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NSW Extension Of Contract Or New Procurement Appropriate?

Discussion in 'Commercial Law Forum' started by Valila, 16 September 2014.

  1. Valila

    Valila Member

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    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.
     
  2. Sarah J

    Sarah J Well-Known Member

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    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?
     
  3. Valila

    Valila Member

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  4. Sarah J

    Sarah J Well-Known Member

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    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?
     

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