making a
- Contract must be executed on behalf of the president of India or the
governor of the State.
D.G.Factory v. State of Rajasthan (3)
In this case there was a contract to supply a police uniform and that contract
was signed by Inspector General Police on behalf of president /governor of the
state without mentioning on behalf of president/governor of the state. The state
contents that it is not a valid contract. The Supreme Court said that, in
absence of specific rule if competent authority has signed the deed in its
official capacity, the requirement shall be deemed to have been complied with.
- Contract must be executed by the person authorized by the president of
India or governor of the state.
State of Bihar v. Karamchand karm Thapar (4)
In this case respondent company entered contract for construction of aerodrome
with Bihar government. After completion of work the dispute arouse with regard
to the payment. Matter was referred to the arbitration. The said agreement was
made in favor of governor and was signed by the executive engineer. After the
award was made, the government contended that it was signed by executive
engineer who is not an authorised person to sign so the agreement is void. The
supreme court held that there is a specific authorisation by the governor to
execute the agreement.
In this case new marine coal company supplied coal to the government of Indi,
and the government made use of coal , and when the company asked for money at
that time government says that the contract does not satisfy the requirement of
Article 299 of the constitution of India. The supreme court order the government
to pay compensation which is consumed by it, as it has derived the benefit out
of this contract.
Non - compliance
in case Mulam Chand v/s State of Madhya Pradesh
In this case supreme court held that the question of ratification in government
contract for non-compliance of Article 299 does not arise at ,all as it is not
The government contract is same as any other ordinary contract but the parties
here will be central or the state government i.e president of India and governor
of the State. Here, the contract should comply with the mandatory requirements
which is mentioned in the Article 299 of the constitution of India and also the
section 10 of Indian contract Act , 1872. The judiciary will also play a crucial
role by exercising judicial review , it will look into that there will be no
fraud and arbitrariness while entering into a contract.
- section 2(h) of the Indian contract Act, 1872.
- AIR 1964 SC 1714.
- AIR 1971 SC 141.
- AIR 1962 SC 110.
- 1964 AIR 152.
- 1968 AIR 1218.