Watch out for the “availability of funds” clause

December 4, 2015

The ‘nudum pactum’ mistake

Source: Federal News Radio, Richard Lieberman, November 24, 2015

One of the three basic requirements for a contract to be enforceable is consideration, which usually means a promise to pay money, but could mean that another valuable item would be provided instead (as in a trade, for example, of one valuable car for another valuable car).

In federal procurement contracts, the courts have said that to be a valid contract, the transaction “must show a mutual intent to contract including an offer, an acceptance and consideration.” If there’s no consideration, is it a contract? The answer is simple: it’s a “nudum pactum” and there is no valid contract.

A “nudum pactum” is defined as a “bare agreement,” a promise or undertaking without any consideration for it. Where there is a “nudum pactum,” the contract is neither valid nor enforceable.

Government contractors must be wary of performing under a “nudum pactum.” They likely will not be paid for their goods or work, and unlike a valid contract, the contractor will have no recourse to courts. The issue primarily arises where the contract contains one or more “availability of funds” clause.   Read More …

Is money available for your contract?  Contact your nearest PTAC if you have questions about this.


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