Requesting Entity: City of Navotas

Issues Concern: Termination for Convenience under the Guidelines on Termination of Contracts

Details

Whether the City Government of Navotas can terminate an existing contract pursuant to Section III(B) of the Guidelines on Termination of Contracts (Guidelines) considering that conditions exist making the project implementation economically, financially or technically impracticable.

[S]ince the conditions and circumstances associated with and underlying the original concept for the Project have changed per information provided by the Consultants, thereby making the implementation of the original Project economically, financially, or technically impractical, the City Government may opt to terminate the existing contract for convenience. Nonetheless, the existence of these conditions is best determined by the PE since it is in the perfect position to assess, evaluate, and fully understand the objectives, peculiarities and condition of the Project and how its execution are affected by attending happenstances.

Whether the contactor may be paid for services it has so far rendered under the Memorandum of Agreement (MOA) and other documents on the basis of quantum meruit.

[B]ased on Section IV(8) of the Guidelines, payment on quantum meruit is allowed only in Termination for Convenience involving Contracts for Goods, and is silent on Contracts for Works. For infrastructure projects, however, the contractor normally submits a statement of work accomplished or progress billing in order that it will receive the corresponding progress payment. Thus, there should be no concern on whether the contractor may be paid for services rendered since progress billings should have been submitted so that it may receive payment for the portion of work or services it has completed. On the other hand, the Supreme Court held in several cases that contractors are allowed to recover on the basis of quantum meruit, but the amount of recovery would only be the reasonable value of the thing or service rendered regardless of any agreement as to value.