Overview of Contract Management & Contract Law 1

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Overview of Contract Management &

Contract Law


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Contractmanagement

Contract

Types of contracts Contract Law

Contract management

Disputes & Resolution


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Contract

A Promise enforceable by Law

Offer +Acceptance (Legally binding)

To be legally binding as a contract, a promise must beexchanged for adequate consideration. i.e., benefit a partyreceives


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Contracts

Essentials of a Valid Contract

There must be an agreement or meeting the minds

The agreement must be between parties competent to enterinto a contract

The Parties must give free consent

The agreement must be supported by lawful consideration.

Subject matter must be definite and lawful


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Contracts by Government

Article 299

Deed must be by authorised person

Transparency in the deal

Public Interest in accepting Tenders should prevail

Negotiations should be done with a purpose and prudence.


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CONTRACTING IN GOVERNMENT

Government is, by far, the largest contractor in

any Country, so too in India . Supply products

(purchases ) and services (Consultancy, labour

etc.,)WHAT IS THE SIGNIFICANCE OF GOVT.

CONTRACTS ?

Contract between private parties is absolutely

binding and valid if section 10 of the Indian

Contract Act 1872 is satisfied.


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SECTION-10

All agreements are contracts if they are made

by the free consent of parties competent to

contract, for a lawful consideration and with a

lawful object, and are not hereby expressly

declared to be void______

Contracts entered into between private persons

and the Government are governed by Article 299of Constitution of India.


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ARTICLE 299

All contracts made in exercise of the executive power

of the Union or the State shall be expressed to be made

by the President or by the Governor of the State as the

case may be and all such contracts and all assurances of

property made in the exercise of that power shall beexecuted on behalf of the President or the Governor by

such person and in such manners as he may direct or

authorise

Neither the President nor the Governor shall bepersonally liable_______


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Types of Contracts

Lumpsum

Item Rate

Cost Plus Percentage

Cost + Fixed Fee

Maximum Price

Turnkey


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Form of Contracts

Formal & Informal

Express & Informed

Unilateral & Bilateral


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LAW OF CONTRACT

Freedom of contract

Contract adhesion

Exclusions & Exemptions

Sanctity of Contract


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CONTRACTS ARE GOVERNED BY

Indian contract Act 1872

( as amended by Act 4 of 2003)

Deals mainly with general and limiting principlessuch as formation, Validity, performance orbreach and remedies therefore.

Not a complete code on contract since statutes

dealing with negotiable instruments Act 1881,the Indian Arbitration & Conciliation Act1996, the sale of Goods Act 1930 are not coveredby the Contract Act


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WHAT IS AN AGREEMENT

Every promise and every set of promises forming

the consideration for each other is an

agreement Section 2 (e) of the Indian

Contract Act.

AGREEMENT AND CONTRACT

An agreement which is enforceable by Law isconsidered to be a Contract Section 2 (h) of

the Indian Contract Act.


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All Agreements are Contracts if

they are made byFree Consent

Party's Competent to ContractLawful Consideration

Lawful Objective


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Contract Management

Contract Organisation

Owner

Contractor

Architects & Designing / Engineer

Suppliers / Sub

Contractors

Statutes and Mandates


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Contract Management ..contd

Management of Contracts

PreContract Requirements

Contract Operation

Issues and Problems arising

Disputes & Resolutions

Closure of Contract


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Contract Management

PreAward Stage (Tenders)

Award of Contract (Agreement)

Performance of the Contract(Execution Process)

Post Completion of Stage


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Pre

Award Stage(Tenders)


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Tenders

Negotiated Tenders

Limited Tenders

Open Competition

Mode of Publication Notice inviting tenders

Submission of Tenders

Irregularities in submission

How to Treat?

Conditions by contractors in tender

With drawl of Tender


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CONTRACT CONDITIONS THAT HAVE

MONETARY IMPLICATIONS

EXTENSION OF TIME

LIQUIDATED DAMAGES

PENALITIES

PAYMENT TERMS LIKE MOBILISATION ADVANCE, SECURITY

DEPOSIT, TIME LIMIT WITHIN WHICH BILLS ARE TO BE

PAID, STAGES OF PAYMENT

ARBITRATION CLAUSE

MACHINERY AND MATERIALS ISSUED BY CLIENT WHETHERFREE OR AT FIXED COST

ESCALATION

LIMITATIONS OF LIABILITIES


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MODES OF INVITING TENDERS

NEGOTIATED TENDERS

LIMITED COMPETITION

OPEN COMPETITION


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REQUIREMENTS TO BE FULFILLED BEFORE

INVITING TENDERS

SANCTION TO BE OBTAINED

URGENT WORKS WITH NO TIME

SPLITTING OF WORKS TO BE DISCOURAGED


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INFORMATION TO BE PROVIDED IN

NOTICE

QUALIFICATIONS

NAME

EMD

SECURITY DEPOSIT

TIME LIMIT

COST

MODE OF SUBMISSION

DATE, TIME AND PLACE OF OPENING TENDERS


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PREPARATION AND SUBMISSION OF

TENDER

PURCHASE OF BLANK TENDER FORM

STUDY OF TENDER DRAWINGS

VISIT TO THE SITE OF WORK

ROUGH VERIFICATION

ANALYSIS OF RATES

DECIDING THE PERCENTAGE

WORKING OUT THE LUMPSUM

CHECKING OUT THE RATES

COPIES OF DOCUMENTS


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IRREGULARITY IN SUBMISSION OF

TENDER

UNSIGNED TENDER MAY BE BINDING

ESTIMATES AS OFFERS ARE BINDING

PAYMENT OF EARNEST MONEY

WITHDRAWAL OF TENDER PRIOR TO ITS ACCEPTANCE

PRE QUALIFICATION OF TENDERS


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Acceptance of Tender

Letter of Intent

Mode of Communication

Date of Acceptance

Revocation of Acceptance

Rejection of Tender


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Operation of Contracts

Interpretation

Duties / Obligations of Owner

Duties / Obligations of Contractor

Organising the Project Execution

Monitoring the progress


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Award of Contract(Agreement)


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ESSENTIAL CHARACTERISTICS OF A

CONTRACT

The terms of the contract must be clear andprecise.

Time is the essence of contracts

The terms of contract should be enforcedstrictly. This responsibility rests with bothparties.

Revision of rates in accepted agreements duringthe currency of such agreement is prohibited.


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CONTRACT DOCUMENT

CONTAINS

NOTICE INVITING TENDERS

INFORMATION & INSTRUCTION TO TENDERERS

GENERAL CONDITIONS OF CONTRACT

SPECIAL CONDITIONS OF CONTRACT

SCHEDULE OF QUANTITIES & COST

TENDER DRAWING

SPECIFICATION OF WORKS

FORMS FOR BANK GUARANTEE IN RESPECT OF EARNEST MONEY

PERFORMANCE GUARANTEE

MOBILISATION ADVANCE


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GENERAL CONDITIONS OF

CONTRACT Formulated in advance

Not individually negotiated

Any ambiguity in the interpretation of clauses is likely to lead

to litigation, loss of resultant goodwill and waste of time.


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Contents of Contract Agreement

Scope of Work

Schedule of list of work or items of work

General Conditions

Special Conditions

Specifications

Notice of Tender, Correspondence to acceptance and letter

of acceptance


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Scope of Work

Schedule of list of work or items of

work

General Conditions

Special Conditions

Specifications

Notice of Tender, Correspondence to

acceptance and letter of acceptance

Contents of Contract Agreement


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Performance of the Contract

(Execution Process)


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Problems & Issues

Interpretation of Contract

Handing over site

MaterialsIssue and use

Drawings & Designs

Payments


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CONTRACT MANAGEMENT

FUNDAMENTAL PRINCIPLES TO BE FOLLOWED:

Ensuring good workmanship by proper supervision

Keeping proper account of materials used.

Ensuring scheduled inspections .

Recording measurements and obtain signature of the

contractor.

Carrying out prescribed test checks as stipulated.

Ensuring adherence to specifications and drawings


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EXTENSION OF COMPLETION

PERIOD Granting of extension of time is however a matter of

discretion. While so doing care should be taken to ensurethat the contract was not placed on time preference terms.

Extension with or without financial implications.


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VARIATIONS IN QUANTITIES

World Bank conditions : For a particular item if differenceis more than 25% provided the change exceeds 1% ofinitial contract price, the Engineer shall adjust the rateto allow for the change.

If the quantity exceeds the above, it will be referred tothe Employer. The rate in BOQ shall be used. If it doesnot correspond to any item in BOQ, the contractor shalloffer the quotation. Finally mutually agreed rate is paid.

Supplemental rates -as per agreement conditions.


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Is failure to perform an obligation arising out of

the contract.

Total Breach

Partial Breach

Anticipatory Breach

BREACH OF CONTRACT


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Abandonment or total failure to complete

either to start with or midway in execution.

Delay in completion of the works

Defective work

COMMONEST BREACHES OF

CONTRACT


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Failure to handover possession of the site tothe Contractor

Delay in supply of working drawings, details,

designs and decisions

Delay in supply of materials

Ordering suspension or stoppage of work or

entering with the progress of work in any

manner.

Failure / Delay in making payments of R.A.

Bills, extra items, excess quantities, including

settlement of final bill.

Contd

BREACH BY THE OWNER


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Failure/Delay in nominating specialist

subcontractors and suppliers. Delay caused by other agencies employed at

the site of work by the owner in addition to

the contractor.

Wrongful deduction of liquidated damages /penalty.

Termination of contract wrongfully and

illegally.

Failure / Delay in appointing architect or an

Engineer or in filling the vacancy.


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Abandonment or total failure to complete

Delay in completion

Defective design, materials and / orworkmanship

Failure to submit planned programme

Unauthorised sub-contracting

Contd

BREACHES BY CONTRACTOR


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Failure to insure as required

Failure to employ qualified engineers

Failure to maintain and submit labourreports

Payment of unauthorised wages

Failure to take safety precautions

Causing damage to property of work ofother agencies.


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O C A


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-An absolute necessity or compulsion,

circumstances beyond onescontrol

Natural Calamities

Civil War

Strikes

FORCE MAJEURE


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Arbitration is the settlement of dispute by the

decision not of a regular and ordinary court of

Law but of one or more persons called

arbitrators.

Advantages Efficient, Expeditious, Economical

substitute to court actions.

Disadvantages Legal principles may be

violated, rules of evidence may be waived,

injustice.

ARBITRATIONARBITRATION ACT

1940


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Department Contractor Syndrome

Not understanding even genuine grievances

Claims as a matte of extra profit not genuine


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Post Completion of Stage

Disputes arising out - DisputeResolution

Overview of Contract Management & Contract Law 1

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