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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
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