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Collusive: Definition, Example and Related Terms

What does it mean when something is Collusive ?

Collusive behavior refers to actions taken together by two or more parties in secret, with the intent to deceive or achieve a fraudulent or illegal outcome. In the context of contract law, collusion often involves a covert agreement or scheme between parties to mislead or take unfair advantage of a third party, potentially undermining the legitimacy or fairness of a contractual arrangement.

Collusion can have serious legal implications, as such activities may render a contract void or unenforceable, due to the deceptive strategies involved. Participating in collusive actions contradicts the principles of good faith and fair dealing, which are foundational to legal agreements and negotiations.

Examples of potential collusive behavior include two companies secretly agreeing to fix prices, outbidding competition by rigging bids, or conspiracies to defraud a third party through misleading information or actions.

It's important for contract managers and legal professionals to be aware of and vigilant against signs of collusion, as identifying and addressing such behavior early can prevent significant legal liability and financial loss.

Example(s)

  • Scenario Description
    Two contractors secretly agree to submit complementary bids in a tendering process to ensure one of them wins. This behavior constitutes collusive bidding, which is illegal and can lead to the nullification of both bids and potential legal repercussions against the contractors.
    A group of companies agrees not to compete on price to maintain higher profit margins. Such an agreement is a collusive price-fixing scheme that violates antitrust laws and can result in heavy penalties, including fines and dissolution of the collusive agreement.