Download - Contract Management & Contract Law

8/2/2019 Contract Management & Contract Law

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Overview of Contract Management &

Contract Law

Dr S N RaoDirector, ESCI


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Contractmanagement

Contract

Types of contractsContract 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 be exchanged for adequateconsideration. 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 enter into a contract

The Parties must give free consent

The agreement must be supported by lawfulconsideration.

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

GOVERNMENTGovernment is, by far, the largest contractor in

any Country, so too in India . Supply products

(purchases ) and services (Consultancy, labouretc.,)

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 Article299 of 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 be

executed on behalf of the President or the Governor by

such person and in such manners as he may direct or

authoriseNeither the President nor the Governor shall be

personally liable_______


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Types of Contracts

Lumpsum

Item Rate

Cost Plus Percentage

Cost + Fixed Fee

Maximum PriceTurnkey


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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

BYIndian contract Act 1872

( as amended by Act 4 of 2003)

Deals mainly with general and limitingprinciples such as formation, Validity,performance or breach and remedies therefore.

Not a complete code on contract since statutes

dealing with negotiable instruments Act 1881,the Indian Arbitration & ConciliationAct 1996, the sale of Goods Act 1930 are notcovered by 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 by

Free Consent

Party's Competent to Contract

Lawful 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

Pre Contract Requirements

Contract Operation

Issues and Problems arising

Disputes & Resolutions

Closure of Contract


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Contract Management

Pre Award 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 PublicationNotice inviting tenders

Submission of Tenders

Irregularities in submissionHow 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 CLIENTWHETHER FREE 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 BEDISCOURAGED


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TENDER DOCUMENTS TO BE READY

BEFORE INVITING TENDERS

NOTICE INVITING TENDERS

STANDARD FORM OF TENDER

SCHEDULE OF QUANTITIES OF WORK

COMPLETE SET OF DRAWINGS

COMPLETE SET OF SPECIFICATIONS

ESSENTIAL ARCHITECTURAL

DRAWINGS


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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 CONTRACTThe 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 both

parties.

Revision of rates in accepted agreementsduring the 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

CONTRACTFormulated in advance

Not individually negotiated

Any ambiguity in the interpretation ofclauses 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

Materials Issue and use

Drawings & Designs

Payments


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Deviations in Contracts

Escalation of rates

Extra Items

Extra Quantities

Change of Specifications

Time over runs & Extensions

Loss to Owners / Neighbours properties

Disputes & Resolution


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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

PERIODGranting of extension of time is howevera matter of discretion. While so doing

care should be taken to ensure that thecontract was not placed on timepreference terms.

Extension with or without financialimplications.


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VARIATIONS IN QUANTITIES

World Bank conditions : For a particular item ifdifference is more than 25% provided the changeexceeds 1% of initial contract price, the Engineer shalladjust the rate to 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 labour reports

Payment of unauthorised wages

Failure to take safety precautions

Causing damage to property of work of otheragencies.


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Contractor to do work and supply materials

implicitly undertakes:

To do work in workman like manner that is with

care & skill

To use the material of good quality and where

specifications of quality are agreed this will

mean good of their expressed kind.

Both the work and material will be reasonably

fit for the purpose for which they are required.

CONTRACTORS IMPLIED

CONDITIONS


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-An absolute necessity or compulsion,

circumstances beyond ones control

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.

ARBITRATION ARBITRATION

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


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THAN Q