Procurement manual: guide to procurement within BERR. Section D: legal framework
URN No: URN 08/1509/A4
Department for Business, Enterprise and Regulatory Reform procurement manual section D: legal framework
D. THE LEGAL FRAMEWORK
D.1 Introduction
D.2 Contracts
D.3 Intellectual Property Rights, Ownership of Results and Confidentiality
D.4 UK Legislation
D.5 EU Public Procurement Directives
D.1 INTRODUCTION
Public sector procurement must be conducted to comply with all relevant legislation and procurement processes must take into account general contract law.
This section of the Manual provides an outline of important general contract law matters together with brief explanations of relevant legislation. It is not a definitive guide to the law as it relates to procurement activity. If in doubt you should contact Legal B1 or alternatively your Directorate’s solicitor.
D.2 CONTRACTS
D.2.1 Contents
Definition Of A Contract
Types Of Contract
Elements Of A Contract
BERR Contracts
Creating A Contract By Requesting Quotations Or Tenders
Creating a Contract By Ordering Without Tendering
Creating a Contract By The Action Of The Parties
"Battle Of The Forms" (Conditions Of Contract)
Letters Of Intent
Breach and Liquidated Damages
Force Majeure
Contractual Delegation And Signature
Terms And Conditions Of Contract
Standard Terms and Conditions
General Conditions for Works Contracts (GC/Works)
Model Forms Of Contract And Conditions
Special/Supplementary Terms And Conditions Of Contract
Interdepartmental Trading
Contracts With Foreign Organisations
Suppliers’ Use Of Subcontracted Staff
D.2.2 Definition Of A Contract
A contract is a legally binding agreement between two or more parties. Normally, neither party may be released from their respective commitments under a contract except by mutual consent. A contract should not be entered into lightly, as consequential liabilities may exceed the price of the goods or services being procured.
A contract does not necessarily have to be in writing; any agreement made orally (with the exception of contracts of guarantee, hire purchase, insurance and property sales) is also binding. The problem with oral agreements is in establishing proof of that agreement or, more particularly, any element of it.
The value of a purchase has no bearing on the existence or validity of a contract or on the possible costs that could result from liabilities under the contract.
The legal framework that holds contracting parties accountable as well as providing protection is called Contract Law.
D.2.3 Types Of Contract
There are two main types of contract - those under seal and those not under seal.
Contracts under seal are affected by deeds, which are in writing and are signed, sealed and delivered. Examples of transactions under seal are those for the sale of interests in land or where there is no consideration. BERR staff will rarely encounter contracts under seal. The Legal Services Directorate must always be consulted on contracts under seal.
Contracts not under seal are commonly, with certain exceptions, those made orally or in writing. This is the contract type applicable to most procurement activity.
A contract can also be implied by the action of the parties – see D.2.8 - Creating a Contract by the Action of the Parties.
D.2.4 Elements Of A Contract
The essential elements required for a contract to exist are:
• intention - the parties must intend and communicate their intention to enter into contract under the law;
• offer and acceptance - there must be an offer and an unqualified acceptance;
• consideration - money or money's worth must be exchanged for goods or services provided;
• capacity to contract - the parties must have capacity to enter into the contract;
• consent - this must not have been obtained by means of fraud, deceit, duress or misrepresentation, whether deliberate or unintentional;
• legality - the contract must not be for an immoral or illegal purpose, and
• performance - the obligations under the contract must be capable of performance by the parties.
D.2.5 BERR Contracts
To minimise the risk of dispute and to ensure that the Department’s interests are protected, contracts between the Department and other parties must be:
a. in writing, and
b. on BERR Standard Terms and Conditions or conditions approved by your Directorate’s solicitor.
Any oral negotiation should be undertaken on the basis that it is subject to formal written agreement and will not be treated as binding on the Department until set out in writing.
Corporate status is vested solely in the Secretary of State who is the principal in all contracts whether placed directly by the Department (including its Executive Agencies) or through a Government Agency (such as HMSO, OGCbuying.solutions & COI).
Most purchasing is straightforward and simply entails sending a purchase order to a supplier. When the Purchase Order is sent to a supplier it must be accompanied by the applicable BERR terms and conditions of contract (unless previously supplied) to ensure the Department’s position is properly protected.
Contracts placed by government departments in the name of their Secretaries of State are no different in the eyes of the law from any other contract. The Department can therefore sue or be sued in the event of a breach.
Procurement staff are daily committing the Department to the performance of obligations under contracts, which the law will enforce if necessary. It is therefore important that procurement staff are appropriately trained to carry out their tasks.
D.2.6 Creating A Contract By Requesting Quotations Or Tenders
A purchaser makes an invitation to treat when he asks a potential supplier to submit a quotation or a tender. The supplier responds by making a bid, which constitutes an offer. When the purchaser issues an unqualified acceptance of that offer, a contract is created.
In practice, the Department’s specification or the supplier’s tender may be varied during negotiations, giving rise to counter-offers. In such cases, it is important that procurement staff record the outcome of any negotiations and obtain the written acceptance of the supplier to terms agreed. This ensures that both parties to the contract are clear about and agree on all aspects of the required performance, other documentation (terms and conditions, specification, schedule, etc. included in the invitation to tender) and the bid/proposal.
You should not consider negotiations to be complete until you have recorded in writing with your supplier the final contractual agreement. Only then should work under the contract commence.
D.2.7 Creating a Contract By Ordering Without Tendering
When purchasing low-value items for which competitive tendering is deemed inappropriate the purchaser may simply issue a purchase order for goods or services. For certain categories of spend, the Government Procurement Card (GPC) is an effective tool to reduce administration costs. Please refer to the GPC guidance. In such cases, the purchaser makes an offer and the contract is made when the supplier accepts the order without qualification, for example by direct despatch of goods.
If the order is sent on the supplier’s catalogue order form and the supplier’s terms and conditions are included on the form, the order will be on the supplier’s terms and conditions.
If the order is sent on the supplier’s order form but with the supplier’s terms and conditions deleted and the Department’s terms and conditions attached, it will be on BERR terms and conditions.
If the order is sent using the Department’s purchase order with BERR Standard Terms and Conditions attached, it will be on BERR’s terms and conditions. In this situation, care has to be exercised when receiving goods since the delivery note or invoice may contain the supplier’s terms and conditions and this would constitute a counter-offer (see D.2.9 - "Battle of the Forms" (Conditions of Contract) below).
D.2.8 Creating a Contract By The Action Of The Parties
A contract can be created implicitly through the actions of the parties. It is therefore important that the Department not create a contract by "part performance" or by performing its agreement with the contractor before a written agreement is in place. This is particularly important where the Department is negotiating, or believes that it is negotiating, the terms of an agreement. Part performance is a prima facie indicator that the Department has accepted the terms as last exchanged.
D.2.9 "Battle Of The Forms" (Conditions Of Contract)
You should be aware of what is often referred to as the "battle of the forms". This is concerned with the question of offer and counter-offer.
Purchasers may invite tenders or seek quotations and eventually place an order with the supplier, believing that the conditions applying to the contract are those in the tender document or on the purchase order form sent to the supplier. However if the supplier, in accepting the order, sends that firm's standard conditions of sale, often on the reverse of a standard form of acceptance or similar document, these will prevail in the event of a dispute.
The rule is that the last conditions sent constitute a counter-offer and unless challenged prevail. It is not possible to forestall this by including a statement on the order excluding the supplier's conditions. Such a statement would not legally affect the counter-offer situation. A similar position arises when goods are received and used, implying acceptance by conduct.
It is important that procurement staff and users check the conditions attached to acceptance of orders, delivery notes and invoices and that proper arrangements are made for the inspection of goods before usage. For many low value purchases of well-established items of proprietary brands, these problems may not be of great significance. But failure to be vigilant in this respect could result in difficulty and costly mistakes.
During any negotiations, it is essential that BERR respond to any letters from the supplier suggesting amendments to a draft contract to ensure that, if there is part performance, this is on terms acceptable to BERR.
The Standard Terms and Conditions should only be relaxed by the Department in exceptional circumstances (for example, when no other supplier is prepared or able to do the work or supply the goods).
Remember, the last party to write will probably be the most satisfied with the result of any subsequent dispute. If in doubt, always ask the firm concerned to withdraw their conditions in favour of the Department’s standard terms and conditions and obtain their written acceptance of the position.
D.2.10 Letters Of Intent
Letters of intent should not be sent because they constitute an agreement to meet the supplier's costs in preparing to fulfil the obligations of a contract before that contract is awarded. If a problem arises to prevent the award, then expenditure may be incurred for no benefit.
Procurement staff should wait until proper financial and contractual approval is given before committing the Department. In addition, tenderers should not be informed of the award of a contract over the telephone.
D.2.11 Breach and Liquidated Damages
A breach occurs when one party to a contract, without lawful excuse, fails to perform its obligations, states that it will not perform them, does some act which precludes performance or performs them defectively.
Damages are a remedy for a breach of contract (although not the only one) and BERR will always need to consider carefully whether damages are the appropriate remedy. Damages may be sought by a party whether it has suffered loss or not. However, if the party cannot show that it has suffered any loss, the damages, if any, awarded by a court are likely to be only nominal.
Damages are not to be thought of as a punishment for a criminal act and will not usually be set so high as to be punitive or exemplary.
If the contract itself provides that compensation is to be paid in certain circumstances, the amount to be paid must not be excessive or it will be deemed to be a penalty (irrespective of how it is described in the contract) and not enforceable. A penalty clause in a contract is not legally enforceable, but where the compensation is a genuine pre-estimate of loss, this is termed "liquidated damages" (but often referred to mistakenly as ‘penalty clauses’) and the courts will allow recovery. It follows that where contracts include incentive clauses which allow payments to the supplier to be varied according to performance, these will be enforceable only if any reduction in payment for performance below the level normally required meets the definition of ‘liquidated damages’.
If the action or inaction of a contractor amounts to an apparent breach of contract, your Directorate’s solicitor must be consulted immediately. This is particularly important if a time-of-the-essence clause has been introduced into the contract. If the Department is at fault, the policy is to pay for equipment supplied or services rendered but not to make other payments. It is also policy to avoid costly litigation wherever possible.
D.2.12 Force Majeure
D.2.12.1 BERR does not generally accept force majeure clauses in contracts as BERR is unlikely to benefit from such a clause. Where the other party wishes to introduce a force majeure clause, Legal Services Directorate should be consulted.
D.2.12.2 Bidders may try to claim force majeure in order to secure acceptance of a late bid. BERR should not accept bids after the closing date stated in the invitation to tender, as it would be acting unfairly against the other bidders.
D.2.13 Contractual Delegation And Signature
Authority to commit the Department to expenditure requires formal written delegation to named individuals. However, in contractual matters this is regarded as purely an administrative procedure. It has no effect on the validity of any contractual commitment entered into and will not be a matter of concern to a contractor. If, without this delegation, the most junior member of staff in an organisation were to enter a contractual arrangement for a major item of expenditure the contract would be valid in law, even though that officer acted beyond his or her authority.
Following the approval from the budget holder, the signing of the contract can be carried out by a nominated officer, usually the Senior Responsible Officer or the contract manager. These officers should have received training in purchasing and supply techniques, including legal aspects, in order to perform their duties satisfactorily.
D.2.14 Terms And Conditions Of Contract
The expressions "terms" and "conditions" are often used interchangeably to describe provisions in a contract. Strictly speaking, a "condition" is a provision breach that gives the party not in breach the right to treat the contract as being at an end, to regard themselves as released from their obligations under the contract and to sue for damages. A "term", also called "warranty", does not have this important effect but merely gives the party not at fault the right to sue for damages. You should consult your Directorate’s solicitor in any situation in which this terminology comes into question.
Conditions may be "express" or "implied". Express conditions are those specifically agreed with the supplier in the form of general and/or special conditions. Implied conditions are those which are not specifically stated by the parties but which apply to the contract by virtue of statute law, or trade custom or as the result of case law. Implied conditions are equally effective and binding and reference to the most important of those Acts relating to goods and services is included in the invitation to tender.
Except for conditions implied by statute, it is not good practice to rely on the possibility that desired conditions will be implied and most purchases are likely to be made on express standard or general conditions supplemented as necessary by special conditions.
D.2.15 Standard Terms and Conditions
BERR seeks to conduct its business on its own or on general Government terms and conditions and to avoid or reject those of the supplier or contractor. Care is necessary to ensure that this is achieved wherever possible whilst recognising that some purchases will have to be made against the supplier’s terms and conditions, for example, for software support and those for dealing with members of the Motor Manufacturers Association.
BERR has Standard Terms and Conditions of Contract for Services (PF31) and Standard Terms and Conditions of Contract for Goods (PF32). These documents:
a. set out the obligations and rights of both parties with regard to basic contractual issues (such as payment and invoicing, revision of charges, default by the contractor and termination of the contract); and
b. establish a sound legal framework for any agreement and ensure the Department can enforce compliance or take other remedial measures in the event of default by the supplier.
BERR’s Standard Terms and Conditions should be used in preference to any other conditions and must not be amended without consulting IWS Commercial Office, who will liaise with Solicitors if necessary.
Copies of the relevant terms and conditions of contract should be sent with and indicated on the Invitation to Tender/Quote documents in the case of competitive tendering. If a Purchase Order is issued without prior competitive tendering, the terms and conditions should be attached and drawn to the supplier’s attention at this stage. Any other conditions that are to apply but are not pre-printed should be entered in the "other" box.
Suppliers’ conditions of sale are designed for their benefit and may contain clauses unacceptable to the Department. Some suppliers may purport to limit or even exclude liability under the contract and staff must be vigilant and read all the small print where the decision has been taken to negotiate on supplier's conditions. If in any doubt about the implications of any provision staff should seek advice from their Directorate’s solicitor or the Procurement Policies & Services Branch.
D.2.16 General Conditions for Works Contracts (GC/Works)
There are a number of sets of general conditions for works contracts, published by the Stationery Office. These standard government contracts cover all aspects of building, civil engineering, mechanical and electrical engineering and associated works as well as maintenance works. These have recently been revised and consolidated.
The GC/Works suite of contracts is now as follows:
• GC/Works/1: For use on major building and civil engineering projects with and without Bills of Quantities, and Design and Build.
• GC/Works/2: For use on moderately costly building and civil engineering contracts (£25,000-£200,000) and demolition works of any value.
• GC/Works/3: For use on contracts of a wide value range for the provision of mechanical and electrical services and plant in a building.
• GC/Works/4: A general-purpose contract aimed at small works projects, including building, civil engineering, mechanical and electrical services (value up to £75,000).
• GC/Works/5: For use when appointing consultants to undertake the full range of services required for construction projects.
• GC/Works/6: Standard form of day work contract.
• GC/Works/7: Standard form of contract for a measured term contract.
• GC/Works/8: Specialist term contract for use where specified maintenance of equipment is required and can be costed per task.
• GC/Works/9: Lump sum maintenance contract (1-5 years) for operation, maintenance and repair of fixed mechanical and electrical plant, equipment and installations.
Staff requiring further information about procurement of works and the application of these standard contracts should consult Building Facilities Management Unit in IWS Directorate. They may also consult the Guide to the Appointment of Consultants and Contractors (GACC) prepared by the Central Advice Unit of the former Property Advisers to the Civil Estate (PACE), a copy of which is held by IWS Commercial Office.
D.2.17 Model Forms Of Contract And Conditions
BERR lawyers have produced a standard Contract Letter( PF40) used in instances when it is considered appropriate that the Purchase Order for the goods or services being purchased should be accompanied by a formal letter.
A number of model forms of contract and conditions have been developed by professional and trade bodies and are usually recognised both nationally and internationally. They include:
• For Major Mechanical or Electrical Plant
- MF/1 (1988) home and overseas contracts with erection including forms of tender, agreement, subcontract and performance bond
- C (1975 with 1978 amendments) home contracts without erection, electrical and mechanical goods, other than cables.
• For Civil Engineering and Works
- Association of Consultancy Engineers (ACE) Conditions of Engagement 1981 (as amended) are 13 model agreements covering reporting and advisory work, civil mechanical and electrical work, structural engineering work and engineering services.
• For Computer Hardware and Software
- Office of Government Commerce (OGC) Model Agreements are comprehensive terms and conditions for the purchase and support of major IS systems and services and of telecommunications systems and services (to be used only with guidance from the IS centre of expertise in IWS Directorate).
D.2.18 Special/Supplementary Terms And Conditions Of Contract
Additional terms and conditions of contract (special conditions) including those drawn from standard or general terms and conditions may be introduced into any contract by agreement.
In introducing special conditions into a contract to which general conditions will largely apply you should be aware that special conditions take precedence over general conditions in case of overlap and vigilance is needed to avoid inadvertently removing or amending a condition approved by BERR or the Treasury Solicitor.
Major contracts may contain only special terms and conditions, which will include specially drafted conditions as well as those drawn from standard or general conditions. A price variation clause and the form of a guarantee are examples of special conditions.
D.2.19 Interdepartmental Trading
Since the Crown is indivisible, one department cannot legally contract with another nor apply conditions to a "purchase" nor act as an agent of another.
Conditions that a "buying" department attaches to its letter (order) are unenforceable but procurement staff should include relevant BERR conditions with any such letter (order) and negotiate on any disputed clauses so as to reach an understanding.
Units receiving letters (orders) from other departments should make clear any conditions they regard as not acceptable and refuse to accept the letter (order) if the "buying" department is not willing to remove the offending clause. Where there is regular business between two departments the responsibilities can best be set out in a Supply and Service Agreement.
General guidance on this matter is provided in Managing Public Money.
Purchases through the Government Central Purchasing Agencies will be on the relevant Agency's general terms and conditions or on special terms and conditions introduced into the contract (which will be in the name of the Secretary of State for Business, Enterprise and Regulatory Reform).
The ordinary rules of contract apply to the Contract of Agency, which provides the Government Agencies with powers to bind the Department under a contract. As Agents, they have a number of duties to their principal. They must:
a. carry out their work with skill and diligence and take no secret profit from it;
b. follow their principal's instructions, as set out in the Supply and Service Agreement to which they are subject;
c. in return they are entitled to remuneration either in accordance with what was previously the custom or as specified in the Supply and Service Agreement;
d. once a contract has been established between the Secretary of State as principal and another party, e.g. the successful tenderer, the Government Agency is no longer liable although it may continue to be involved in post contract administration.
D.2.20 Contracts With Foreign Organisations
It is important that contracts with foreign organisations should have a jurisdiction clause in order to save possible lengthy and costly argument about which country’s jurisdiction should apply to a particular contract. Litigation in a foreign country is also likely to be more difficult and less favourable for BERR.
The use of BERR’s Standard Terms and Conditions of Contract will ensure that English law prevails. It is therefore important that tenderers accept the Department’s terms and conditions, and this should be a key consideration during tender evaluation.
When entering into contracts with foreign organisations, your Management Unit solicitor should be consulted at the earliest opportunity for advice.
D.2.21 Suppliers’ Use Of Subcontracted Staff
If a supplier uses staff other than its own employees to provide services to the Department (for example, programmers, typists, secretaries) make sure that the supplier has an agreement with such staff requiring them to be bound by all appropriate BERR terms and conditions before those staff begin work under the supplier's agreement with the Department.
D.3 INTELLECTUAL PROPERTY RIGHTS, OWNERSHIP OF RESULTS AND CONFIDENTIALITY
D.3.1 Contents
General
Purchase of "Standard" or "Off the Shelf" Goods
Purchase of "Non standard" or "Off the Shelf" Goods Modified to Specification of Purchaser
Purchase of Goods Designed to Specification of Purchaser
Freedom to have Goods Supplied by a Second Supplier
Development of Goods with Seller
Procurement of a Computer Program
Research and Development
D.3.2 General
The Department’s position on intellectual property rights, ownership of results and confidentiality is set out in the Standard Terms and Conditions of Contract for Services (PF31).
Intellectual or industrial property (IP) is the result of any intellectual effort and includes the following:
• Patents
• Copyright
• Designs (registered and unregistered)
• Trade Marks (registered and unregistered)
• Semi-conductor topographies
• Rights in performances
• Confidential Information.
Intellectual and Industrial Property Rights (IPR) are the legally enforceable rights that the owner of the IP holds and which can determine the use that others make of that IP.
Summary descriptions of each of the above types of IP are to be found in Annex 4 - Intellectual Property.
D.3.3 Purchase of "Standard" or "Off the Shelf" Goods
When standard goods are purchased, one expects to enjoy "quiet possession" of the goods and this includes freedom from any action based on the goods infringing any intellectual or industrial property rights of a third party.
Such rights as could be infringed by the goods include:
• features covered by a patent or design registration of a third party,
• a registered trade mark which is incorrectly used or used without permission,
• features copied from material in which the copyright is held by a third party,
• information that has been received in confidence from a third party.
In order to protect the buyer from any such action, the seller usually provides an indemnity against any loss suffered by the buyer due to such an action. Alternatively, the seller may warrant that the goods supplied do not infringe the intellectual or industrial property rights of third parties.
D.3.4 Purchase of "Non standard" or "Off the Shelf" goods modified to the specification of the purchaser
One expects to enjoy quiet possession of the goods and the seller usually provides an indemnity or warranty. However, the indemnity or warranty will not normally cover infringement by features of the goods that exist solely to comply with the specification of the buyer.
In addition, the seller may consider that in modifying the goods to conform with the specification of the buyer, some act may occur which causes infringement of intellectual or industrial property rights of a third party. The seller may therefore require the buyer to provide an indemnity against any loss incurred by the seller as a result of such infringement or a warranty of non-infringement.
D.3.5 Purchase of Goods Designed to Specification of Purchaser
The seller will usually provide a limited indemnity or warranty, but this will not cover infringement by features of the goods that exist solely to comply with the buyer's specification. The seller may require an indemnity or warranty from the buyer in respect of any act performed solely to comply with the specification.
D.3.6 Freedom to have Goods Supplied by a Second Supplier
In any of the previous three situations, freedom of action may be required to have the goods produced by a second supplier to the design of the seller. For this freedom, a licence is required for any background intellectual or industrial property rights belonging to the seller and covering features that the seller may have included in the design of the goods.
D.3.7 Development of Goods with Seller
The buyer can expect "quiet possession" of goods and may require freedom of action to have the goods produced by a second supplier. The seller will therefore usually provide a limited indemnity or warranty and a licence under any background intellectual or industrial property rights as above.
During the development, both the buyer and the seller may make inventions or create designs, literature or artistic material protected by patents, design registrations or copyright. The ownership of such intellectual property must be specified and apportioned between the parties.
D.3.8 Procurement of a Computer Program
Owners of computer programs frequently use the copyright owned in the program to control any copying or use of that program. The owner normally grants the user a licence under his copyright to use the program in a restricted way and only to make limited copies of the program.
The owner cannot under a licence restrict certain usage. For example, a licensee cannot be prevented from copying the program for purposes of decompilation (disassembly) to the extent that decompilation and copying is necessary to obtain information to enable a completely different (not-copied) program to work with the decompiled one. The licensee cannot be restricted from making a back-up copy of a program if such a copy is necessary for the purposes of the agreed use. The owner may insist that the user includes a copyright notice in any copies made and may request that the details of the program are retained in confidence by the user.
The user can expect to enjoy quiet possession of the program and the owner will usually provide an indemnity or warranty as above.
D.3.9 Research and Development
It should be noted that if the Department retains control of Intellectual and Industrial Property Rights for Research &Development, the work will be subject to the Services Directive.
D.4 UK LEGISLATION
D.4.1 Contents
General
- Sale of Goods Act 1979
- Supply of Goods and Services Act 1982
- Sale and Supply of Goods and Services Act 1994
- Data Protection Act 1998
- Enterprise Act 2002
- Competition Acts of 1980 and 1998
- Unfair Contract Terms Act 1977
- Limitation Act 1980
- Health and Safety at Work etc. Act 1974
- Misrepresentation Act 1967
Industrial and Intellectual Property Acts
Transfer of Undertakings (Protection of Employment) Regulations 2006 - TUPE
Sources of Additional Information
D.4.2 General
The provisions of the following Acts may affect contracts entered into by the Secretary of State and are important to be aware of. The following list provides a brief description of each Act.
1. Sale of Goods Act 1979 (as amended)
Contains provisions relating to the purchase and hire purchase of goods and services (including IT equipment and software).
2. Supply of Goods and Services Act 1982
Provides protection for those who hire, buy in part-exchange or have goods supplied as part of a service.
3. The Sale and Supply of Goods Act 1994 amends and supplements the Sale of goods Act 1979
4. Data Protection Act 1998
Relates to the holding of personal data on automatic equipment (including computers) - the Act is relevant where personal details relating to contractors’ staff, Departmental staff and consultants are held in this manner.
5. Enterprise act 2002
Contains various provisions about competition law and procedure.
6. Competition Acts 1980 and 1998
Provide the means for controlling anti-competitive practices through powers to investigate and if appropriate prohibit particular practices.
7. Unfair Contract Terms Act 1977
Imposes limits on the avoidance of civil liability for breach of contract or negligence by contract terms. For example liabilities under the Supply of Goods and Services Act 1982 cannot be restricted.
8. Limitation Act 1980
Provides directions for taking action for breach of contract, for example not more than 6 years from the date when the breach occurred.
9. Health and Safety at Work etc. Act 1974
Imposes a duty on the supplier to ensure that an article is safe to use and on the Department and the employee to use it properly and safely. (The Control of Substances Hazardous to Health Regulation 1988 (COSHH) were made under this Act.)
10. Misrepresentation Act 1967
Specifies remedies for incorrect statements made in contract negotiations.
D.4.3 Industrial and Intellectual Property Acts
Many of the contracts to which the Department is a party involve the creation or use of patents, design rights, trade marks, copyright or some other industrial or intellectual property. You should therefore be aware of the provisions of the following Acts (all of which either have been, or may be, amended by other Acts, so seek advice from the Patent Office, Copyright Directorate or your Directorate’s solicitor if in doubt):
a. Trade Marks Act 1994
b. Patents Act 1949 and Patents Act 1977
c. Copyright, Designs and Patents Act 1988 (includes copyright, design right, rights in performances and the amended version of the Registered Designs Act 1949)
d. Registered Designs Act 1949
e. The Design Right (Semiconductor Topographies) Regulations 1989
D.4.4 The Sale of Goods Act 1979
This Act provides for a number of implied rights, for example:
a. Proper Title - the buyer is entitled to assume that the seller has the right to sell the goods; and
b. Sale by Description - where there is a contract for the sale of goods by description, the goods shall correspond with that description.
D.4.5 The Sale and Supply of Goods Act 1994
This Act, which amends but does not repeal the 1979 Act, applies to contracts of sale made on or after 3 January 1995. It makes provision for:
a. Satisfactory Quality: goods should meet the standards that a reasonable person would regard as satisfactory taking account of any description of the goods, the price and any other circumstances relevant to the goods; and
b. Fitness for Purpose: goods should be reasonably fit for the purpose for which they are commonly supplied. Where the purpose has been expressed to the seller at the time of sale, the goods should be reasonably fit for that purpose even where they are not commonly supplied for that purpose.
D.4.6 Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
The Transfer of Undertakings (Protection of Employment) Regulations 2006, known as "TUPE", implement the 1997 European Council Directive 77/187/EEC, which is generally referred to as the Acquired Rights Directive (ARD).
Broadly speaking, TUPE protects employees’ terms and conditions, but not future occupational pension rights, when the business they work in is transferred from one employer to another, and the business retains its identity. When TUPE applies, employment with the new employer is treated as continuous from the employee’s start with the former employer. Terms and conditions cannot be changed if the reason for the change is simply the transfer of the undertaking. Changes for other reasons may be negotiated.
TUPE primarily affects the market testing or contracting out of services normally carried out in-house. It is Government policy that TUPE provisions should also apply when certain existing contracted out services, or services that have been contracted out as a result of market testing, contracting or privatisation, are re-tendered. A Statement of Practice on Staff Transfers in the Public Sector was published by the Cabinet Office in January 2000 and is available on the Cabinet Office website.
It is for BERR to satisfy itself, on the basis of advice from its legal advisers, whether TUPE applies in any particular case, and if so to ensure compliance, including consultation requirements, up to the point of transfer and to ensure that contractors accept their responsibilities. Do not rely on contractors’ assertions or on the legal advice that contractors may obtain about the applicability of TUPE.
If TUPE does apply the new employer takes over the contracts of employment of all the employees at the time of transfer (with certain limited exceptions - see below) on the same terms and conditions, except in relation to future occupational pensions entitlement. The new employer also takes over any collective agreements, including recognition agreements, applying to the transferring employees and is obliged to make information available to workers’ representatives and the former employer, and to consult workers’ representatives on matters relating to the transfer.
Future occupational pension arrangements are not covered by the Acquired Rights Directive (ARD) but are protected by UK law. The Government requires that when staff transfer from Crown employment with TUPE protection, broadly comparable occupation pension provision for future service must be secured for them with their new employer, or appropriate compensation paid.
While TUPE provides that dismissals connected with a transfer are automatically unfair it makes exceptions if there are economic, technical or organisational reasons requiring changes in the workforce. For example, dismissal on economic grounds could be justifiable if demand for the service falls below the point where the business remains viable, on technical grounds if an employer wishes to use new technology for which the workforce do not have the necessary skills and on organisational grounds if the work is to be carried out at a different location and it is not practicable to transfer staff.
If a contract has already been awarded in circumstances where TUPE applied, it does not automatically follow that TUPE would apply if the contract went to a different employer on re-tendering. The circumstances of the case would need to be considered. However, it would be sensible when awarding contracts to which TUPE applies to ensure that the contracts entitle the Department to information about the contractor’s staff that could be passed on to other bidders and commit the contractor to facilitating transfer to a new contractor at the end of the contract.
D.4.7 Sources of Additional Information
The paragraphs above are brief summaries only of the key effects of the legislation referred to.
Advice on the application and effect of this and any other legislation concerning the purchase of goods, services and works may be obtained from IWS Commercial Office or from your Directorate’s solicitor.
D.5 EU PUBLIC PROCUREMENT DIRECTIVES
D.5.1 Contents
The Directives and Related UK Legislation
Sources of Additional Information
D.5.2 The Directives and Related UK Legislation
The EU Directives governing procurement and the related UK subordinate legislation putting them into force are:
a. The Public Contracts Regulations 2006 (SI 2006/5) putting into force the Public Sector Directive 2004/18/EC
b. The Utilities Contracts Regulations 2006 (SI 2006/6) putting into force the Utilities Directive 2004/17/EC.
D.5.3 Sources of Additional Information
For further information on the effect of these Directives see Section E.8 - European Union Directives.