BUILDING CONTRACT AGREEMENTS

An agreement which is entered into by a owner of a site with a contractor for construction of
a building is known as building contract agreement. Generally an owner of a site look out for
a reputed and reliable builder for construction of building over his property and after
finalizing one enters into an building contract agreements.

Building contract agreements are defined as agreements between the contractor and a
another person called the owner or the employer for construction of buildings and other
structural work proposed to be constructed, which fall within the category of ordinary
contracts and are governed by the provisions of Indian Contract Act including the basic rules
as envisaged under the said Act such as, competency of the parties to the contract,
consent, existence of consideration to the agreement and not against the public policy.

Modes of entering Building contracts

There are two methods which are generally used by the owners and the contractors as
detailed below:
Contract entered after inviting tenders: In this method tenders are invited by the owner
of the site for 3 or more contractors by advertising or issuing the tender. Thereafter the
best tender is choosen and the tender amount is accepted with other terms and conditions.
Acceptance by the owner of the property constitutes a valid contract. The agreement should

contain all the necessary and mandatory terms and conditions, particulars of the work
required to be done and the schedule of quantities and rates in order to constitute a valid
contract. This method of agreement is generally followed by the Government, Local
authorities, Architects and other public corporations and trusts.

Contract by directly executing agreement: Under this method the agreement is directly
entered into by the contractor and the owner. They straight away negotiate and enter into a
construction agreement and averments pertaining to the tenders cannot be looked into for
evidence unless some ambiguity in the interpretation of recitals in the agreement exists.
This method is generally adopted by commercial firms or individuals.

Format of the agreement: The architect will also have a construction agreement which
will be in the printed form wherein blanks are filled in by hand or some provisions are
altered by hand, if necessary. While doing so it must be kept in mind that that there should
be no discrepancies between the written words or those in printed. In case of any
inconsistencies or discrepancies the written words will prevail over the printed words as the
the words filled in the blanks will express the intention of the parties.

Appointment of an Architect: An architect is immediately appointed who has to be duly

qualified after the search for the contractor is over or after the contractor is finalized. The
mode of entering into an agreement depends upon the architect and the contractor. The
architect prepares preliminary drawings and estimates and then prepares working drawings
and specifications and bills of quantities and other documents relevant for the contract. In
order to carry out the day to day supervision of the work, a clerk of works or resident
engineer is appointed and also to see that the instructions of the Architect and structural
engineer are complied with by the contractor.
Types of Building Contracts:
Building contracts are generally of four types as listed below
Lump sum contract: Under this type of contract, a mutual negotiation is arrived in
between the parties whereby the contractor agrees to carry out the work for a fixed amount
irrespective of anything else. This method is not advisable as it may lead to a lot of
confusion.

Items rate contract: In this type of contract work is divided into several items of work and
the contractor quotes price of each item including the remuneration that will be paid in

accordance with the work carried out at the rates agreed upon, which can be assessed with
the help of a qualified Architect or a Civil Engineer.

Percentage contract: In this type of contract a percentage of amounts on the total actual
cost of the building is paid to the contractor as agreed earlier.

Cost plus percentage contract: In this category, the contractor gets the actual cost of
work as well as certain percentage over and above the said cost which is accepted by the
owner.

General conditions of a building contract

Apart from the above, the Architect also has to decide on any dispute if arises regarding the
construction work and give his decision by issuing a certificate to that effect. Further he also
has to administer and keep an check on the daily construction work.

Appointment of Sub-Contractor
A sub contractor can be appointed by a contractor for carrying out either for the whole work
or part of the work, with or without the consent of the owner. Privity of contract does not
arise between the owner and the sub contractor in cases where the consent of the owner is
not obtained and the contractor alone will be liable for all the acts done by the SubContractor. Similarly the Sub-Contractor does not derive any right to raise claim against the
owner pertaining to the construction contract. It is advisable to enter into a construction
agreement after complying with all the necessary formalities as provided in the statute and
the same must be reduced in writing to manifest the specific duties and obligations vested
on all the necessary parties as many construction projects are left incomplete due to high
construction cost and to lack of co-ordination between the owner, contractor and the
architect. It is very important to incorporate all the terms and conditions of the contract
clearly to avoid unnecessary dispute and successful completion of the project.