31 January 2012 Written by  Wondwossen Wakene

Performance of Administrative Contracts

Preview

Normally performance includes an act of giving, doing or not doing as the case may be in view of the creditor, the creditor’s agents or anyone who is to benefit from under the contract.

Performance of a contract under normal course of things extinguishes the obligation. Upon performance the respective obligations of the parties to the contract will come to an end.

In principle, a contract is binding upon the parties to it as if it is a law. Art 1731(1) to this end prescribes as:

“The provisions of a contract lawfully formed shall be binding on the parties as though they were law”

Thus the first source of obligation will be the contract duly formed by the parties.

The parties to an administrative contract are the administrative agencies and the contractors. Contracts validly formed by the parties will try to address the who? Whom? And how? questions that are associated with  the contract and the consequent performance.

Who should Perform?

The contract can be performed by the debtor, his agent or by a person authorized by court or law (Art. 1740(2). The persons authorized by law are tutors, liquidators, trustees and a person authorized by court is either a curator or an interested creditor who wants to save the rights of the debtor by performing his obligation. However, the law never mentions about performance of a contract by a third party who is  not authorized by debtor, court or law.

Never the less, we can easily argue that if the creditor accepts the payment, the debtor has no right to stop a third party from performing the obligation since the creditor has a right to assign his right to a third party without the consent of a debtor (Art. 1962). In such case, if the debtor insists on paying the debt, he can pay it to the person who has already paid the creditor (Art. 1824). The law refrains from including unauthorized third party in the list of Art 1740(2) since assignment of a right is a contract. A creditor is not duty bound to receive payment from a person not authorized by debtor, court or law. He/she is free to accept or reject such payment without any effect on his/her right against the debtor.

However, the creditor may sometimes insist that the debtor himself should perform the obligation (Art. 1740(1). This is when the contract or the law expressly provides that the debtor shall perform the contract personally. For example, Ethiopian Labor law provides that the employee should perform the contract personally.

The second case where personal performance becomes necessary is when the creditor proves that personal performance is essential to him. The creditor can prove such only when the obligation is obligation to “do” of a professional nature or art. For example, a lawyer, or a doctor can not authorize a duty which he agreed to do. Moreover, a musicians, painters, Poet, actor, dancer etc cannot authorize someone to perform his obligation.

Generally, the creditor should accept performance either from the debtor, his agent or person authorized by a court of law unless he proves that personal performance of the contract is essential to him by the contract or a the law expressly provides personal performance.

The rule under our law is available under Art.1740 (2). According to this provision “… the obligations under the contract may be carried out by a third party so authorized by the debtor, by the court or by law.”

Thus a contract may be performed by anyone, not only and solely by the debtor but by an gone. We require the debtor and only the debtor to perform the obligations under the contract if “… this is essential to the creditor or has been expressly agreed.” (Art.1740(2)] if the creditor benefits  only if the debtor personally performs the obligation then only the debtor personally should perform the obligations under the contract. On the other hand if there is an express agreement to this effect of performing the contract personally by the debtor then even though not essential to the creditor still the obligations should be executed by the debtor.

Does this rule squarely fit to administrative contracts?

An example

Assume ERA (Ethiopian Roads Authority) enters into a contract with XYZ construction company to construct a bridge on river Abbay. Can XYZ Construction Company pass the obligation to CRBC?

  • If among other things XYZ was picked by ERA for the artistic genius of the company then the design cannot be performed by any other company. (1740(1))
  • If the contract with ERA is to construct a bridge and nothing else, XYZ construction may authorize CRBC. (1740(2)]

Art 3172(1) says “… contracting parties shall perform their obligations in a manner provided in the contract”. Based on this provision contracting parties may agree to the effect of carrying out obligations personally.  Even the last sentence which reads “… or has been expressly agreed” authorizes parties to have the said stipulation of imposing an obligation on one of the parties to enable personal performance of the obligation.

What is wrong if a person bus is not authorized by the debtor, the court or the law performs an obligation?  In the case of administrative contracts, we have Articles 3201-3206.Let us briefly consider the case together with for who to perform sub-section.

For Who to Perform?

Performance can be made, according to Art. 1741, to the “creditor or a third party authorized by the creditor, by the court or by law to receive it on behalf of the creditor.” Therefore, the debtor should take every caution so as not to pay either for an incapable creditor or to an unqualified person.

With respect to incapacity, the law is referring to one whose cause is interdiction or absence for that matter. This is so in association with physical persons. But administrative contracts involve parties that are juridical persons. Thus at least one of the parties to an administrative contract is a juridical person. Accordingly the incapacity consideration with regard to juridical persons is a different one. Thus it cannot be insanity or senility. That is, the causes of incapacity that we know with respect to phssical persons are not important here. Rather we should look for the causes somewhere else.  Can you mention any ground of incapacity for a juridical person? Or rather from where does a juridical person derive its capacity?

A juridical person derives its capacity from the law or the instrument that establishes it. Establishment, registration and license are some of the sources   which confer capacity. As the case may, be the law prescribes how juridical persons derive their capacity. Accordingly, they may derive their capacity from a proclamation or a memorandum of association. Proclamations are usually sources of capacity to administrative authorities while a memorandum of association serves to establish enterprises. Therefore a juridical person lacks capacity when it is not constituted in accordance with one of the ways mentioned above. This is not the only way. Administrative authorities may lack capacity after due constitution. This usually results following the revocation of license, dissolution or even amalgamation. Paying to an administrative authority which has undergone through one of the above processes will amount paying to an incapable creditor.

When does one pay to an incapable administrative agency? Can you imagine a situation when an administrative agency enters into an agreement with full capacity but afterwards lacks its capacity?

If this happens, the debtor cannot validly discharge his/her debt by paying to such an entity.

Most of the time the obligations incurred on the part of the debtor involve non-monetary obligations. Non-monetary obligations are susceptible to manipulation because it is difficult to gauge in terms of objective standards such as numbers.  So the general contract provisions might not be properly operative under administrative contracts. Let us briefly discuss provisions of the law that govern the manner of performing administrative contracts.

Bona fide performance

One of the pillars of contractual relationships is good faith .Good faith in turn is something expressed and not legislated-better practiced and inferred and not derived.

Because bad faith or good faith, as the case may be, is a state of mind which hardly can be implied without being expressed, one should seek the same from circumstances.

One outlet of good faith during performance will be carrying out our obligation diligently. Diligence still is susceptible to manipulation unless we have a working standard for the same. Our law provides the requirement of diligence and the nature of the same under Art.3172 (2) and Art.3172 (3). To begin with, Art.3172 (3) prescribes “[The contracting parties] shall perform [their obligations] diligently.”

To this end the obligations shall be performed in a correct manner deemed to be satisfactory according to the rules of art prevailing at the time and in the kind of activity concerned “(Art.3172 (2))

Our law postulates diligence as a standard of good conduct. Unlike other systems our law further goes in trying to stipulate this very standard of diligence.

How should one understand diligence under the Ethiopian civil code? It is synonymous with the rules of the art prevailing at the time and kind of activity. Different trades prescribe as to the how works are done. These prescriptions might have evolved from custom or written and learned rules of conduct i.e. rules of ethics. To see whether one is diligent or not it suffices to see whether he/she is acting in accordance with these rules while carrying out duties. Additionally these rules of conduct are conditional on the type of activities. Rather than dealing with the most volatile and hypothetical concept of diligence our law tries to crystallize it and associate it with the more concrete concept of prevailing art.

Last modified on Wednesday, 02 May 2012 13:05