Contracts Types Conditions

8/7/2019 Contracts Types Conditions

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The most important terms and

conditions put forth in contract

document for an effective

contract management.

CONTRACT

According to the Indian contract act 1872,

contact is defined as an agreement

enforceable by law.The term contract used in construction

industry can be defined as an agreement

entered into by two competent parties under

the terms of which one party agrees to

perform a given job for which the other party

agrees to pay .

The contract requires the responsibilities,

obligations and duties to be defined clearly.

MANAGEMENT

Getting results to people is the fundamentalobjective of management.

It is a discipline approach for the optimal use

of available scarce resources.

It ensures co-ordination of individual efforts to

achieve group goals. The process includes * Planning


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* Organizing

* Staffing

* Leading

* Controlling

The process is optimized so as to provide the

best results in the shortest time with the least

resources.

CONTRACT MANAGEMENT

The primary objective of contract

management is completion of work entrusted

to a contractor with least complications.

Management of contract should be done in

such a way that contractor at least gets

whatever is due to him within the perimeter of

conditions of contract without affecting

harmony and the owner realizes full value for

money invested in construction activity

thereby protecting the interest of both and

ensuring full discharge of contractualobligations of both the parties.

CONTRACT DOCUMENT

It is an agreement which consists of the

general condition of the contract

specifications, bills of quantities including allmodifications which are incorporated in the


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document before the execution as also

contract drawings prepared by the architect

from time-to-time.

A contract document consists of :

* Articles of agreement

* General conditions of contract

* Bill of quantities

* Specifications

* Other related papers

pertaining to the work like drawings

issued from time-to-time.

TERMINOLOGY

Arbitration: a simple method by which two ormore parties agree to refer a dispute existing

between them to a third person of their choice

for a binding decision.

Bank Guarantee: a contract to perform the

promise or to discharge the liability of a third

person in case of his default.

Clerks of works: a person approved by the

architect and appointed and paid by the owner

to act under the orders of the architect to

inspect the works in the absence of the

architect.


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Cartel: It is a combination of contractors to

keep up prices and to kill competition in

tendering process.

Contingencies: allowance made to coverunforeseen errors and omissions.

Damages: monetary compensation for the

injury suffered.

Day work: work which under the terms of the

contract is to be paid for time and materialsand not by measurements.

Deviation: Excess or shortfall with respect to

plan or estimate.

Defendant: The person defending or denying

accused. The person against whom recovery issought.

Escalation: Competition for price rise.

Extra time: Any item of work which is

outside the offer made by the contractor and

therefore outside the contract as well. Frustration of contract: duty to perform a

promise in a contract is discharged.

Force Majeure: An unexpected event .

Lien: It is the legal right to control the real or

personal property of another person until such


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time as that person satisfies a debt or duty

owed to the lien holder.

Negotiation: A process for amicable

settlement of an issue in the spirit of give andtake.

Plaintiff: A person who complains and brings

an action.

Quantum Meruit : As much as one deserves.

Surety: One who promises to answer for thedebt, default or miscarriage.

Variations : alteration or modifications of the

designs, quality or quantity of the work as

shown upon the contract drawing and desired

by architect or referred to in the contract billsand includes the addition, omissions or

substitution of any work.

Work order: It is a written order issued by

the order issued by the owner or his

authorized architect to the contractor,

intimating him that his offer has been

accepted by the competent authority and that

he is ordered to commence the work.

Prime Cost: It is an approximate sum

included in the contract to cover the cost of

some particular item of work or of someparticular goods or materials to be supplied by


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the contractor or by some nominated person,

the cost of which is not known at the time of

signing the contract.

Provisional sum: The main contractor quotesa provisional sum for specialized works such

as pile foundations, water proofing treatment,

lifts and air conditioning work after obtaining a

quotation from specialist firms. These sums

are called provisional sums and are subject to

adjustment later after execution of work.

INDIAN CONTRACT ACT 1872

They involve issues relating to

*technology

*finance*administration

*management

Mutual agreement between the contracting

parties as to the terms and conditions of the

contract

Genuine intention of the parties to accept and

fulfill their respective right s and duties under

the contract

Legal capacity of the parties to make a valid

contract


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Consideration of some value(such as payment

for construction work done)

Exchanged by parties

Lawful nature of the object of the contract.

GENERAL CONDITIONS OF A CONTRACT

ADOPTED BY IIA

* Performance bond (security deposit)

* Damages for non completion

* Determination of contract

* Interim payment

* Completion certificate

* Virtual completion certificate

* Pentultimate certificate

* Interim & final certificate *

Materials

* Fluctuations *

Variations

* Defective work * Defect

liability period

* Arbitration *

Excepted matter

Discuss the merits & demerits of

different types of contract


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TYPES OF CONTRACTS

1. Measurement contracts

2. Lump sum contracts

3. Cost plus fee contracts

4. Turnkey contracts

5. Build own operate transfer

01. Measurement contracts

a. Percentage contracts

For all small works and work repetitive

nature percentage e rate contracts are

adopted

Owner indicates quantities and estimated rate

for all items of workThe estimated cost is reflected in the tender

schedule.

The tendered quotes % above or below the

estimated cost put to the tender

Payment is made on the basis of actualquantities executed and measured

b.Item rate contract

For major works item rate contracts are

adopted


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Owner indicates quantities and units only for

all items of work and the tenderer quotes

rates for each individual items

Payment is made for actual work done based omeasurements

This type of work is useful for works where all

items are not finalized at the beginning

Item can be modified within the certain limit

on the basis of detailed planning and design.02. Lump sum contract

Scope of work construction drawings and

detailed specifications are given to the

tenderer along with terms and conditions of

contract Schedule of quantities may or may not form a

part of tender document

The tender quotes a fixed price for a whole

work tendered

If this type of contract is adopted the ownerwill brake knowing cost of work on the eve of a

word of contract.

This contract specifies stage payment to effect

interim payment.

This type of contracts can be considered whenscope of work is frozen,planning,designing and


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working drawings are completed before

inviting tenders

03. Cost plus fee contract

This method of contract is adopted for

1. Emergency works

2. Miscellaneous work

3. Works for which scope cant be defined

properly at tender stage

The contractor is paid his actual cost of

materials material labor higher charges of

machinery and a fee towards his profit and

overhead.

This fee may be a percentage of total cost

with or without ceiling or a lump sum amount

Here contractors risk is min and owners

liability is not known on the eve of

commencement of work.

Under some circumstances this type of

contract is adopted in govt. or private sector

work.

04. Turn key contracts

In turnkey contract the contractor takes full

responsibility for design, contracting and

commissioning of facility of defined scope for


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a fixed lump sum price. This is an area of high

risk for the contractor

The contractor ha s to bear the normal risk of

unforeseen site conditions poor weather andfoundation problems.

For turnkey contractor time is truly equal to

money and schedule slippage may adversely

affect his profitability particularly in cases

where there is no provision for escalation. A bonus or penalty clause may be included as

in incentive or disincentive to the contractor to

complete the work on time.

This type of contract is suitable for projects

where all the functional parameters arefinalized and changes and extras are not

made later.

Such types of contracts are seen more in

commercial defense and interior projects of

multidisciplinary character and when timely

completion is imp.

05. BOOT contract

This type of contract is adopted for highway

projects, airport, convention centers IT parks,

power plants and bridges.


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Government avoids funding and allows a

private person or a group to invest build and

transfer the facility after recovering the

investment.This type is desirable where the government

itself is unable to raise huge resources to take

up such big projects.

Contracts Types Conditions

Documents