OPEN UNIVERSITY OF SRI LANKA

Construction Contracts and

Claims-CEX 7105

P.G. Diploma in Construction Management

Programme Level 7

RRGS BANDARA
115440954
 Construction Contracts and Claims-CEX 7105

Q1
Disputes arising as a result of poor quality Tender documents and Contract documents are a
frequent occurrence in the construction industry.
Discuss whether the use of Standard Bidding Documents would help to minimize such
disputes.

Due to above reasons there were many incidents happened reference to disputes and it will be
one of major problems and the reason to leave the construction industry who subjected to
damaged. To avoid this type of cases it is introduced by the relevant authorities to follow
standard document systems reference to the construction industry. These standards are
introduced and recognized and can mention as follows according to the step by step. They are as
follows,
Tender or Bidding documents
Purpose
Instruct bidders on procedure for submission of bids
Describe goods or works to be produced
Inform the bidders of criteria for evaluation
Define conditions of contract
Components
Invitation for bids
Instruction to bidders (ITB), ITB data sheet
General conditions of contract (GCC)
Technical specifications
Schedule of requirements
Bidding and contract forms and attachments
Instruction to bidders
Eligibility qualification
Procedure for clarifications
Bid preparation - form
Number of copies, addressee
Language
Pricing and currencies

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Modification and withdrawal

Bid securities, sureties, etc.
Bidding documents and salient features.
1. Payment Conditions
Fixed price
Price Adjustment
Advance payments
Direct payment
2. Bid Security
Should not be too high
1 to 5 percent of price
Fixed amount preferable
3. Performance Security
Goods: 5-10 percent
Works: 10 percent
4. Advance Payment
Bank guarantee for equal amount
5. Retention Money
5 percent of contract value
Technical Specification
General
Sufficiently specific to elicit responsive bids
Enable participation by any qualified bidder, without technical prejudice
Display technical criteria for evaluation of bids
Particular (Goods)
Technical features
Performance requirements/design criteria
Reference to Design drawings
Applicable standards and codes internationally acceptable (substantial
equivalence acceptable)
Requirements for commissioning and operating conditions

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Guarantee requirements
Discourage specific brand requirements or trade marks
6. Particular (works)
Reference to Working Drawings
Bill of quantities
Industry standards
General Condition of Contract
Rights and obligations of both parties
Procedure for insurance, inspection, documentation
Procedure for measurement
Procedure for alterations
Price adjustment procedure
Procedure, terms of payment
Procedure for performance securities
Force majeure
Procedure for damages, penalties for delay
Procedure for termination
Mode and form for settling disputes
Applicable law
Special Condition of Contract
Definition of the purchaser/supplier
Specific amount of performance security
Specific procedures for inspection testing
Special requirements for insurance
Specific payment terms/currency
Price adjustment mechanism
Other deletions/additions to general conditions
Bidding Document Common Issues
Bid closing and opening at same time
Cost of bid document
Bidding time

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Language
Commercial deviations (law-liquidated damages-taxes-termination-warranty-
arbitration)
Certifications/authorizations/registration
Bid and performance security (period-value)
Above factors are directly related with the Standard Bidding Documents and the disputes also
create mainly with reference to the above factors. Therefore If any institution can follow
Standard Bidding Documents reference to the type of contract and the type of tendering, they can
minimize disputes arising in the construction industry. This is the most suitable way to follow to
minimize the disputes because above mentioned factors are the key factors that are based for the
creation of disputes.

Q2
Two primary obligations of the Contractor in a construction contract are;
Obligation to complete the Works and
Obligation to maintain steady progress.
Discuss these aspects of contracts citing the relevant clauses in Conditions of Contract and
also the Employers and Engineers contractual role in enabling the contractor in fulfilling
contractors obligation.

The contractor shall design execute and complete the works accordance with the contract and
with the Engineers instruction, and shall remedy any defects in the works. The contractor shall
provide the plant, all contractors personnel, goods consumables and other things and services
whether of a temporary or permanent.
The contractor shall take full responsibility for the care of the works and goods from the
commencement date until the taking over certificate is issued (sub clause 10.1)
The progress of a contractors works is often a key factor in a construction project
completing on time. Construction contracts usually include terms that specify the progress
required and the consequences if that progress is not achieved.

With no express or implied obligations as to progress, it is a matter for the contractor to plan and
resource the works appropriately, so that it can achieve the specified completion date. Its
obligation to progress is limited to getting all its work done by the contractual completion date.

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A contractor could therefore fall behind the contract programme with impunity, provided that it
continues to comply with its other contractual obligations.

While it would depend upon the other terms of the contract, if a contractors slow progress
amounts to a breach of that free standing obligation to complete by a given date and the
employer suffers losses as a result of that breach. Then those losses could form the basis of the
employers withholding for delay-related matters.

Obligation to Perform in Accordance with Contract The Contractor shall execute and complete
the Works and remedy any defects therein in strict accordance with the Contract, with due care
and diligence and to the satisfaction of the Engineer, and shall provide all labor, including the
supervision thereof, materials, Constructional Plant and all other things, whether of a temporary
or permanent nature, required in and for such execution, completion and remedying of defects, as
far as the necessity for providing the same is specified in or is reasonably to be inferred from the
Contract. The Contractor shall comply with and adhere strictly to the Engineer's instructions and
directions on any matter, touching or concerning the Works.

Responsibility for Site Operations The Contractor shall take full responsibility for the adequacy,
stability and safety of all site operations and methods of construction, provided that the
Contractor shall not be responsible, except as may be expressly provided in the Contract, for the
design or specification of the Permanent Works or of any Temporary Works prepared by the
Engineer.

Responsibility for Employees the Contractor shall be responsible for the professional and
technical competence of his employees and will select for work under this Contract, reliable
individuals who will perform effectively in the implementation of the Contract, respect local
customs and conform to a high standard of moral and ethical conduct.

Source of Instructions The Contractor shall neither seek nor accept instructions from any
authority external to the Employer, the Engineer or their authorized representatives in connection
with the performance of his services under this Contract. The Contractor shall refrain from any

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action which may adversely affect the Employer and shall fulfill his commitments with fullest
regard for the interest of the Employer.

The Contractor warrants that no official of the Employer has been or shall be admitted by the
Contractor to any direct or indirect benefit arising from this Contract or the award thereof. The
Contractor agrees that breach of this provision is a breach of an essential term of the Contract.

Confidential Nature of Documents All maps, drawings, photographs, mosaics, plans, reports,
recommendations, estimates, documents and all other data compiled by or received by the
Contractor under the Contract shall be the property of the Employer, shall be treated as
confidential and shall be delivered only to the duly authorized representative of the Employer on
completion of the Works; their contents shall not be made known by the Contractor to any
person other than the personnel of the Contractor performing services under this Contract
without the prior written consent of the Employer.

Q3 Explain in detail the terms unconditional offer and Unconditional award

Unconditional offer

An offer must be a clear, unequivocal and direct approach to another party to contract. Lawyers
speak of certainty of terms as a condition of a valid offer. For this reason, advertisements,
catalogues or store flyers are not offers. In an advertisement, a pivotal term is uncertain.
Essentially invitations to the general public to make an offer on a particular item refer to an offer.
But, even here, there have been exceptions. For example, in a 1856 case, an advertisement of
train rates was held to be a valid offer. Much depends on the wording of the "invitation".
An offer, once made, can be revoked before acceptance unless it is under seal. An offer can also
expire if a deadline for acceptance passes. If there is no specified deadline, then the offer expires
in a "reasonable time", depending on the subject-matter of the contract.

For perishable goods such as food, a "reasonable time" would likely be a matter of days. The
"reasonable time" would be longer where the subject matter of the contract is a building.

Requirements of an award

o To Unconditional offer

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Following factors to be considered for the unconditional offer

The acceptance must not change the terms of the original offer in any way.
This principle is called the mirror image rule.
Any change in the terms of the offer means the offeree has not really accepted the offer.
The offeree has made a counteroffer.
If a counteroffer is made, the original offeror is not obligated to go along and no contract
exists.
The offeror becomes an offeree and may accept or reject the counteroffer.
Contracts for the sale of goods are exceptions to the mirror image rule be legally binding; the
acceptance must meet certain basic requirements.

Methods of Acceptance (Award)

The time at which an acceptance takes place is important because that is when the contract
comes into existence.
Special rules govern acceptances that take place when the parties are separated by a distance and
must be communicated by letters, telegrams, or fax.

According to common law, an acceptance that must be sent over long distances is effective when
it is sent. An acceptance is implied when the offeree accepts by the same or a faster means than
that used by the offeror.

The authorization of an acceptance can also be implied by any reasonable means, including:

Past practices between the parties

The usual method in the trade

Customary means in comparable transactions

Q4
Failure on the part of the Engineer to issue drawings or instructions within a reasonable time
is not an uncommon occurrence in construction projects.
Explain the steps that need to be taken by the Contractors Site Representative to safeguard
the interests of the Contractor and to ensure that the Contractor is adequately compensated
for any loss or damages that may result due to such failures.

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To safeguard the contractor from this type of incidents due to Engineers failures, all requesting
should be submitted to the engineer by in written with a copy to the relevant authority. Or
otherwise should maintain a log book for each and every sites the project. Tee requesting should
be included compulsorily date and the requirement and the other relevant details reference to the
program and the progress of the project. And also the site representative should forward
reminders to the relevant officer mentioning his first requesting. He should mark all the delaying
period of the supplying of drawing and other instruction from the engineer and other reasonable
reasons to request extension, if he couldnt complete the project within the scheduled period.
Otherwise he is the responsible person for the completion of the project within the period and
cost