MGMT 450 – Contract Modification and Options
As a country, the United States has many needs to obtain goods, services, and real estate. These needs are addressed through acquisition by contract. Through purchase or lease, the Federal Government contractually procures supplies, services, and interests in real property. While Federal Government contracting has the same elements as contracting between private parties, i.e. a lawful purpose, competing parties, offer and acceptance, terms of the offer, etc., Federal contracts are regulated to a much higher degree since the funds are public and must be appropriated.
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(Lexis Nexis, 2012)
All contract parties are free to request contract modifications. Once agreed upon and signed, contract modifications are enforceable in a court of law. However, there must be a legitimate commercial reason for a contract modification, and the modification must be reasonable in light of the standards within the particular industry. Courts are free to strike down contract modifications that are brought about by duress or bad faith.
The simplest way to modify a contract is before it is signed. Minor modifications to a contract can be handwritten into the document. Major modifications to a contract will require negotiation. Simply insert the agreed changes and print a modified version of the contract. All parties should review the reprinted document to ensure that the correct changes were made, and then sign the newest version. Without mutual agreement and signatures, each party still has the option of walking away from the proposed contract without any binding responsibility.
When a business owner enters a contract with the federal government for the provision of goods or services, he or she must be aware of the complex terms of such contracts. After a contract has been signed, satisfactory performance and management is required and enforceable by law. While many business owners are familiar with the Uniform Commercial Code and common law rules governing their business contracts, most are not familiar with the unique administrative rules governing federal government contracts.
Guidance for modifications is found in several statutes, one of which is the Federal Acquisition Regulation (FAR). Part 43 prescribes policies and procedures for preparing and processing contract modifications for all types of contracts including construction and architect-engineer contracts. Subpart 43.102 further states that only contracting officers acting within the scope of their authority are empowered to execute contract modifications on behalf of the Government. Other government personnel shall not execute contract modifications, act in such a manner as to cause the contractor to believe that they have authority to bind the Government, or direct or encourage the contractor to perform work that should be the subject of a contract modification. When either party to a government contract violates any federal statutes or terms of their specific contract, a breach has occurred.
A breach of contract is a cause for legal action in which a binding agreement has not been honored by one or more of the parties to the contract. This typically occurs by non-performance or interference with the other party's performance. If the party does not fulfill his contractual promise, has given notice to the other party that he/she will not perform his duty as mentioned in the contract, or if by his/her action and conduct seem to be unable to perform the contract, he/she is said to breach the contract. (John G. Cameron, 2010)
The government’s right to terminate...