Gale Encyclopedia Of American Law 3Rd Edition Volume 8 P20 pdf

resentment in another person that may cause that person to engage in an illegal act. Provocation may be alleged as a defense to certain crimes in order to lessen the severity of the penalty normally impos ed. For example, provocation that would cause a reasonable person to act in a heat of passion—a state of mind where one acts without reflection—ma y result in a reduction of a charge of murder to a charge of voluntary MANSLAUGHTER. PROXIMATE CAUSE An act from which an injury results as a natural, direct, uninterrupted consequence and without which the injury would not have occurred. Proximate cause is the primary cause of an injury. It is not necessarily the closest cause in time or space nor the first event that sets in motion a sequence of events leading to an injury. Proximate cause produces particular, foreseeable consequences without the interven- tion of any independent or unforeseeable cause. It is also known as legal cause. To help determine the proximate cause of an injury in NEGLIGENCE or other TORT cases, courts have devised the “but for” or “sine qua non” rule, which considers whether the injury would not have occurred but for the de fendant’s negligent act. A finding that an injury would not have occurred but for a defendant’s act estab- lishes that the particular act or omission is the proximate cause of the harm, but it does not necessarily establish liability since a variety of other factors can come into play in tort actions. Some jurisdictions apply the “substantial factor” formula to determine proximate cause. This rule considers whether the defendant’s conduct was a substantial factor in producing the harm. If the act was a substantial factor in bringing about the damage, then the defendant will be held liable unless she can raise a sufficient defense to rebut the claims. PROXY A representative; an agent; a document appointing a representative. A proxy is a person who is designated by another to represent that individual at a meeting or before a public body. It also refers to the written authorization allowing one person to act on behalf of another. In corporate law, a proxy is the authority to vote stock. This authority is generally provided by the charter and bylaws of a corporation or by a state statute. If authority is not provided, a stockholder cannot vote by proxy. The record owner of the stock whose name is registered on the corporate books is the only individual who can delegate the right to vote. In the absence of an express requirement, no particular form is necessary for a proxy. It must, however, be evidenced by a sufficient written grant of authority. A proxy is not invalid if minor errors or omissions appear on the document. Generally any power that a stockholder possesses at a corporate meeting can be delegated to a proxy. An ordinary proxy can vote on regular corporate business, such as the amendment of the bylaws. The proxy is not authorized to vote, however, on extraordinary corporate business, such as a merger, unless given special authority to do so. When a proxy acts within the scope of her authority, under agency principles, the stockholder is bound as if she acted in person. A proxy can be revoked at any time, unless it is coupled with an interest or made expressly irrevocable. The sale of a stockholder’s shares automatically revokes any proxies previously given to vote those shares. A proxy can also be revoked when the stockholder gives a subse- quent proxy or attends the meeting in person. A stockholder can act as a proxy for another shareholder, but it is not necessary for a proxy to be a stockholder. PRUDENT PERSON RULE A standard that requires that a fiduciary entrusted with funds for investment may invest such funds only in SECURITIES that any reasonable individual interested in receiving a good return of income while preserving his or her capital would purchase. Historically known as the prudent or reasonable man rule, this standard does not mandate an individual to possess exceptional or uncanny investment skill. It requires only that a fiduciary exercise discretion and average intelli- gence in making investments that would be generally acceptable as sound. PUBLIC As an adjective, open to all; notorious. Open to common use. Belonging to the people at large; GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 178 PROXIMATE CAUSE _____________, INC. Smith Building 1000 Main Street Spur, Texas 77111 __________________ NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 15, 2009 __________________ To the Shareholders of April 3, 2009 ____________, INC The annual meeting of the shareholders of ______________, Inc. will be held in the Presidential Ballroom of the Longhorn Hotel, 2000 Steer Street, Spur, Texas, on Friday, May 15, 2009, at 9 A.M., Spur time, for the following purposes: 1. To elect a Board of Directors for the ensuing year; 2. To act upon the recommendation of the Board of Directors that ______________ be elected and approved as independent public accountants to examine the Company's accounts for the current fiscal year; and 3. To transact such other business as may properly come before the meeting or any adjournments thereof. The Board of Directors has fixed the close of business on March 20, 2009, as the record date for determining shareholders entitled to notice of and to vote at the meeting. You are cordially invited to attend the meeting in person. Even if you plan to attend the meeting, however, you are requested to sign, date and return the accompanying proxy as soon as possible. By Order of the Board of Directors _________________________________ Whether or not you will be able to attend the meeting, PLEASE VOTE YOUR SHARES PROMPTLY BY EITHER SIGNING AND RETURNING THE ACCOMPANYING PROXY CARD OR CASTING YOUR VOTE VIA TELEPHONE OR THE INTERNET AS DIRECTED ON THE PROXY CARD. No postage need be affixed to the enclosed reply envelope if it is mailed in the United States. PROXY STATEMENT This Proxy Statement and the accompanying form of proxy are being mailed on or about April 3, 2009 in connection with the solicitation by the management of ____________ Inc. (the "Company") of proxies to be used at the annual meeting of its shareholders to be held on May 15, 2009, and any and all adjournments thereof, for the purposes set forth in the accompanying notice of the meeting. When proxies are returned properly executed, the shares represented thereby will be voted. If the proxy signed without a vote indicated in the boxes, the shares will be voted for the election as directors of the nominees named herein and in favor of the election and approval of ______________ as independent public accountants to examine the Company's accounts for the current fiscal year. If a choice has been specified, however, the shares will be voted accordingly. A shareholder giving a proxy may revoke it at any time before it is voted at the meeting. In addition, a shareholder who attends the meeting may, if he wishes, vote by ballot at the meeting, thereby cancelling any proxy vote previously given. The Company will pay the cost of soliciting proxies. In addition to the solicitation of proxies by mail, proxies may also be solicited by telephone, telegram, or personal interview by regular employees of the Company. The Company will reimburse brokerage houses and other nominees for their reasonable expenses in forwarding proxy material to beneficial owners of stock. Whether you can attend the meeting or not, your proxy vote is important. Shares can be voted at the meeting only if the owner is present or is represented by proxy. Accordingly, it is requested that you sign and return the enclosed proxy in the envelope provided. The principal executive offices of the Company are located in the Smith Building, 1000 Main Street, Spur, Texas 77111. VOTING OF SHARES Only shareholders of record at the close of business on March 20, 2009, are entitled to notice of and to vote at the meeting. At such date the Company had outstanding 453,052,689 shares of Common Stock. Each share entitles the owner of record on the record date to one vote per share on all questions submitted to shareholders. I ELECTION OF DIRECTORS There are eleven directors to be elected. It is intended that the persons named in the following tabulation will be placed in nomination, and the persons named in the accompanying proxy will vote in favor of such nominees, unless contrary instructions are set forth on the proxy. Each nominee is a member of the present Board of Directors. The terms of office of all directors to be elected at this annual meeting will be until the next annual meeting of shareholders and their successors are elected and qualified. The persons named in the proxy may act with discretionary authority if any nominee should become unavailable for election, although management is not aware of any circumstances likely to render any nominee unavailable. The following information has been furnished by each nominee. [continued] Proxy Statement A sample proxy statement used by a fictional company to notify its stockholders of the upcoming annual meeting of shareholders. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION PROXY 179 A sample proxy statement used by a fictional company to notify its stockholders of the upcoming annual meeting of shareholders (continued). ILLUSTRATION BY GGS CREATIVE RESOURCES. REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. Proxy Statement nommoCfoserahSsadevreS denwOkcotSrotceriD tayllaicifeneBylsuounitnoC 8002,92tsuguAecniSnoitapuccOlapicni rPdnaemaN 607,9610991 snavE.WydroJ Chairman of the boards of directors of ________ Company, ________, Inc., ________, Inc., _________, Inc., and _________ Company, subsidiaries of the Company, and Vice Chairman of the Board of the Company. [Portions omitted for the purpose of illustration.] Remuneration—The following tabulation sets forth information regarding each director and each of the three highest paid officers of the Company whose aggregate direct remuneration exceeded $180,000 during the year ended June 30, 2008, the aggregate direct remuneration paid to all persons who served as directors and officers of the Company during that period, in each case for the portion of the period in which they served as such, the estimated annual benefits to be paid upon retirement under the existing retirement plan and Company contributions under the existing stock purchase plan. Annual Rate snoitubirtnoCfodet amitsEseiticapaC eeyolpmErednUstifeneBlaunnAetagerggAhcihWni Name or Remuneration Direct Under Stock Purchase Identity of Group Was Received Remuneration Retirement Plan Plan Jackson C. Browne . . . . . . . . . . Chairman of the $169,337 $60,242 $5,450 Board, President and Chief Executive Officer, Director [Portions omitted for purpose of illustration] Stock Option Information—The 2003 Stock Option Plan and the 2006 Stock Option Plan (the "Plans") for officers and other key employees of the Company and its subsidiaries provide for the grant of five-year, qualified stock options, and ten-year, non-qualified stock options, to purchase Common Stock of the Company, in each case at an option price not less than the market value of the Common Stock on the date of grant. As of August 29, 2008,there were outstanding qualified stock options covering 450 shares of the Common Stock and exercisable at an average option price of $52.66, which had been granted to officers under the Plans. The following tabulation sets forth certain information regarding the persons listed under "Remuneration," above, and all directors and officers of the Company as a group, with respect to non-qualified stock options granted to such persons under the Plans: Non-qualified Options: fosagnidnatstuOecnisdesicr exEecnisdetnarG 8002,92tsuguA7002,03enuJ7002,03enuJ etagerggA stekraM noeulaVetagerggAegarevA Average foetaDesahc ruPnoitpO Option serahSesahcruPecirPserahSecirPserahS Price Jackson C. Browne 86,400 $12.90 — — — 86,400 $12.90 [Portions omitted for purpose of illustration.] II SROTIDUATNEDNEPEDNIFOLAVORPPADNANOITCELE The Board of Directors has approved and recommends_____________ for election and approval by the meeting as independent public accountants to examine the Company's accounts for the current fiscal year. Representatives of _____________, the independent public accountants of the Company for the year ended June 30, 2008, are expected to be present at the meeting with the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions. The election and approval of _________ requires the affirmative vote of a majority of the shares of Common Stock present or represented and entitled to vote at the meeting. The persons named in the accompanying proxy intend to vote the proxy in favor of such election and approval, unless contrary instructions are set forth on the proxy. The Board of Directors is aware that there are currently pending investigations and lawsuits involving various major accounting firms and has considered the fact that several such actions are pending against _____________. After such consideration, the Board recommends the continuation of this firm as independent auditors of the Company's accounts. The members of the Audit committee ofthe Board of Directors are Messrs. Babe M. Carruth, J. O. Willis and R. B. Schramm. TROPERLAUNNA The Annual Report to shareholders, including financial statements, for the fiscal year ended June 30, 2008, has been mailed to all shareholders. The Annual Report is not a part of the proxy solicitation material. SSENISUBREHTO The Management does not intend to bring any business before the meeting other than the matters referred to in the accompanying notice and at this date has not been informed of any matters that may be presented to the meeting by others. However, if any other matters properly come before the meeting, it is intended that the persons named in the accompanying proxy will vote pursuant to the proxy in accordance with their best judgement on such matters. ,srotceriDfodraoBehtforedrOyB __________________________ Dated: April 3, 2009 GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 180 PROXY relating to or affecting the whole people of a state, nation, or community; not limited or restricted to any particular class of the community. PUBLIC ADMINISTRATIVE BODIES Public administrative bodies are agencies endowed with governmental functions. Public administrative agencies are created by statute and only the legislature has the authority to provide for their creation. The statutory provisions that creat e the administra- tive agencies and confer functions on them determine the character of the agencies. In general, agencies represent the people and act as guardians of the PUBLIC INTEREST, not the interests of private persons. As an incident to the performance of their public functions, however, agencies can decide issues between private parties or private rights. Administrative agencies are extensions of the legislative branch of the government and can perform acts of a legislative or QUASI- LEGISLATIVE nature. Agencies can also be part of the executive branch of government and can be empowered to deal with matters within the scope of executive power. Administrative agencies are continuing organizations, unaffected by changes in person- nel. Ordinarily final actions of administrative officers or bodies within the scope of their authority are binding on their successors. All persons are equally eligible to hold an administrative office unless they are excluded by some constitutiona l or statutory disqualifica- tion. The legislature usually establishes the qualifications of those who are to hold admin- istrative offices. The qualifications must be reasonable in light of the functions and duties of the office. The tenure and term of adminis- trative officers are indicated in the statute. Generally an official is entitled, and sometimes required, to hold office until a qualified successor is chosen . The power to remove an official is derived from the sovereign power of the state and is indispensable in obtainin g good administration of public activities. An officer should be removed only according to law. If the office is held at the pleasure of the appointing agency, the INCUMBENT can be removed without notice or hearing. Generally when authority is conferred on an administrative body composed of three or more members, the authority can be exercised by less than all the members, provided all had notice of the meeting and an opportunity to attend. Membership on an administrative board ordi- narily includes the right to vote, and statutory provisions governing the method of voting should be observed. The number of members for effective action is usually fixed by statute, and action by a quorum is necessary. Unless provided by statute, the authority cannot be exercised by a solitary member, or less than a majority. A statutory requirement that a quorum be present is a jurisdictional one that cannot be waived; the action of less than a quorum is void in such a case. In the interest of orderly procedure and certainty, administrative bodies keep minutes or written records of all proceedings and actions. Administrative agencies speak through their records, and the minutes must be truthful, clear, and precise. In contested cases when an administrative agency acts in a QUASI-JUDICIAL capacity, the record should contain a summary of the facts and circumstances presented and the reasons for any administrative actions. Administrative bodies have an inherent right to amend their records. When records are incorrect, they can be changed to reflect the truth. Typographical or clerical errors can be corrected at any time. Records should be open for inspection by persons who have some real or proper interest in them, such as the parties to a proceeding. When the records are made public, no particu- lar reason has to be demonstrated for inspecting them, since such records can be examined out of mer e curiosity. The right of inspection, however, is subject to reasonable regulation. Liability for the expenses of an administra- tive agency is usually regulated by statute. The legislature can also grant the agency the exclusive power to fix the fees for expenses incurred in the performance of its duties. Administrative officers and agencies have no COMMON LAW or inherent jurisdiction of powers. Custom or usage cannot invest administrative officers, agencies, or bodies with authority. Their powers are wholly derived from, and limited by, the constitution, a statute, or some other legislative enactment. In addition to the express powers, the officials and agencies have whatever implied power s are reasonably neces- sary to effectuate the express powers and duties. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION PUBLIC ADMINISTRATIVE BODIES 181 An administrative agency that originally acquires jurisdiction over a particular matter ordinarily has exclusive jurisdiction as against an agency with CONCURRENT JURISDICTION, and no coordinate body has any right to interfere. An administrative body, however, can perform its duties in matters over which it has exclusive jurisdiction in cooperation with other public bodies and officials. When the power and jurisdiction of federal and state agencies conflict or overlap, the federal authority is supreme and w ill prevail. Where Congress has preempted a particular field and has granted exclusive power over it to a federal agency, the power of a state is suspended, and a state agency has no jurisd iction, even when the particular matter sought to be administered by the state agency has not been addressed by the federal agency. The mere enactment of a federal statute authorizing a federal agency to act in a certain field does not preclude a state from enacting a statute on the same general subject and creating a state agency for its enforcement. When Congress in enacting a statute has not preempted an area, a state board or official, acting under a state statute, can assume jurisdiction and act. As a general rule, administrative agencies or officers are not civilly liable for the conse- quences of their acts, when acting in GOOD FAITH within the scope of proper authority. An officer is not responsible for damages if he makes a MISTAKE OF FACT in exercising discretion or an error in ascertaining and deciding on the facts of a case, or if the law is misconstrued or misapplied. Similarly, an administrative officer is not liable for the wrongful acts or omissions of subordinates, unless she directed, authorized, or cooperated in them. Liability results, however, when damages occur as a result of an official acting outside her scope of jurisd iction and without legal authorization. When exercising their powers, administra- tive agencies must keep within the scope of the powers granted to them. They are powerless to act contrary to the provisions of the law, and they must follow the standards established by statute. They cannot ignore or transgress the statutory limitations on their power, even to accomplish what they believe to be worthwhile goals. Acts or orders that do not fall within the powers granted are wrong and void. Persons whose rights are affected by admin- istrative action are entitled to an impartial action free from bias, prejudice, or personal interest. When an individual or a group claims that an administrative act adversely affects a right, a presumption exists in favor of the legality and regularity of official acts of administrative officers and agencies. It is presumed that they act within the limits of the authority conferred on them and that facts exist that justify the administrative action. Investigations by administrative agencies or officials are informal proceedings to obtain information to govern future action. They are not proceedings in which action is taken against anyone. An administrative investigation is comparable to a GRAND JURY investigation where witnesses are compelled to appear and testify. An administrative body can be required to make certain investigations, such as when a public service commission is required to investigate the activities of a public utility. A board might also be authorized to exercise its discretion in determining when an investigation is to be made. The form of the investigation usually depends on the nature of the question to be decided and the type of data that is needed. Investigations are ordinarily held in private, and they must be conducted so that harmful publicity will not result or influence the final outcome. In the course of its investigation, a board can review official documents and can supplement this means of inquiry by private correspondence and by conducting personal research. Investigations by administrative agencies or officials have no parties as found in a lawsuit or criminal prosecution, and usually, there is no need to give notice of the investigation. An administrative body or official can issue a SUBPOENA requiring a witness to appear and to testify at an investigation. In addition, a subpoena can be issued for the production of all books, papers, or other documents that are relevant to the inquiry. The subpoena is void when it does not indicate that the evidence to be produced is germane to the inquiry. A person must respond to a subpoena to the best of his ability. Compliance with a subpoena is enforce- able by a court order. Although hearings can be held, as a general rule, a hearing is not an integral part of an investigation by an adminis- trative body or official. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 182 PUBLIC ADMINISTRATIVE BODIES An administrative body or official is not bound to conduct an investigation under the strict rules of evidence required for courts, but particular evidence, such as HEARSAY evidence, has been held to be inadmissible. Witnesses can be called in an investi gative proceeding and their testimony can be taken, subject to CROSS- EXAMINATION. Witnesses can even be entitled to the presence and advice of counsel. The costs and expenses of an investigation can be assessed against the particular persons or corporations involved, particularly if the complaining party receives an adverse decision. Public admini strative bodies promulgate rules and regulations. Their authority to do so and the guidelines under which the agencies perform these duties are governed by adminis- trative law and administrative procedure. FURTHER READINGS Box, Richard C. 2004. Public Administration and Society: Critical Issues in American Governance. Armonk, N.Y.: M. E. Sharpe. Fitzgerald, Randall, and Gerald Lipson. 1984. Porkbarrel: The Unexpurgated Grace Commission Story of Congressional Profligacy. Washington, D.C.: Cato Institute. Osborne, David, and Ted A. Gaebler. 2000. Reinventing Government: How the Entrepreneurial Spirit Is Trans- forming the Public Sector. Cambridge, Mass.: Perseus. Pinkerton, James P. 1995. What Comes Next? The End of Big Government—and the New Paradigm Ahead. New York: Hyperion. CROSS REFERENCES Administrati ve Agency; Administrative Law and Procedure; Agency; Good Faith; Usage. PUBLIC CONTRACT A public contract is an agreement to perform a particular task to benefit the community at large that is financed with government funds. Federal, state, and local governments enter into contracts to purchase goods and services. The construction of public buildings, highways, bridges, and other structures is governed by a well-defined contractual process of competi- tive bidding that seeks to protect the public against the squandering of public funds and prevent abuses such as FRAUD, favoritism, and extravagance. A public contract is a legally enforceable commitment of a party to undertake the work or improvement desired by a public authority. Public contracts are largely governed by the gen- eral law of contracts. Private individuals and corporations are held to stricter standards in their dealings with the government than in their private dealings. Conversely the government must deal fairly with those who contract with it. It can enter contracts within the limitations imposed by constitutional and statutory pro- visions. In addition, federal laws must be observed because most public projects receive financial aid from the federal government. Awarding Contracts The method by which contracts are awarded is ordinarily regulated by statute or constitutional provision, and the prescribed method must be followed. For significant expenditures of public funds, government bodies usually must use a bidding process. In the awarding or letting of public contracts, the public body invites bids or makes requests for proposals so that it can award the contract to the bidder who qualifies under the terms of the governing statute. The submission of a bid in response to an invitation is considered an offer, and although it may not be freely withdrawn prior to acceptance, it does not become a contract unless and until such time as it is accepted by the proper public authority. A bid that does not respond to the terms contained in the invitation to bid is not within statutory requirements but is considered to be a new proposition or a counterproposal. Competitive Bidding For major government expenditures, such as construction of public buildings and highways, government bodies require competitive bidding, which is a well-defined public process of letting a contract. Competitive bidding is a means of preventing political GRAFT and corruption be- cause the public nature of the process dis- courages favoritism and fraud. The integrity of the process is a central goal of competitive bidding. If a public official or employee is later found to have had an interest in a public contract, the agreement is void and unenforce- able, and the interested parties may be subject to criminal prosecution. To provide bidders with an opportunity to bid competitively on the same work, the appropriate public authorities must adopt plans and specifications that definitely set the extent and type of the work to be done and the materials to be furn ished. The public entity itself must prepare these plans and GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION PUBLIC CONTRACT 183 specifications, and it must provide all prospec- tive bidders with the same specifications from which to prepare their bids. The specifications must not be drafted so as to restrict bidding to a single bidder unless it is clearly essential to the PUBLIC INTEREST to do so. The plans and specifications cannot be changed once an invitation for bids or the bids themselves have been made unless all bidders are notified so that they have an opportunity to bid under new conditions. In making specifica- tions, the public authority has wide discretion concerning the particular equipment or product that it might require as part of the contract. For example, it might designate a specific product covered by a patent held or manufactured only by one bidder. Once the plans and specifications are prepared, the public entity must publish a public notice of its intentions to receive bids. This notice does not constitute an offer but is merely a solicitation of offers. An invitation to bid should indicate the deadline for bids to be submitted. It must be explicit in order to facilitate intelligent bidding. Certain conditions are required of bidders. There might be a requirement that bids be properly signed and accompanied by a financial statement of the bidder. Customary additional requirements are a certificate attesting that the bidder has not colluded with others in the submission of the bid, and a bond or other security, which is conditioned on the making of a contract and the performance of work according to the contract. A contractor’s bond requires the contractor to pay a certain amount of money to the public authority if the obligations in the bond are not fulfilled. The bond contains two obligations: one for the faithful performance of the contract and the other for the protection of the right of laborers and material handlers to be paid. A bid for the construction of public works must be in subst antial and material conformity to the details contained in the bid specifications. All matters concerning the substance of the competitive bid, such as those that might affect price, quantity, quality, or manner of perfor- mance, must conform to the details indicated in the specifications. Failure to substantially com- ply will result in rejection of the bid, and a contract entered into based on such a bid is invalid. A bid may be accepted if it contains minor or immaterial deviations from the specifica- tions. Whether a deviation is material and substantial is determined by whether the bid limits fair competition by providing the deviat- ing bidder with a substantial advantage or benefit not enjoyed by other bidders, a QUESTION OF FACT decided in light of all the circumstances of the case. Once the time for filing bids expires, the bidder is bound by the bid as filed, which cannot be altered. A material defect cannot be corrected after the bids have been opened, but a minor defect can. If necessary information is missing from a bid when it is opened, it cannot be supplied then or later by a private under- standing between the bidder and the public authority. In general, an individual who files a bid cannot withdraw it. The benefits that will accrue to a bidder under the public bidding statutes are viewed as adequate consideration to make a bid irrevocable. Some statutes, however, permit a bidder to withdraw a bid at any time prior to its acceptance. Withdrawal is generally allowed if a bidder makes an honest and GOOD FAITH mistake in calculation that has a material effect upon the substance of the contract. A bidder can withdraw a bid only if he is reasonably prompt in providing notice of the error to the public authority or if the public authority will not suffer substantial hardship when the bid is withdrawn. Once the public authority opens the bids, it must review them within a reasonable period to determine if one should be accepted. A bid must be accepted for the formation of a public contract to occur. An acceptance and award of the contract to a bidder must be on the terms advertised because PUBLIC POLICY proscribes granting to a successful bidder or her SUBCON- TRACTOR a benefit that was not extended to others who submitted bids. A public body can be granted the right by statute, or it can reserve in the advertisement of bids the right to reject any and all bids, but it cannot do so arbitrarily or without good cause. A typical reason for rejection of all bids is that the bid amounts exceed the public funds allocated for the project. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 184 PUBLIC CONTRACT Ordinarily the award of a public contract under a competitive bidding statute must be to the lowest bidder unless facts establish that another bid, although higher, is the lowest one made by a responsible bidder. The lowest responsible bidder is the contractor whose bid was in substantial conformity to the plans and specifications and who is able to perform the work at the lowest cost. The dollar amount of a contractor’s bid is only one factor in deter- mining the lowest responsible bidder. The government unit must also consider a bidder’s experience, prior dealings with the government body, reputation for satisfactory work, and intention to employ local labor. The fact that a low bidder has demonstrated delay, lack of cooperation, or poor performance on prior contracts supports a finding that the person is not the lowest responsible bidder. Since the 1970s public contracts led by competitive bidding have been subject to AFFIRMATIVE ACTION requirements. The federal Public Works Employment Act (42 U.S.C.A. § 6701 et seq.), enacted in 19 77, imposed certain conditions on public projects that receive financial assistance from the federal government. The most controversial provision prohibits any local public works project from being granted federal assistance unless at least 10 percent of its work goes to minority business enterprises. A minority business enterprise is a business in which minority group members own at least a 50 percent interest or, in the case of a publicly owned business, 51 percent of the stock is owned by minorities. When a bid is submitted, it mu st be accompanied by a statement that the bidder has taken s teps to include the involvement of minorities in the project. The U.S. SUPREME COURT,inFullilove v. Klutznick, 448 U.S. 448, 100 S. Ct. 2758, 65 L. Ed. 2d 902 (1980), upheld the constitutionality of the 10 percent requirement, holding that the set-aside provided a way for groups previously subjected to DISCRIMINATION to achieve equal economic opportunity. However, in City of Richmond v. J. A. Croson Co., 488 U.S. 469, 109 S. Ct. 7 06, 102 L. Ed. 2d 854 (1989), the Supreme Court struck down a set-aside pro- gram for minority contractors. The Court concluded that these types of affirmative action programs can only be justified to remedy prior government discrimination instead of past societal disc rimination. Thus, if it cannot be shown that a city discriminated against minor- ities in the past, the set-aside program is an unconstitutional preference. Legal Challenges to Awarding of Public Contracts A low bidder is ordinarily entitled to reasonable notice and a hearing prior to rejection of the bid unless the bidder has blatantly failed to comply with a specific contract provision, such as the minority contractor requirement. Unsuccessful bidders can start lawsuits that challenge the rejection of their bids and the awarding of a public contract to another bidder. Because public contracts are matters of public interest, taxpayers can also contest the award of a contract. The courts ordinarily will not interfere with an action of a public official or body in accepting or rejecting bids and awarding a contract, provided that the official or organization made it fairly and honestly, in good faith, and in the interest of the p ublic. An award that was made arbitrarily or capriciously or as a result of favoritism or fraud will be subjected to judicial scrutiny. There should be a reasonable time interval be tween the op ening of th e bids and the execution of a public contract to allow a disappointed bidder to bring any complaint before a court for JUDICIAL REVIEW. Contracts executed by public officers who do not have the authority to make contracts are void and unenforceable. A contract is void if the bidder has failed to comply with competitive bidding requirements. A contractor has the responsibility to learn whether the contract complies with the law. In general, once the courts declare a public contract void, the contractor cannot recover unpaid claims, but the government can recover any payments it made under the contract. A public entity may be obligated to pay the reasonable value of the benefits received under a void contract but only in the absence of a statutory prohibition against such arrangements. At the federal level, the Government Accountability Office (GAO) is the agency that reviews protests arising from the public contract bidding process. GAO reviews protests through an adversarial process handled by a group of 30 attorneys within the agency’s Office of General GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION PUBLIC CONTRACT 185 Counsel. The GAO reviews a decision based on specific allegations of whether the government’s actions in accepting a certain bid were contrary to applicable law or contrary to the evaluation scheme established by the agency. The GAO will sustain a protest only when the agency has failed to follow procurement rules and the failure prejudiced the protesting party’s chances of winning the competition. The GAO does not frequently sustain protests, but some parties have successfully challenged bids. In 2008 the Air Force accepted a bid for a new refueling tanker from a European competitor to Boeing. The $40 billion deal was part of a series of contracts that could be worth as much as $100 billion. Boeing alleged that the Air Force had failed to follow the evaluation criteria that the Air Force had established regard ing technical requirements of the tankers. The GAO determined that the Air Force had made a number of significant errors that likely affected the contract award. Thus, the GAO sustained Boeing’s bid protest. Contractual Rights of the Parties A public contract can be assigned by one contractor to another where the assignment is restricted to funds due under the contract. However, it is not assignable without the consent of the public body with which the contract is made. A contractor and his or her assignee are both bound by the terms of the main contract. The contractor cannot transfer by assignment anyth ing that was not allowed under the main contract. The law can provide that no assignment is valid unless copies of the contract and the assignment are filed with the COURT ADMINISTRATOR in the county where the public works project is located. A contractor can employ subcontractors to perform certain portions of the work. For example, in the construction of a public building, a contractor will typically hire an electrical and a mechanical subcontractor, along with subcontractors who do cement work, roofing, and painting. A subcontractor enters an agreement with an original contractor to perform part of the work that the contractor has agreed to perform in the original contract. A public authority has the inherent right to make reasonable and necessary changes or modifications in public contracts, according to a new agreement between the contracting parties. A public contract can also contain a provision governing its cancellation or termina- tion under certain conditions. A public author- ity generally cannot lawfully rescind its contract without the contractor’s consent, except in the case of fraud, mistake, or the invalidity of the contract. A contractor is bound to the contract as agreed, and a failure to observe it will make the contractor liable for breach of contract. The contractor is entitled to recover for work completely or substantially pe rformed in com- pliance with the contract. Where a substantial performance of a contract has taken place with the use of defective materials or faulty work- manship, the defects must be corrected if practicable. If correction is not possible or practicable, the contractor will be awarded the contract price reduced by the difference be- tween the value of the defective work and its value if completed according to the terms of the contract. A public contractor can be compensated for additional work that results from authorized changes in the plans and specifications, as well as for extra work or materials required because conditions differ from their representation in the plans and specificatio ns. Oftentimes con- tractors realize the bulk of their profit from such change orders. When a contractor does not complete the job within the time specified, she or he has committed a breach of the contract. Some public contracts contain penalty clauses, which assess the contractor a certain amount of money for each day past completio n. By contrast, road and bridge contracts may contain clauses that reward a contractor for finishing the project ahead of schedule. ABA Section on Public Contract Law Many lawyers with practices focusing on public contracts belong to the American Bar Associa- tion’s Section on Public Contract Law. This section consists of several committees, including the Federal Procurement Division, the Con- struction Division, the General Interest Com- mittees Division, the Operations Division, and the State and Local Procurement Division. This GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 186 PUBLIC CONTRACT section produces a number of books and journals related to public contracts, including the Public Contract Law Journal. FURTHER READINGS Berger, Joseph R. 2008. “The Year in Sustained Bid Protests at the U.S. Government Accountability Office and the U.S. Court of Federal Claims.” Public Contract Law Journal. (37). Drake, W. Avon, and Bert D. Holsworth. 1996. Affirmative Action and the Stalled Quest for Black Progress. Champaign: Univ. of Illinois Press. Hearn, Emmett E. 2002. Federal Acquisition and Con- tract Management. 5th ed. Los Altos, Calif.: Hearn Associates. Keyes, W. Noel. 2000. Government Contracts in a Nutshell. 3d ed. St. Paul, Minn.: West Group. Madsen, Marcia. 1997. “Purchasing Reforms Pique the Need for Contract Attorneys.” National Law Journal (August 4). Porterfield, Richard L. 1993. The Insider’s Guide to Winning Government Contracts. Hoboken, N.J.: John Wiley & Sons. Seyfarth, Shaw, Fairweather & Geraldson. 1999. The Government Contract Compliance Handbook. 3d ed. St. Paul, Minn.: West Group. Whelan, John W. 2000. Federal Government Contracts: Cases and Materials. 2d ed. New York: Foundation Press. CROSS REFERENCES American Bar Association; Fraud; Government Account- ability Office. PUBLIC DEFENDER An attorney appointed by a court or employed by the government to represent indigen t defendants in criminal actions. CROSS REFERENCE Right to Counsel. PUBLIC DOMAIN Land that is owned by the United States. In COPYRIGHT law, literary or creative works over which the creator no longer has an exclusive right to restrict, or receive a royalty for, their reproduc- tion or use but which can be freely copied by the public. In general, all works created or registered on or after January 1, 1978, are protected by copyright law for the duration of the author’s life plus 70 years, at which point they will enter the public domain. CROSS REFERENCE Public Lands. PUBLIC FIGURE A description applied in LIBEL AND SLANDER actions, as well as in those alleging invasion of privacy, to anyone who has gained a high degree of prominence in the community as a result of his or her name or exploits, whether willingly or unwillingly. However, just who does and does not qualify as a public figure, for these purposes, is open to argument. If a PLAINTIFF in a libel or slander action qualifies as a public figure, he or she has a higher BURDEN OF PROOF and must show that the LIBELOUS or slanderous conduct of the DEFENDANT was motivated out of “actual malice,” the standard set forth in the case of NEW YORK TIMES CO . V. SULLIVAN, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). FURTHER READINGS Glasser, Charles J. 2009. International Libel & Privacy Handbook. New York: Bloomberg Press. PUBLIC FORUM See FREEDOM OF SPEECH. PUBLIC HEALTH SERVICE The Public Health Service (PHS) is the operat- ing division of the Health and Human Services Department (HHS) responsible for promoting the protection and advancement of the U.S. population’s physical and mental well-being. The Public Health Service was first estab- lished by an act of July 16, 1798 (ch. 77, 1 Stat. 605), which authorized the creation of hospitals to care for U.S. merchant seamen. Subsequent legislation substantially broadened the scope of its activities, and the Public Health Service accomplishes its goals through a number of agencies and programs. These entities coordi- nate and implement national health policy on the state and local levels, conduct medical and biomedical research, and enforce laws to ensure the safety of drugs and medical devices and to protect the public against impure foods and cosmetics. There are several sub PHS agencies or Operating Divisions. Agency for Healthcare Research and Quality The Agency for Healthcare Research and Quality (AHRQ ) supports research designed to GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION PUBLIC HEALTH SERVICE 187 . group of 30 attorneys within the agency’s Office of General GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION PUBLIC CONTRACT 185 Counsel. The GAO reviews a decision based on specific allegations of. official. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 182 PUBLIC ADMINISTRATIVE BODIES An administrative body or official is not bound to conduct an investigation under the strict rules of. 2009 GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 180 PROXY relating to or affecting the whole people of a state, nation, or community; not limited or restricted to any particular class of the