Overview of Contract Management &

Contract Law
Contract management
Contract
Types of contracts
Contract Law
Contract management
Disputes & Resolution





Contract
A Promise enforceable by Law

Offer +Acceptance (Legally binding)

To be legally binding as a contract, a promise must be
exchanged for adequate consideration. i.e., benefit a party
receives

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 lawful consideration.
Subject matter must be definite and lawful
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.
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.

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 299
of Constitution of India.

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
authorise
Neither the President nor the Governor shall be
personally liable_______

Types of Contracts
Lumpsum
Item Rate
Cost Plus Percentage
Cost + Fixed Fee
Maximum Price
Turnkey

Form of Contracts
Formal & Informal
Express & Informed
Unilateral & Bilateral
LAW OF CONTRACT
Freedom of contract
Contract adhesion
Exclusions & Exemptions
Sanctity of Contract
CONTRACTS ARE GOVERNED BY
Indian contract Act 1872
( as amended by Act 4 of 2003)
Deals mainly with general and limiting principles
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 & Conciliation Act
1996, the sale of Goods Act 1930 are not covered
by the Contract Act

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 is
considered to be a Contract Section 2 (h) of
the Indian Contract Act.

All Agreements are Contracts if
they are made by

Free Consent
Party's Competent to Contract
Lawful Consideration
Lawful Objective



Contract Management
Contract Organisation
Owner
Contractor
Architects & Designing / Engineer
Suppliers / Sub Contractors
Statutes and Mandates
Contract Management ..contd
Management of Contracts
Pre Contract Requirements
Contract Operation
Issues and Problems arising
Disputes & Resolutions
Closure of Contract
Contract Management
Pre Award Stage (Tenders)
Award of Contract (Agreement)
Performance of the Contract
(Execution Process)
Post Completion of Stage
Pre Award Stage
(Tenders)
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
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 WHETHER
FREE OR AT FIXED COST
ESCALATION
LIMITATIONS OF LIABILITIES
MODES OF INVITING TENDERS
NEGOTIATED TENDERS

LIMITED COMPETITION

OPEN COMPETITION

REQUIREMENTS TO BE FULFILLED BEFORE
INVITING TENDERS
SANCTION TO BE OBTAINED

URGENT WORKS WITH NO TIME

SPLITTING OF WORKS TO BE DISCOURAGED

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

INFORMATION TO BE PROVIDED IN
NOTICE
QUALIFICATIONS
NAME
EMD
SECURITY DEPOSIT
TIME LIMIT
COST
MODE OF SUBMISSION
DATE, TIME AND PLACE OF OPENING TENDERS

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

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

Acceptance of Tender
Letter of Intent
Mode of Communication
Date of Acceptance
Revocation of Acceptance
Rejection of Tender
Operation of Contracts
Interpretation
Duties / Obligations of Owner
Duties / Obligations of Contractor
Organising the Project Execution
Monitoring the progress
Award of Contract
(Agreement)
ESSENTIAL CHARACTERISTICS OF A
CONTRACT
The terms of the contract must be clear and
precise.

Time is the essence of contracts

The terms of contract should be enforced
strictly. This responsibility rests with both
parties.

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

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

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.
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

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
Performance of the Contract
(Execution Process)
Problems & Issues
Interpretation of Contract
Handing over site
Materials Issue and use
Drawings & Designs
Payments
Deviations in Contracts
Escalation of rates
Extra Items
Extra Quantities
Change of Specifications
Time over runs & Extensions
Loss to Owners / Neighbours properties
Disputes & Resolution
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
EXTENSION OF COMPLETION
PERIOD
Granting of extension of time is however a matter of
discretion. While so doing care should be taken to ensure
that the contract was not placed on time preference terms.

Extension with or without financial implications.

VARIATIONS IN QUANTITIES
World Bank conditions : For a particular item if difference
is more than 25% provided the change exceeds 1% of
initial contract price, the Engineer shall adjust the rate
to allow for the change.

If the quantity exceeds the above, it will be referred to
the Employer. The rate in BOQ shall be used. If it does
not correspond to any item in BOQ, the contractor shall
offer the quotation. Finally mutually agreed rate is paid.

Supplemental rates -as per agreement conditions.


Is failure to perform an obligation arising out of
the contract.

Total Breach

Partial Breach

Anticipatory Breach
BREACH OF CONTRACT

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
Failure to handover possession of the site to
the 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
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.


Abandonment or total failure to complete

Delay in completion

Defective design, materials and / or
workmanship

Failure to submit planned programme

Unauthorised sub-contracting
Contd
BREACHES BY CONTRACTOR

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
other agencies.

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

-An absolute necessity or compulsion,
circumstances beyond ones control

Natural Calamities

Civil War

Strikes
FORCE MAJEURE

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
Department Contractor Syndrome

Not understanding even genuine grievances

Claims as a matte of extra profit not genuine
Post Completion of Stage
Disputes arising out - Dispute
Resolution