NSW Extension Of Contract Or New Procurement Appropriate?

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Valila

Member
16 September 2014
2
0
1
Hello.

I need some advice regarding the following situation:

1. After a tender process, a part of an organisation has entered into a contract for the provision of (certain) services for an 18 month period which expired in July 2014
2. An extension of the contract was evoked for a further 3 months.
3. During the extension period another, larger part of the organisation has negotiatied with a vendor and decided to piggy back on the existing contract and on the Quote stipulated term of 3 years + 2x1
4. In my vendor meeting, it was implied that we are willing to either a) extend the current contract or b) more likely, enter into a new contract altogether. Under these discussions, the vendor will now forward a draft contract.

Given the above situation, I would like to understand what our position is under contract law. I would think that we should have probably gone to the market for another competitive tender given the increased volume in business. Otherwise, given the conversations with the vendor and other parts of the organisation, are we bound by commercial law to enter into a new agreement given the implication?

Any advice would be much appreciated.

Thanks.
 

Sarah J

Well-Known Member
16 July 2014
1,314
250
2,389
Melbourne, Victoria
Hi Valila,

You will need to look at your original contract.

1. Is the subsequent extension a right able to be unilaterally evoked by the other party or will your consent be needed as well? Can either party deny the renewal?

2. Is there a procedure in place in the contract whereby the renewal must comply with?

3. Are there circumstances where the renewal period lapses or no longer operates/applies?

I don't understand how another organisation can piggy back onto this extended period by virtue of the original contract. Is the other organisation a party to the original contract? If not, how can they enter the contract under the renewal period?
 

Valila

Member
16 September 2014
2
0
1
Hi Valila,

You will need to look at your original contract.

1. Is the subsequent extension a right able to be unilaterally evoked by the other party or will your consent be needed as well? Can either party deny the renewal?

As far as I know, our organisation had requested the renewal of the contract by 3 months. The only section in the contract I could find is relates to Termination:

“11.1 This agrement may be terminated by either party:
(a) Immediately if the other party becomes insolvent
(b) By provision of three months notice, in accordance with clause 13 of this Agreement.
11.2 If, by termination of this agreement, a continuance of the services are required, all conditions as set out in this agreement, will remain in-force, until a new agreement is confirmed, or until the services are no longer required.”


2. Is there a procedure in place in the contract whereby the renewal must comply with?

I suppose the renewal period lapses after three months – the original extension period requested by us.

There is no procedure in place that I am aware of.

3. Are there circumstances where the renewal period lapses or no longer operates/applies?

I don't understand how another organisation can piggy back onto this extended period by virtue of the original contract. Is the other organisation a party to the original contract? If not, how can they enter the contract under the renewal period?

This other party that wishes to piggy-back was not part of the original contract. I believe that whilst they were looking at options (which provider to go with etc.) we were under the original contract. Unforeseen delays have caused that we have now entered the extension period and their original request remains.
 

Sarah J

Well-Known Member
16 July 2014
1,314
250
2,389
Melbourne, Victoria
If a new party joins the contract then you will need to draft a new contract. You may keep the same terms, but the contract period resets anew. You are not bound to enter into this contract.

What is it that you are seeking or wishing to happen?