Reclon Consulting Engineers (Pvt) Ltd v National University of Science & Technology

On 18 August 2013, Reclon Consulting Engineers (Pvt) Ltd (plaintiff) entered into a written agreement with the National University of Science & Technology (defendant) to provide professional mechanical and electrical engineering services for student residences intended initially for the Zone 6 Youth Games. The agreement was signed on defendant's behalf by its Director of Physical Planning, Works and Estates. Plaintiff completed stages 1, 2, and 3 of the work, producing drawings and documentation that defendant accepted and used to obtain a development permit from Bulawayo City Council. Plaintiff invoiced defendant US$225,593.01 on 16 September 2013. Defendant acknowledged the debt in writing on 29 October 2014, stating it would pay once it received funding from the Government of Zimbabwe. However, defendant subsequently refused payment and raised defenses including: (1) the agreement was signed by an unauthorized representative; (2) government was responsible for payment; and (3) the contract violated the Procurement Act and Regulations, making it unenforceable. Plaintiff had previously done three similar projects for defendant signed by the same official position without tender processes.

• Whether plaintiff provided the professional engineering services and is entitled to payment of US$225,593.01 plus interest
• Whether plaintiff was required to comply with section 6 of the State Liabilities Act before issuing summons
• Whether the agreement was subject to the Procurement Act (Chapter 22:14)
• Whether sections 30, 31, and 32 of the Procurement Act were complied with
• Whether the agreement was signed by an authorized representative of defendant
• Whether the parties failed to comply with section 5(1) read with subsections (3) and (4) of the Procurement Regulations SI 171/2002
• Whether the contract, having been concluded in breach of procurement legislation, is unenforceable
• Whether the court should relax the par delictum rule to prevent unjust enrichment
• Whether plaintiff is entitled to costs on an attorney and client scale

Judgment entered against defendant for: (a) Payment of US$225,593.01 for professional mechanical and electrical engineering services; (b) Interest at 5% prescribed rate from date of service of summons to final settlement; (c) Costs of suit on attorney and client scale.

Where a contract is concluded in breach of procurement legislation but one party innocently believed the contract was lawful, fully performed its obligations, and the procuring entity accepted and used the services while being unjustly enriched, a court may exercise its discretion to relax the par delictum rule and enforce the contract. Public policy demands that innocent parties who provide goods or services to parastatals or state enterprises after being misled by officials to enter into contracts that violate procurement procedures should be permitted to recover the value of goods or services to prevent unjust enrichment. State entities cannot hide behind self-created illegality arising from their own failure to comply with procurement legislation to avoid payment to innocent contractors who have fully performed.

The court observed that defendant's approach of routinely signing agreements unlawfully was "bizarre and cavalier" and inconsistent with any institution of higher learning employing highly qualified personnel. The court commented that state entities should not be allowed to hide behind the mantra of "public funds" to enrich themselves at the expense of innocent business entities. The court noted that institutions must take action against wayward employees who violate procurement legislation rather than using such violations as a shield against liability. The court also observed that the agreement itself was not illegal in the sense that what plaintiff did was not prohibited by law; rather, the illegality arose from non-compliance with procurement procedures.

This case is significant in Zimbabwean contract law and procurement law for establishing that courts have discretion to relax the par delictum rule (that illegal contracts are unenforceable) where: (1) one party innocently enters into a contract believing it to be lawful; (2) the innocent party has fully performed; (3) the procuring entity has been unjustly enriched; and (4) public policy demands protection of innocent contractors misled by state entities or parastatals. The judgment clarifies that not all contracts concluded in breach of procurement legislation are automatically void and unenforceable. It places emphasis on the degree of moral turpitude of each party and prevents state entities from hiding behind self-created illegality to avoid paying for services received and used. The case strengthens protection for innocent contractors dealing with statutory bodies while emphasizing that such bodies must hold their officials accountable for procurement violations rather than enriching themselves at contractors' expense.