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    What is a FAR interpretation in terms of contract with BPA's? FAR 2.101 states that Contract means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by 31 U.S.C.6301, et seq. For discussion of various types of contracts, see part 16. A basic agreement and basic ordering agreements are listed under subpart 16 and 13.303 for BPA's and 35.015(b) for additional coverage of basic agreements with educational institutions and nonprofit organizations. BPA is not grant or cooperative agreement but bilateral instrument that may be considered as a contract in a broad meaning of contract IAW FAR 2.101? If BPA is considered as a contract, FAR 5.202(11) would apply to the base BPA and subsequent call orders? Thank you for your time and support.


    This is a case where the FAR can be confusing because it does expressly state that a Basic Ordering Agreement and Basic Agreement are NOT contracts. But no such express statement is found when it comes to Blanket Purchase Agreements (BPAs) at FAR 13.303 or FAR 8.405-3. It is easy to see where there may be some confusion as the terms contract and agreement are often erroneously used interchangeably. While you might think the definition of contract is broad, there are some very clear common law principles that establish what is or is not a contract. For a contract to be binding and enforceable, the four essential elements of a contract must be present  - legal capacity/mutual assent/consideration/lawful purpose.*  While the FAR 2.101 defines contract in a manner that may be subject to a broader interpretation, it is the common law definition of a contract that really determines the difference between a contract and an agreement.

    A BPA is classified as an agreement because it lacks the legally and mutually binding terms and conditions that are enforceable unlike a contract. A BPA in and of itself does not create any obligation on the part of either party. The BPA establishes the baseline rights and responsibilities of the parties but is not enforceable by law in the same way a contract is. In addition, the most obvious element of a contract that is missing in a BPA is consideration or the “bargained-for exchange of something of legal value."  There is no consideration with the BPA itself, the consideration is present in the orders against the BPA. It is therefore the order issued against the BPA that creates that contractual binding obligation for the seller to deliver and the buyer to pay. A BPA is not a type of contract, it is a type of agreement.

    * See The Restatement (Second) of the Law of Contracts a legal treatise from the second series of the Restatements of the Law. This reference is used to inform judges and lawyers about general principles of contract common law. 

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