Public procurement contracts are characterised by the fact that their content is prepared by the contracting authority. In practice, contractors have limited opportunities to negotiate their content, which may lead to abuses resulting in a gross imbalance between the positions of both parties to such contracts.
For this reason, the legislator has introduced in Article 433 of the Public Procurement Law a list of prohibited contractual provisions that cannot be included in a public procurement contract.
According to this provision, the draft contract provisions must not provide for:
- the contractor’s liability for delay, unless justified by the circumstances or scope of the contract;
- the imposition of contractual penalties for the contractor’s conduct not directly or indirectly related to the subject matter of the contract or its proper performance;
- the contractor’s liability for circumstances for which the contracting authority is solely responsible;
- the possibility for the contracting authority to limit the scope of the contract without specifying the minimum value or size of the parties’ performance.
The purpose of this provision is to ensure balance between the parties and to eliminate clauses that lead to abuse of the contracting authority’s position. For example, in its judgment of 25 April 2022, ref. no. KIO 914/22, the National Appeal Chamber (NAC) stated that the contracting authority’s right to determine the terms of the contract is not absolute, as the contracting authority may not abuse its subjective right.
In turn, in its judgment of 20 March 2023, ref. no. KIO 551/23, NAC indicated that Article 433(1) of the Public Procurement Law prohibits the establishment of contractual penalties for delay or the introduction of contractual rules of liability for damages by the contractor granting the contracting authority a claim for damages in connection with the delay. Furthermore, this provision should also be seen as an obstacle to the formulation of contractual provisions in which a simple delay on the part of the contractor (and not a delay) constitutes the basis for the contracting authority to exercise its rights, such as the right to withdraw from the contract in connection with the contractor’s delay, or the right to reduce the remuneration or increase the amount of the performance bond in the event of the contractor’s delay.
In practice, contractors should pay particular attention to contractual provisions concerning contractual penalties, the scope of the contract and liability for circumstances beyond their control. In case of doubt, it is advisable to raise objections at the tender stage and, if they are not taken into account, to consider lodging an appeal with the NAC.
Contracting authorities should remember that the use of prohibited clauses may not only lead to the appeal being upheld by NAC, but also to the invalidation of part of the contract in respect of the prohibited contractual clauses.