In 2016, the municipality of San José de Cúcuta signed a services contract with a private party to "support management" in determining and assessing the betterment levy, a tax on the increase in land value produced by the administration's planning decisions. In practice, the contractor was supporting no one: he assessed the tax, ran the administrative procedures and decided how much each taxpayer owed. Almost a decade later, the Consejo de Estado used that case to draw a line that ought to have been clear from the start: there are state functions that no services contract can delegate, however the subject matter is worded.
The Third Section, Subsection C, with Justice Nicolás Yepes Corrales as rapporteur, decided the appeal in its judgment of 18 June 2025 (case 54001-23-33-000-2017-00633-01, file 66,396). The municipality had unilaterally terminated the contract on realising that the tax procedures run by the contractor were defective, and the contractor sued, claiming the termination was unlawful. The Consejo de Estado did not fully side with either party: it found that the contract itself was absolutely void, on a defect graver than any argument about termination.
The judgment uses the case to distinguish two mechanisms that are often confused in state contracting. One is unilateral termination as an exceptional clause under articles 14 and 17 of Law 80 of 1993: a discretionary power of the entity, designed to stop a public service from being paralysed or seriously affected while the contract is being performed. The other is the duty to terminate under the second paragraph of article 45: where a contract falls into one of the grounds of absolute nullity in article 44 — for instance, having been entered into against an express legal prohibition — the entity has no discretion at all; it is obliged to terminate and settle it in whatever state it is in. These are two mechanisms with different premises, limits and consequences, and treating them as interchangeable is, in the court's view, an error that compromises the lawfulness of the administrative action.
The second mechanism applied here. Assessing a tax — determining what a taxpayer owes, processing any appeals lodged and ruling on refunds — is a public function that the law reserves to public servants vested with tax authority, not an "administrative support" task that can be outsourced through a civil contract. By transferring that function to a private party with no legal authorisation to do so, the municipality and the contractor entered into a transaction the law expressly prohibits, which triggers the ground of absolute nullity in paragraph 2 of article 44 of Law 80. And that nullity, the bench recalls, the judge can and must declare of its own motion in the proceedings, whether or not it appears among the claims, provided the parties have taken part and the ground is fully proven.
The practical consequence is harsh for anyone who contracted in good faith. Once absolute nullity for unlawful subject matter is declared, the contractor loses any ground to claim restitution of rights or damages: that route exists only where the contract is valid and has been breached. All that remains available is the mutual restitution under article 48 of Law 80, and only where it is proven that the entity received an actual benefit from the work performed and that the benefit has not been recognised. In this case, with no proof that the municipality had collected or received payments arising from the contractor's assessments, not even that restitution succeeded. The outcome was a nullity with no compensation for either party.
The lesson is not a technicality for litigators. Services and management-support contracts are, rightly, a routine tool in Colombian public procurement; the problem appears when their subject matter, written in innocuous language ("support", "advice", "assistance"), ends up assigning in practice decision-making functions the law reserves to public servants: assessing taxes, ruling on administrative appeals, exercising powers to impose penalties or certifying third parties' compliance with legal effect. For entities, reviewing current contracts against this line of case law is cheaper than waiting for a lawsuit; for suppliers, a contract that in practice turns them into decision-makers over third parties' rights is an alarm, not an opportunity, because if the delegation turns out to be unlawful, the one who loses the money is the one who provided the service.
It is also a reminder that the line between "unilateral termination" and "absolute nullity" is not a procedural nuance: it determines whether the contractor can claim anything at the end of the road or walks away empty-handed. At LuxIA we follow precedents like this closely precisely because they rarely appear in a draft contract or a set of bidding documents; they appear once someone — a contractor, a watchdog, a new mayor — has already noticed that something did not add up.