Contracts Types Conditions
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Transcript of 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.