Protection in the event of termination of the contract at the initiative of the tender customer

According to current legislation, the contract is valid until all obligations under it are fulfilled. However, quite often you may encounter the need to terminate the procurement contract. And here there are certain nuances: do both parties agree to terminate the agreement: the customer, the bidder/winner, or is the contract terminated unilaterally. The lawyers of our company provide services related to the protection of the bidder in the event of termination of the contract at the initiative of the tender customer.

Legislative framework

The Law of Ukraine “On Public Procurement” (hereinafter referred to as the Law) provides for certain conditions for terminating a contract. A contract may be terminated by agreement of the parties; unilaterally; by court decision.

When concluding a contract between the customer and the participant, all conditions under which it may be terminated must be spelled out in detail. For example, the customer of public procurement may indicate the following reasons for terminating the contract:

• No need to purchase goods or services.

The customer must convince the participant that this point is acceptable.

• Reduction of funding.

In this case, the termination of the contract may be initiated by the potential winner of the tender. It will be much more profitable for him to terminate the contract than to wait for the customer to fulfill all the conditions.

• Breach of the contract by the supplier.

This is also a reason for terminating the contract by agreement of the parties.

• Change of activity/termination of the supplier.

If any changes occur, for example, a change in the KVED, the death of the entrepreneur, etc., this should be clearly stated in the contract to allow for the possibility of terminating the contract without going to court.

Thus, to avoid troubles in the future, it is better to anticipate them in advance.

What is the liability for terminating a contract on the initiative of the customer?

Article 611 of the Civil Code of Ukraine states that a breach of an obligation leads to legal consequences. These legal consequences are established both by the Law and by the concluded contract.

If there is a unilateral refusal to fully or partially fulfill the terms of the contract, it is considered amended or terminated. However, this does not mean that the parties are exempt from liability. For example, the customer is threatened with the payment of penalties:

• Penalty.
• Fine.
• Penalty.

If the customer plans to terminate the contract on its own initiative, it must send the appropriate proposals to the winner of the tender. Within 20 days of receiving the notification, the winner of the tender must notify the customer of the results of considering the proposal to terminate. Quite often, the desired result cannot be achieved at this stage. The interested party has the right to refer the dispute to court for resolution.

If the contract was terminated by court order, the decision becomes effective after the appeal stage.

Therefore, in the process of forming a proposal, it is better for the customer to foresee possible adverse conditions:

• Withholding of financing.
• Lack of need for an order, etc.

After terminating the procurement contract, the customer must publish a corresponding report on the implementation of the procurement contract. This report is published within 20 working days. Please note: the reasons for terminating the contract must be described in detail.

To summarize: for terminating the procurement contract, the appropriate procedure must be indicated when concluding it. Unilateral termination is possible only in cases where this is provided for by the contract. If this is not provided for, or the other party does not agree to its termination, this issue can be resolved in court.

The lawyers of our company will be able to protect your interests as a participant or winner of the tender. Our specialists guarantee comprehensive support for participants in public procurement. The key for us is compliance with the principles of transparency and legal certainty and the absence of any manifestations of discrimination. Our specialists assess each case individually, taking into account the degree of violation, the actual circumstances of the case and the consequences for the parties.

If you need to appeal the termination of the contract at the initiative of the tender customer, we can help you! We look forward to your consultation!