1. Liability for Contracts

Under the exercise of its executive power, the Union or a state can enter into contracts for the acquisition, holding and disposal of property, or to carry on any trade or business, or for any other purpose. But, the Constitution lays down three conditions which must be fulfilled by such contracts:

(a) They must be expressed to be made by the president or governor, as the case may be;

(b) They must be executed on behalf of the president or governor, as the case may be; and

(c) They must be executed by such person or in such manner as the president or governor may direct or authorise.

These conditions are mandatory and not merely directory in nature. Failure to comply with them nullifies the contracts and renders them void and unenforceable in the courts.

Further, the president or the governor is not personally liable in respect of any contract executed in his name. Similarly, the officer executing the contract is also not personally liable. This immunity is purely personal and does not immunize the government from a contractual liability, making the government suable in contracts. This means that the contractual liability of the Union government and the state governments is the same as that of an individual under the ordinary law of contract, which has been the position in India since the days of the East India Company.