Administrative Contracts in General
This unit is intended to acquaint students with the nature generally of and the formation and object of administrative contracts. Administrative contracts are very much important in ETHIOPIA under current settings .some people say it is bad to have too much interference in the private sphere in the era of privatization. The government should regulate the market being another argument. Leaving aside the literary arguments, legally Ethiopia has devoted one title in its civil code to specifically deal with administrative contracts. In addition to this, we have procurement proclamation to enable equitable, efficient and effective procurement. In this section, we will have something to say on Ethiopian administrative contract.
At the end of the unit students will be able to
define administrative contracts
Ø form administrative contracts.
Ø distinguish administrative contracts from other types of contracts.
Ø understand the views the two prominent legal systems have towards administrative contracts
Ø Know the historical setting of administrative contracts.
1.1 Brief Genesis of Administrative Contracts
Though hard to locate the exact time, one can still validly locate philosophical and economic backgrounds of administrative contracts.
Back in the days of Adam Smith who preached the laissez faire argument with the effect of diametrically insulating the state from the market, the role of the state was exponentially limited to enabling the state to undertake only its “traditional” functions.
As per Adam Smith, the state was advised to let the market alone. The state should put its hands off the market but without forgetting to create internal peace and order, facilitating the market by formulating a peaceful environment and without directly intervening in the market. To this end, the state should establish institutions like the police, courts and parliaments. Such an impact on the economy as caused by leaving the market alone however would not outlive such a condition as the Great Depression. The Great Depression proved the fact that markets cannot operate by their forces alone-rather to some extent the state should regulate the market. Next generation political economists devised the WELFARE state where we have a state which regulates the market- that provides public services such as education ,health, transport, water, light ,sanitation, recreation etc.
Thus, apart from its traditional functions, the state was also conferred with those additional functions listed above. Basically the state used to institutionalize its coercived force to carry out its protection function. But with the growth in the type and nature of functions and because the appropriate way of attaining goals as the case may be is entering into contract. Either by its coercive force or its right to enter in to contract the state strives to carry out its ever growing functions.
To this end of utilizing its contracting capacity, government enters into a special type of contract called administrative contract. Note that it is from this background, apart from other things, that administrative contracts derive their peculiar feature.
1.2 Administrative Contracts and Other Forms of
Contracts: General Overview
Because of the need to carry out its functions, government, via its branches, will embark upon different activities which inevitably will invite the interplay of its branches and the private sector. These branches other wise known as administrative agencies assist government to properly take its tasks of service provision among other things. It is therefore while these agencies carry out their functions that they use the law of administrative contracts to their ends. The ends are public services, the means administrative contracts.
If this is so, administrative contracts are contracts under the strict sense of the law but only an” administrative” one (see for example Art. 1676(2) cum Art.1675 of Ethiopian civil code with Art.3131 of the same).
But this nature of the contract i.e. being an administrative contract makes the same different from the beginning to the end from other types of contracts that we know.
Our inquiry therefore will be what is there in administrative contracts? What grain of difference does the qualification administrative add over non-qualified contracts?
One basic addition by the qualification is associated with prerogative matters. Because administrative agencies favorably enjoy the presumption of acting on behalf of the public and because public interest is overriding enough to put aside even basic principles of the law the agencies will enter into an arrangement where the platform is squarely fitted to their play than to the other contracting party.
When talking about administrative contracts, hence, one is talking about a contract where the two parties are unequal. Being a contract between unequal parties from the onset, at the end of the day, it will end up entitling parties in unequal manner.
If this is so, how should we define administrative contracts? Well as noted earlier the general contract title of the civil code is applicable to this case because of Articles 1676, 3131 and Art. 1675.
“A contract is an agreement whereby two or more persons as between themselves create, vary or extinguish obligations of a proprietary nature”.
Administrative contracts do share all of the above elements. The differences, however, extend beyond the requirements of Art. 1675 far in to the requirements of Art.3132 which partly reads as: “A contract shall be deemed to be an administrative contract where”
a. It is expressly qualified as such by the law or by the parties; or
b. It is connected with an activity of the public service and implies a permanent participation of the party contracting with the administrative authorities in the execution of such service.
Let us examine the elements of Art.3132:“Expressly qualified as such by the law or the parties”
According to this expression, a contract (remember Art.1675) will be an administrative contract if the law expressly qualifies it as an administrative contract. To this end, the law clearly enumerates what can be considered as administrative contract. But what if the law expressly disqualifies a contract to be an administrative contract? Both instances are the experiences of Ethiopia. Let us begin with the first. In the civil code we have such articles as Article 3207 and 3244 which expressly qualify contracts as administrative contracts.
As to the second instance, we have the Mining Proclamation No.52/1993 which disqualifies contracts concluded by the administrative authorities with other parties under Art. 55(2).
The second implication of Art.3132 (1) is that parties may qualify expressly a contract as an administrative contract. An issue worth raising at this juncture will be ‘are all contracts administrative contracts merely because they are qualified as such by the parties? ’
Among other things, a contract qualified as such by the parties on face value cannot be considered as an administrative contract unless one of the parties is an administrative authority.
For one other reason to be consequently discussed i.e. for content consideration a contract merely qualified as an administrative contract by the parties will not also be an administrative contract. What about a contract that involves an administrative authority but not qualified as such by the parties? Stated otherwise are all contracts that make one of the parties an administrative authority administrative contracts? René David says
As a French legal scholar and as I think it fit, in our classification of law, public law should be distinguished from private law. Especially it is important to separate civil law from administrative law…contracts made by public officials have this [special trait] which enable us call them administrative contracts and treat them separately from civil law.[emphasis]
This, as it may, the civil code proceeds to say-“ … Connected with an activity of the public service and implies a permanent participation of the party contracting with the administrative authorities in the execution of such service”
The previous element is more or less concerned with the form of the contract, meaning the name the parties give to their contract when they first form it. The form it takes confers the contract a special nature.
Here we are concerned with the content of the contract, that is itsobject which determines the nature of the contract. Based on the object and the manner of meeting their object together with the type of the parties and their manner of participation in executing the object of the contract, we have another mechanism of distinguishing administrative contracts from ordinary contracts.
The object: this is one of the ways which is helpful to distinguish administrative contracts from the rest of the contracts.Art.3207 (1) identifies one of the objects as an activity of a public service”. In turn we have to consider what a public service is in our law.
Any activity which a public community has decided to perform for the reason that it to be necessary in the general interest and considered that private initiative was inadequate for carrying it out shall constitute a public service.
According to Art 3207(1) two reasons make “any activity” a “public service” without which the activity cannot be considered so. What are these reasons? One of these reasons is necessity. This necessity should be the need of the general interest. So any thing necessary and considered as such by a public community to the general interest will fulfill the first requirement of Art. 3207(1). The second reason is inadequacy on the part of the private sector. Thus a public service is any activity but which private individuals on their initiative cannot carry out among other things because of financial constraints.
Thus only a contract that has made its object ‘‘an activity of the public service…” will have the chance to qualify as an administrative contract.
Next to this, the manner of participation on the part of the contractor determines the nature of the contract. As such a contract to be an administrative contract should imply a permanent participation of the contractor… in the execution of such service. Let us in turn see what permanent participation is.
Does permanent under Art. 3132(b) imply bondage? How long should a contract last?
Letting a contract to last forever jeopardizes the basic rights of an individual. Contracts should not be servitudes. Our first consideration therefore should be the individual. Thus we are saying that permanent participation of Art. 3132(b) must not imply the indefinite and forever nature of the relationship. Further “permanent” should imply continuous, uninterrupted, regular and normal participation of the contractor in the relationship and the expansion of a public service.
One other issue worth mentioning is the implication the “or” conjunctive has under Art. 3132(1) & (b). Does the conjunctive make the requirements optional or should we expect the cumulative applications of sub-articles (a) & (b)?
To elucidate, if we are to make the requirements under Art. 3132 optional then we are saying that mere qualification of a contract as an administrative contract will make the same an administrative contract. Sticking to the second extreme will however force us to consider all the elements under Art. 3132 and their affirmative existence to say a contract and administrative contract. Which one position do you think is reasonable? Why?
No less important is the difference between “administrative agencies’’ and “public enterprises”. We say this is important because the law prescribes in addition the nature of one of the parties to an administrative contract .As observed above, the law says one of the parties to an administrative contract should be an administrative authority. But what is an administrative authority? Does it also mean public enterprise? Consider Art 2(f) of Proclamation No.430/2005- “Procuring entity means public body, which is partly or wholly financed by Federal Government budget, higher education institutions and public institutions of like nature”.
From this it is possible to infer that at least two things make an entity an administrative body. The first is the source of income of the entity. If the entity partly or wholly derives its income from the government, there is a possibility to consider it a public body which can enter into administrative contracts. On the other hand the purpose of the organ makes it an administrative body.
Comparison: Genre and View Comparison
Here our basic concern will be comparing and contrasting administrative contracts and other types of contracts on one hand, and the common law and civil law on the other hand.
Administrative contracts are similar to other types of contracts because of their formation, validity requirements and the form. On the other hand, administrative contracts are different from other contracts because of their formation, content and execution.
Let us briefly explain the points- But first what do you think are the views of the two legal systems towards administrative contracts?
The common law views administrative contracts just like other ordinary contracts whose consequences will show up to be the treatment of parties as equal members to the venture. No party will enjoy priority. Both are equal parties to and in the case. As a consequent incidence, the common law requires no new or special law governing administrative contracts. There is only one contract law regime that governs all the instances.
These outlooks will naturally lead to the adjudication of cases that involve administrative contracts by the ordinary courts of law.
Perspective change is observable under the civil law system where parties to administrative contracts are unequal, whose case will be governed by a special regime and adjudicated by special tribunals (i.e. administrative tribunals). This is specially the case in France.
1.3 Formation of Administrative Contracts.
Legally the life of a contract begins at its formation after parties have consented to be bound by it, if parties have the capacity to legally express their consent and if the object of their contract is succinctly defined, plausible and lawful. [Art. 1678]
Short of this, the law either declares the contracts void or puts the possibility of voidability as the case may be.
Normally the requirements under Art. 1678 are those which determine the viability of any contract. Under this very normal condition, exceptional situations are envisaged with regard to formality requirements. In addition to consent and object requirements, the law also shows the possibility of agreeing in favor of a given form or a form by the normal operations of the law [art.1678 (a) and Art. 1719 by virtue of Art. 1676]. Thus, the law either prescribes adherence to a certain form (Arts. 1724 & 1725), or parties may agree to make their contracts in a written form. Art.1724 makes mandatory that contracts with administrative authorities be made following a written form. Any contract to which a government agency is a party, including any type of employment contract, should be made in writing. In public administration, officials do not stay in office indefinitely rather they may leave their office by election, removal or resignation. Once they leave their office it is difficult to ascertain the content of the contract entered into during their stay in office but that continues to be effective even after they leave their office. Moreover, oral contract opens a room for corruption since keeping information is difficult.
As was noted before, Art. 1676 warrants the use of Title XII on contracts in General by explicitly stating “… regardless of the nature thereof and the parties there to.” Because of this, Art. 1678 and consequent provisions that govern the formation of a valid contract will also be valuable in our consideration. In addition, Articles 3140-3145 and 3134-3136 will be considered. By presuming that you have made an intelligible discussion on the General contracts aspect of the law, our concentration will be on the special part of the law that governs administrative contracts proper. Let us consider the validity requirements.
1.3.1 Validity Requirements
There is in general no better evidence of the justice of an arrangement than the fact that all persons whose interests are affected by it have freely and with full knowledge consented to it. In the famous maxim of Hobbes ‘‘there is not ordinarily a greater sign of the equal distribution of any thing than that every man is contented with his share”.
Consent is evidential of a right and constitutive of the same. Because of this philosophy therefore we give a paramount place to consent. Short of consent no evidence and no right.
These justifications can be gathered from Art. 1679 and Art. 1680, while the former talks about the constitutive nature of consent, the latter talks about the evidentiary role of the same. Read Art. 3134 and identify the role played by consent. What is the role?
Under Art. 3134, it is the contract concluded by the administrative agencies that proves the existence of consent. Meaning mere conclusion of a contract by an administrative body implies the existence of consent on the part of the administrative body. It partly reads
“…, the conclusion of a contract by the administrative authorities implies an express manifestation of will on their part”
Hence, we derive consent from the specific form that the contract follows. Because Art.1724 prescribes the making of an administrative contract in a written form, this is indicative of the existence of consent on the part of the administrative agencies.
As a formal and not simple agreement the law does not require the mere existence of consent but its manifestation in some particular form.
The law requires therefore proving consent as expressed by the parties. What can be counted as special under administrative contracts however may be the insufficiency of implied consent. Ordinary contracts envisage the possibility of deriving consent from silence under exceptional circumstances. On the part of administrative contacts always one has to prove the existence of express consent. Nowhere therefore silence does amount to acceptance. To be specific, Art.3134 (2) says “Where an authority competent to approve a contract keeps silent, such silence shall not, in the absence of a formal provision, be deemed to amount to approval.”
Administrative contracts are made by artificial persons be it the administrative agency or the contractor which is usually a business organization.
Capacity, under such circumstances, means a different thing. It cannot be about a mental state nor can it be about chronology. Rather, capacity is all about establishment, registration or license.
Generally, capacity is either legal or technical. Let us begin with the contractor.
Basically any juridical or physical person that wants to conclude a contract with administrative agencies should have:
A. Technical and professional capacity
B. Legal capacity
C. Financial capacity
D. Fiscal capacity
What about administrative authorities? What capacity should they have?
a. The administrative agency should have legal personality which means it should be established through a proclamation or regulation.
b. Next to this validity question and after its positive determination the agency should possess the capacity to enter into contracts .Such capacity may emanate from law or practice (i.e. specific activities or functions). Sometimes capacity may also emanate from authorization. Authorization might be a single venture or still a sort of double standard effectuated in a cumulative modicum with other prerequisites.
c. An administrative agency is still duty bound to assert its financial capacity. To this end “procuring entities shall be responsible for certifying the availability of funds to support the procurement activity before signing a contract “(Art.7(1) (e) of Proclamation No.430/2005)
Here it is worth raising two questions. The first is, “Does lack of credit have a consequence of invalidating administrative contract?” the second is Can such an act be counted as ultra vies?
To address these questions, it is good to consider articles 3142 & 401 of the civil code and Art.7 (1) (c) of the proclamation. In a crystal clear phraseology, Art. 3142 validates an administrative contract formulated regardless of credit requirement. To be specific, acontract concluded by an administrative authority shall be valid not with standing that such authority has not received the necessary credits for the performance of the contract. On the other hand, Art. 401(1) tries to expose what an ultra vires constitutes. Thus,Acts performed by the bodies referred to in this chapter are in excess of the powers given to them by law or without the absence of the conditions or formalities required by law shall be of no effect.
Art 401 serves at least two purposes. Firstly it tries to tell us what ultra vires activities are. Next to this, it sanctions the activities by declaring them as nearly void.
At other times consent might not be this. Rather consent might be approval (Art. 3144) where by no consent is expected to be expressed until and unless “…such approval is given.
This is usually the case “where the conclusion of the contract is subjected to the necessity of a further approval…”
The object of a valid contract should be lawful and possible next to being defined (determined). Art 1711 leaves the parties to freely determine the object of their contracts the extent of the freedom however being “the restrictions and prohibitions as are provided by law.”
You can therefore infer from this that both parties involved in a contract have a say on the object of the contract. Art.1711 thus underscores the fact that object determination is not one way traffic. Peculiar however to administrative contracts, administrative agencies are entitled to formulate in advance model specification, general clauses and common directives (Art 3135) .Predominantly administrative contracts have objects determined by administrative agencies.
However, it is good to note the fact that the legal limit under Art. 1716 is applicable to objects determined by administrative contracts. Can you justify this assertion?
Next to insuring the participation of parties in determining the object of their contracts, the law also wants to maintain the integrity of the object on the face of the law. Though determined by anyone, still the object should be clearly stated in an understandable manner (Art.1714).
An administrative contract should also have a possible and lawful object. To a very large extent parties are free to agree together upon any matter as they please. Limitations are however there-party in the interests of parties and partly on behalf of the public. There are instances where the law admits of no abatement and many in which it will admit of no addition by way of agreement.
Under normal circumstances, compliance to formality requirements is not necessary. (Art.1678(c))
Never the less under those circumstances where the law prescribes, any one has to comply with the prescription. One instance of form prescribed by the law relates to any contract binding the Government or a public administration” underArt.1724)
The requirements of the law here are two. The contract should be made in writing and it should be registered. We can explain of the two fold purposes of the law.
- Designed as a pre-appointed evidence of the fact of consent and of its forms to the intent that this method of defining rights and liabilities may be provided with the safeguards of permanence, Certainty and publicity. Because a contract is law (Art.1731) and because some of the features of a good law with an “ internal morality” per Lon Fuller are permanence, determinacy and publicity writing down a contract caters” the law” these qualities. The quality of publicity conferred on contracts by following Art. 1724 does also serve the ends of Art12 of the FDRE constitution by manifesting the transparency theory.
Any necessary formality has the effect of drawing a sharp line between the preliminary negotiations and the actual agreement and so prevents the parties from drifting by inadvertence into unconsidered consent. What is there in the document expresses the consent. One cannot later modify the consent as written by the one expressed orally.
On top of the prescription under Art 1724, some administrative contracts should be formed following procedures of tender. This will be discussed in depth in our consequent discussion of “modalities of formation.”
1.3.2 Modalities of Formation.
Administrative contracts shoved be concluded following the formality requirements that the law prescribes. Such a provision is available under the General contracts part of the law. This being the rule, some administrative contracts need additional modalities of formation. Accordingly, we have instances when administrative contracts are concluded following a procedure of tender.
As art 3147(1) makes it clear by utilizing “may be…” it is optional that such a procedure is followed. To show the possibility however the law reads “Administrative contracts (may be) concluded by the procedure of allocation by tender” (emphasis)
Once however we are channeled to make an administrative contract by the procedure of allocation by tender, we will act to the contrary i.e. fail short of allocating by tender, “… under pain of nullity.”
The natural questions will be “Why are we channeled as such And when are we channeled?”
To begin with the second, we are forced to conclude an administrative contract by allocation “… whe never the law imposes such obligation”. Let us consider the full text of Art 3147(2). “(Administrative contracts) shall be concluded by (the procedure of allocation by tender)…, whenever the law imposes such obligation.”
Hence once the law dictates us to conclude an administrative contract by the procedure of allocation by tender we have to do it in that way the consequence of not following the diction being nullity.
Among other things the law prescribes to meet the objectives of transparency and taking into account, the sensitivity of the obligation. Thus tender minimizes potential dealings between administrative officials and the other contracting party. And secondly because after all the contract is to be concluded to provide the best for the public, the procedure of tender aims at selecting the best contracting party in terms of reasonable price and modest quality.
By taking these rationales into account the law prescribes adherence to the procedure with the procedure under Art.3148-3169. To this end, administrative contracts that should be made by the procedure of allocation are governed by Articles 3148-3169.
If the contract is to be concluded after allocation, Art.3148 tells us that “the allocation shall be notified to the public in the manner prescribed by administrative regulations or in default… in the manner which appears the most appropriate”.
The law, in this case, is concerned not only with the publicity issue but even with the mechanism of attaining this publicity. The normal way of publicity is through electronic media and printing media. Sometimes administrative agencies will tell the public through electronic media to read and consider a given series of a newspaper usually to better comprehend with the content of the notice.
The minimum threshold of the content of the notice of allocation is available under Art. 3149 fashioned in a mandatory spirit but effectuates in an optional manner i.e. what happens if the notice fails to include one of the lists under Art.3149?
Though the law is silent on this issue, the publication of those issues under Art.3149 limits the prerogatives of administrative agencies from arbitrarily modifying the specifications. (See Art.3150 cum Art 3149) Mind you specifications can still be modified by a new publication (Art.3150). So, isn’t this tantamount to saying “do not modify the old specification with a new one but only the new with a new one?”
One other issue worth noting is the status of this publication under Art. 3148. Should we consider it as an offer or as a declaration of intention? Note that an offer has a quite different legal consequence from a declaration of intention. See for example Art.1690 and 1687 on this issue.
After administrative agencies declare their intention by notifying the public about the allocation, “The contractors or suppliers who intend to present themselves as tenderers shall deposit in the place indicated and within the time specified by the specifications (a declaration of their intention) to tender and their tender.” (Art.3153).
“The declaration of intention (offer) to tender shall indicate the name, first name, qualifications and address of the candidate.” (Art.3154 (1)]
“The [tender] shall contain an offer of the price and the undertakings of the candidate” [Art. 3155(1)]
Thee above provisions show us the need to comply with formality requirements on the event of declaring our intention. Because they are about declaration of intention, we should not think of the formation of an administrative contract at this level. What else should we consider?
As to Art.3159, for example, “The office of allocations shall firstly take cognizance of the declarations of intention to tender.” To verify whether these have been regularly deposited and whether the tenderer fulfill the conditions required for admission to the allocation. “This verification is not to determine the successful tenderer. Rather it is to determine admission to the allocation”.
A provisional successful tenderer is the one who makes the “most advantageous tender for the administrative authorities (Art 3164 (1). Among other things the most advantageous tender is determined by the offered price. To this end Article 3164(2) reads “for this purpose, the office shall take into account the price offered and all the modalities of the tender in conformity with the specifications”.
Even the designation of a provisional successful tenderer does not imply the conclusion of an administrative contract.
For that matter the office (of allocation) need not designate any provisional successful tenderer where regulations of the allocation prescribe that the administrative authorities do not intend to negotiate beyond a certain price. (Art 3165(1)).
On the advent of approval, the contract shall be concluded. Art. 3168 says the successful tenderer will no more be qualified as a provisional but a permanent successful tenderer.
This being one aspect of forming administrative contracts as governed by the civil code, we have other modalities of forming administrative contracts under proclamation No 430/2005. We will briefly consider the procedures under this proclamation.