CONTRACTS MANAGEMENT

Contract law is based on the Latin phrase

pacta sunt servanda i.e. promises must be
kept.
History : During ancient times, Bartering, the
way by which contract was taking place.((Grains
V/s Cattle) (Clothes V/s Fruits), Consideration- Return Promise)

Todays time : we enter into contracts so

many times in a day that contract has become
an indispensable part of our life. (Purchase of milk,
TV, electronics goods, house, services, telephone, internet, transport etc

CONTRACTS
No individual or section of people can be fully
independent or self-reliant in a developed
society. One needs others help. To enforce
commitment in this mutual give and take, one
enters into written agreement with the other
party.
Contract : Legally binding exchange of
promises or agreement between parties
enforceable by law.

INDIAN CONTRACT ACT

INDIAN CONTRACT ACT, 1872: Determines the
circumstances under which the promises made by
the contract shall be legally binding on them.
Offer + Acceptance = Agreement
Agreement + Enforceability at law = Contract

 ESSENTIALS ELEMENTS of CONTRACT

Offer and its acceptance
Free consent of both parties (not caused by coercion,
undue influence, fraud, misrepresentation or mistake)

Mutual and lawful consideration for agreement

It should be enforceable by law (hence, intention should
be to create legal relationship)

Parties should be competent to contract

Object should be lawful
Certainty and possibility of performance
Contract should not have been declared as void under
Contract Act or any other law

Communication, acceptance and revocation of

proposals

 Void Contract (An agreement not enforceable by law is said to be void)

Agreement by incompetent person ( power of attorney , Legal owner)

Parties under mistake of fact ( Agreement to sale the goods on ship which has
already sunk)

Unlawful object or consideration

Agreement without consideration
Agreement in restraint of marriage
Agreement in restraint of trade
Agreement in restraint of legal proceedings
Uncertain agreement [Agreement to sell valves, oil etc.]
Wagering agreement [ eg. Election which party will win ]
Agreement to do an impossible Act [Frustration- renting of hall which
was burned subsequent to contract, death of party, change of lawimport goods banned)

Consequences of Breach of Contract Compensation / Penalty is payable

for breach of contract.

Remedies for breach of Contract

Rescession of the contract ( Non supply of items, payment need not to be

done)

Suit for damage (Compensation to injured party)

Suit upon quantum merit ( as much as earned -as part supply or part
performance)

Suit for specific performance ( Land , used vehicles)

Suit for injunction (sale of property to another person X after agreeing to sell it to Y)

CLASSIFICATION of CONTRACTS

According to formation:
a)
b)
c)

Express contracts
Implied contracts
Quasi contract

TYPES OF CONTRACT

Based on the scope of work required to be executed in CMM, NPCIL:

(a)
(b)
(c)

SUPPLY CONTRACT
ERECTION CONTRACT
SERVICE CONTRACT

Based on the method of execution :

(a) LUMP SUM CONTRACT
(b) ITEM RATE CONTRACT
(c) RATE CONTRACT
[DGS & D- Only Rates & Period fixed but not qty. ]
(d) RUNNING CONTRACT [DGS & D- Apart from rates & period qty is also fixed]
(e) COST PLUS CONTRACTS
(f) TURN-KEY CONTRACTS

 CASE STUDIES

General Conditions of Contract

GENERAL CONDITIONS OF
CONTRACT
1.
2.
3.
4.
5.

INTRODUCTION
SUBJECT MATTER OF CONTRACT
GUARANTEES AND LIABILITIES
CONTRACT EXECUTION
CHANGE IN CONTRACT ELEMENTS

INTRODUCTION
1. Preamble
2. Definitions
3. Interpretation

SUBJECT MATTER OF CONTRACT

1.
2.
3.
4.
5.
6.
7.
8.
9.

Scope of Facilities
Time for Completion
Contractors Responsibilities
Purchasers Responsibilities
Payment
Price Adjustment
Terms of Payment
Taxes & Duties
Securities

GUARANTEES & LIABILITIES

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

Completion Time Guarantee

Defect Liability
Functional Guarantees
Transfer of Ownership
Care of Facilities
Indemnity
Limitation of Liability
Insurance
Change in Laws & Regulations
Force Majeure
War Risks

1.
2.
3.
4.
5.
6.

CONTRACT EXECUTION
Representatives
Work Program
Subcontracting
Subletting & Assignment of Contract
Design & Engineering
Procurement

7.
8.
9.
10.
11.

CONTRACT EXECUTION (Contd.)

Installation
Insurance
Quality Assurance, Inspection, Acceptance
& Rejections
Completion of Erection and PreCommissioning of The Facilities
Commissioning & Operational Acceptance
of Facilities

CHANGE IN CONTRACT ELEMENTS

1.
2.
3.
4.
5.
6.
7.

Change in Facilities
Extension of time for completion
Foreclosure of Contract
Suspension of Site Works
Determination/ Cancellation/ Termination
of Contract in full or part
Settlement of Disputes
Secrecy

1. PREAMBLE
1.
2.
3.

The scope of the contract in brief.

The status of the General Conditions of
Contract in the contract.
The authority in NPCIL to exercise the
rights and discretions for and on behalf of
NPCIL.

2. DEFINITIONS
The words and phrases may have different
meanings depending upon the context they are
used. Therefore, it is necessary to define
exclusive meaning of some important words and
phrases used in the contract.
Some of the important definitions are :

"Contract" or "Purchase Order" shall mean the

communication or document signed for and on behalf of
the Purchaser by an Officer duly authorised confirming
the acceptance of Tender or Offer of the contractor for
and on behalf of the Purchaser on the terms and
conditions mentioned or referred to in the said
communication and other documents including Tender
Document, Terms and Conditions of the contract and
such other documents as may be expressly incorporated
in the Contract by reference.
Contractual Delivery Date shall mean the stipulated
date on which the contractor shall attain completion of
the Facilities, as specified in the purchase order.

Contractual Mile Stone Date shall mean the

stipulated date on which contractor complete
intermediate mile shall stone of despatch, erection,
testing etc. as specified in the Special Conditions of
Contract (SCC) / Purchase Order.
Contract Price shall mean the price as specified in
Section A Item and Price Schedule of the Contract
subject to such addition and adjustment thereof or
deduction there from, as may be made pursuant to the
contract.

Defect Liability Period shall mean the period of

validity of the warranties given by the contractor
during which the contractor is responsible for
defects with respect to the facilities or the relevant
part thereof as provided in GCC clause 6.4 (Defect
Liability).
Effective Date or "Commencement Date" shall
mean the date of issue of Purchase Order on which
the contract shall come into force.

"Excepted Risks" are the risks due to war, hostilities

or warlike operations (whether a state of war be
declared or not), invasion, act of foreign enemy &
civil war, rebellion, revolution, insurrection, mutiny,
usurpation of civil or military government, civil
commotion, nuclear reaction, nuclear radiation,
radioactive contamination, or any other occurrences
that a contractor could not insure against, insofar as
such risks are not normally insurable on the
insurance market and are mentioned in the general
exclusions of the policy of insurance taken out under
the contract.

"Latent Defect" shall mean a defect, inherently

lying within the material or arising out of design
deficiency, which do not manifest themselves and/or
was not reasonably discoverable during Defect
Liability period.

3. Interpretation
Priority of documents
Purchase contract issued by NPCIL comprises a
number of documents all forming part of the
contract. There may be overlapping areas addressed
in more than one document. For the purpose of
interpretation, the priority of documents are given in
the GCC in the following order :a)The contract agreement/Purchase Order
b)Special Conditions of Contract (SCC)
c)General Conditions of Contract (GCC)
d)Tender document excluding (b) & (c)

Purchasers Representative
For commercial matters :
Authorised
Officer
of
C&MM

SGM/GM/AGM/DGM
Nodal Agency for contract execution for all
technical matters :
Project Manager from Procurement/Indenting
Group.
All Site related activities :
Engineer-In-Charge as designated by
PD/CCE

Subject Matter of Contract

1.Scope of Facilities
General overall scope of EPC/Supply
Contract(s) are specified in the respective
GCC. For EPC Package, the scope is
defined right from design, engineering,
procurement, manufacture, shop testing,
quality assurance, transportation, unloading
and storage at site, all site work - erection,
commissioning, performance, testing and
handing over.

1. Scope of Facilities (contd.)

Unless specifically excluded in the contract,
the Contractor has to supply the materials
that may not have been specifically
mentioned in the tender/contract but that can
be reasonably inferred being required for the
Contractor to attain completion of his
obligation.

2. Time for Completion

Time is the essence of the contract.
Failure to deliver in time is construed as
breach of contract.
A breach in contract entitles the party
suffering from such breach to claim damages
from the other party who has breached the
contract.

2. Time for Completion(..contd)

In EPC Contract, in addition to overall
completion date, intermediate milestone
dates for supply/part installation can also be
specified in the contract. These milestone
dates are enforceable contractually and the
Contractor can be made to pay damages
(LD) for not adhering to these milestone
dates.

2. Time for Completion(..contd)

However, in the event of overall completion
within the final CDD, damages recovered for
not adhering to intermediate milestone dates
are refundable to the Contractor.

Contract Price and Payment

Contract Price
1. For contract(s) with contractual delivery
period upto 12 months, the contract price
shall be firm.
2. For contract(s) with contractual delivery
period exceeding 12 months, the contract
price shall be subject to price adjustment
either in positive or in negative side.

Contract Price and Payment (contd)

Price Basis
1. Price of supply items shall be on safe
delivery basis to site.
2. Basic price (except for civil works) shall
be exclusive of all taxes and duties.
3. For civil works, prices are inclusive of all
taxes and duties.

Contract Price and Payment (contd)

Price Basis
4. For indigenous supply items break-up shall be
shown between Ex-works price and safe
delivery charges (i.e. inland transportation and
transit insurance).
5. For imported supply items break-up shall be
shown as FOB Price, ocean/air freight and
marine insurance, port handling/customs
clearance (excluding customs duty), inland
transportation and inland transit insurance.
6. Price of commissioning/start-up spares shall be
inclusive of basic price of the main equipment.

Contract Price and Payment (contd)

Contract Currency
1. For contract awarded through global tendering,
foreign as well as Indian bidders can quote their
price in Indian rupees and/or in any other three
freely tradable foreign currencies, for supply
items and expatriate field labour/ Supervisor for
site work.
2. For other prices like transportation charges
(both import and indigenous), transit insurance,
port
handling
charges,
erection
&
commissioning etc. and civil works in Indian
rupees.

Contract Price and Payment (contd)

Price Adjustment

Component of price eligible for price adjustment

1. Ex-works of price indigenous plant and
equipment including spares.
2. FOB price of imported plant and equipment
including spares.
For the above (1) & (2) Price Adjustment ceiling
of 20% of the total Ex-works/FOB price in
respective contract currencies shall apply.
3. Erection and commissioning price.
4. Civil works price.

Contract Price and Payment (contd)

Component of price eligible for price adjustment
5. No price adjustment is allowed on spares,
tools, tackles and accessories. Engineering
charges, testing charges, analysis charges etc.
payable separately shall also not be eligible
for price adjustment.

PRICE ADJUSTMENT FORMULA

FOR SUPPLY PORTION

The price adjustment formula to be applied to the exworks/ FOB price- component of the supply items shall
be as follows:
EC ( F + a.Ml f1+ b.Nl f2 + c.Ol f3+ d.Pl f4+ e.Ql f5+ lb.Ll flb )
M0
N0
O0
P0
Q0
L0
f =

Z0

Z1
Subscript 1 refers to the indices/ exchange rates as on:
a)90 days prior to the date of dispatch for labour component, and
b)The expiry of 2/3rd period from the date of purchase order to the
date of dispatch, for material component.

PRICE ADJUSTMENT FORMULA

FOR ERECTION PORTION

Indian Currency portion of the Erection &

Commissioning Services
The formula for calculation of the monthly price
variation of the cost of erection portion of the
works is indicated and explained below:
E1 = E0 (0.25 + 0.75F1)
F0

Ex-works/FOB component of the Items

(excluding spares, tools and tackles)

7. Terms of Payment
For supply
(a) 10% advance on unconditional order
acceptance.
(b) 60% on pro-rata basis on despatch of items to
site.
(c) 20% on receipt of items at site.
(d) 7.5% on handing over of facilities to the
Purchaser.
(e) 2.5% on completion of material accounting.
Spares
(a) 75% on despatch of items to site.
(b) 25% on receipt and acceptance of items at site.

7. Terms of Payment (contd)

For erection & commissioning
(a) 10% on site mobilisation.
(b) 68% on pro-rata basis on completion of
milestones as per approved billing schedule.
(c) 2% on compliance of industrial safety
requirement, along with (b) above.
(d) 15% on handling over of facilities to the
Purchaser.
(e) 5% on completion of material accounting.

7. Terms of Payment (contd)

For civil works
(a) 10% on site mobilisation.
(b) 78% on pro-rata basis on completion of
milestones as per approved billing schedule.
(c) 2% on compliance of industrial safety
requirement, along with (b) above.
(d) 10% on handling over of facilities to the
Purchaser.

7. Interest on Delayed Payment

Interest will be paid to the Contractor in the event of
delay in release of balance payment.
a)In case of supply order, delay beyond 95 days from
the date of receipt of goods at site.
b)In EPC contract, delay in release of payment
against MRICAR beyond 95 days from the date of
receipt of goods at site.
c)For final payment against handing over of
facilities, delay beyond 45 days from the date of
receipt of all supporting documents in acceptable
form.

7. Interest of Delayed Payment(Contd)

Rate of Interest Payable :
a) For Indian currency :
Prime Lending Rate (PLR) of State Bank
of India.
b) For Foreign currency :
London Inter Bank Offered Rate (LIBOR)

8. Taxes & Duties

TO BE DEALT SEPARATELY IN DIFFERENT

MODULE

9. Securities
1. Contract security for Performance Bond as well
as for advance/stage payments shall be only in
the form of Bank Guarantee
2. Bank Guarantee shall be from scheduled
commercial bank in India or from a branch of
Indian bank abroad.
3. Bank Guarantee shall be exactly as per the
format given in the GCC.

9. Securities (contd)
4. Performance Security Bond (PSB) Bank
Guarantee of 10% of total contract value
(supply plus erection) to be submitted within 30
days from the date of award of contract.
5. PSB BG validity till satisfactory completion of
defect liability period and further claim period
of 3 months. In case of EPC Contractor of
foreign origin assigning site work to another
entity, the entity for the site work shall submit
another PSB Bank Guarantee of 10% of the
value of the work assigned to him.

9. Securities (contd)
6. Performance Security Bond (PSB) Bank
Guarantee is extendable for extension in defect
liability period.
7. PSB can be released on successful completion
of defect liability period including extension, if
any.

9. Securities (contd)
Bank Guarantee for advance/stage payments :
1.
2.
3.
4.

Bank Guarantee of the full value of advance/stage

payments valid till contractual delivery date with a
further claim period of three months.
Bank Guarantee can be cancelled/reduced in value once
in 6 months to the extent of adjustment of the
advance/stage payment against bills paid.
Contractor has to extend the validity of both the Bank
Guarantees for delay in supply/completion.
In the event of delay being caused by reasons
attributable to Purchaser, Bank Guarantee extension
charges shall be borne by the Purchaser.

9. Securities (contd)
Latent Defect Bank Guarantee :
1. 1% of the total value of supply items to
be submitted at the end of defect liability
period valid for 5 years therefrom.
Indemnity Bond for Free Issue Material
(FIM) :
1. Indemnity Bond indemnifying Purchaser
against loss or damage of FIM issued for
fabrication at Contractors works outside
Purchasers site.

1. Completion Time Guarantee

The Contractor is deemed to have given a guarantee
for completion of Contract which shall be attained
on or before contractual delivery date.
He is also deemed to have guaranteed that he shall
adhered to contractual milestone dates.

2. Delay in Supply
Delay in Supply
Reasons for delay in supply can be classified into
the three heads :
1. Delay attributable to the Contractor.
2. Delay attributable to the Purchaser.
3. Delay due to occurrence of one or more Force
majeure events.

Delay in Supply(contd)
Consequences of Delay
Where delay attributable to the Contractor
This provides option to the Purchaser :
1. Accept the delayed supply with recovery of
liquidated damages at specified rate applicable
for the Contractor.
2. To terminate the contract in full or parts and
exercise the rights to the Purchaser available in
GCC.

3. Liquidated Damages
It is a predetermined compensation the Purchaser is
entitled to recover from the Contractor in the event
of delayed supply.
Rate of liquidated damages are 1%, 0.5% and
0.25% for contracts upto 1 year, beyond 1 year and
upto 2 years and beyond 2 years duration of
contracts respectively.
Only supply contract, liquidated damages to be
levied on the value of the delayed portion only.

Liquidated Damages (contd)

For EPC Contract, liquidated damages to be levied
for the total contract value.
In addition, for EPC Contract, liquidated damages
to be also levied for failure by the Contractor on
certain specified milestone dates of supply and/or
erection activities.
In the event of such levy of liquidated damages on
mile stone rates, if the final date is achieved the
liquidated damages recovered on milestone to be
refunded.

4. Defect Liability
The Contractor shall give warranty for plant, equipment and
facilities supplied by them till completion of defect liability period.
Defect liability period for only supply contract is 18 months from
the receipt at site or 12 months from the acceptance, whichever is
earlier.
Defect liability for EPC packages, 18 months from the date of
completion of facilities (satisfactory erection and precommissioning) or 12 months from the date of operational
acceptance of the facilities, whichever occurs first.
If the Contractor fails to make desired repairs/replacement during
the defect liability period, within 15 days of issue of notice, the
Purchaser can get repaired/replaced done from alternative sources at
the cost of the Contractor.

Extension of Defect Liability Period

a) If facilities supplied under a contract could not
be operated during defect liability period due to
defects, the defect liability period of the facility
shall be extended by period equivalent to such
non-availability period.
b) Defective parts of the facilities repaired in defect
liability period shall have an independent 12
months warranty from the date of completion of
such repair/replacement.

5. Latent Defect Liability

From the end of defect liability period, the
Contractor will continue to be liable for
latent defects of the plant and equipment
supplied by him for another period of 5
years.

6. Transfer of Ownership
Ownership of goods to pass from Contractor to the Purchaser
for :
a)For indigenous goods supplied from within the same State as a
site is located ownership of transfer when the goods are brought
to site.
b)Ownership of indigenous stores in interstate transaction shall
be transferred on sale in transit basis.
c)Ownership of imported stores, for direct order shall be
transferred on FOB basis.
d)Ownership of imported goods (through Indian Contractor) shall
be transferred on high sea sale basis.
e)In EPC Contract, transfer of ownership to the Purchaser
notwithstanding the Contractor shall continue to responsible for
successful handing over of the facilities to the Purchaser.

7. Care of the Facilities

From commencement of the work on the facilities at site till
successful handing over to the Purchaser, the Contractor shall
remain responsible for care and custody of the facilities.
In the event of any loss and/or damage of the facilities or the
equipment, the Contractor at its own expenses repair the
affected items.
The Contractor shall also be responsible for loss or damage
to the facilities caused by him or his sub-contractor in the
course of work carried under his defect liability obligation.

7. Care of the Facilities(Contd)

Above obligation notwithstanding, the Contractor shall not
be liable for any loss or damage to the facilities at site for
which he could not get any insurance from the market to
cover his risk.
There are only two risk which falls under this category
namely-War and Nuclear incident.
The Purchaser should bear these loss even before handing
over of the facilities.
The Contractor is also not liable for losses, loss of use in
design, data or specifications provided by the Purchaser.

8. Indemnity
The Contractor to provide the following Indemnity to the
Purchaser.
1)Intellectual Property Rights (IPR Identification)
2)Indemnity against physical loss or damage to the
facilities before handing over to the Purchaser.
3)Indemnity against latent defects for a period of 5 years
starting from completion of defect liability period.
4)Indemnity against non-compliance of statue.
5)Indemnity against damage of FIM.
6)Indemnity against third party life and property loss
claims arising out of nuclear events at site.
7)Indemnity against taxes and duties.

9. Limitation of Liability
The Contractor shall not liable for any
indirect or consequential loss or damage, loss
of use, loss of production, loss of profit or
interest costs. The liability of the Contractor
to the Purchaser shall not exceed the total
contract price.

10. Insurance
The Contractor to take at his own cost, the following insurances for an
EPC package contract.
a)Transit insurance as per ICC Clause A with war and SRCC provisions.
b)Storage-Cum-Erection risk insurance policy.
Both the above insurance policies shall be taken at full replacement
value of the plant and machinery.
c) Insurance for contractors personnel.
d) Third party liability insurance.
e) Automobile liability insurance.
Insurance claim Proceeds shall come to the purchaser fisst
The Purchaser shall disburse the amount to the Contractor for expenses
incurred in respect of repair/re-installation of the damage facilities.

11. Force Majeure

Force majeure shall mean any event which is beyond the control of the
Contractor or the Purchaser, which substantially affects the
performance of the contract.Eg:
a) War, hostilities or warlike operations (whether a state of war be
declared or not), invasion, act of foreign enemy and civil war,
b) Rebellion, revolution, insurrection, mutiny, usurpation of civil or
military government, civil commotion,
c) Embargo, import restriction, confiscation, nationalization,
mobilization, commandeering or requisition by or under the order of
Central, State Government or Local Authority in India or any other act
or failure to act, of any local, state or national government in India,
d) Riot, state/region/country wide transporters strike,
e) Earthquake, landslide, volcanic activity, fire, flood or inundation,
tidal wave, typhoon or cyclone, hurricane, storm, lightning and
pressure waves or other natural disaster,
f) Nuclear event causing nuclear radiation, radioactive contamination.

11. Consequences of Force Majeure

No delay or non-performance by either party caused by
any event of force majeure shall :
a)Constitute a default or breach of the contract can
b)Give rise to any claiming for damages or additional
expenses caused thereby.
c)The contract period shall get extended to cover delay
caused by force majeure without levy of liquidated
damages.
d)Any increase in taxes and duties is also payable in the
case of such extensions due to force majeure.
e)No price adjustment to be applied during such
extensions due to force majeure.

12. Change in Facilities

Both Purchaser and the Contractor have the right to
propose a change in facilities during the
performance of the contract provided such change
falls in the general scope of facility and does not
constitute unrelated work.
No change made necessary because of any default
of the Contractor shall be deemed to be a change
and such change shall not result in any adjustment
of the contract price or time for completion.

12. Change in Facilities(Contd)

When a change is proposed either by the Purchaser
or the Contractor, the Contractor shall prepare a
Request for change proposal which shall include
among the others the following :
a)Description of the change.
b)Effect on the time for completion.
c)Cost of change
d)Effect on functional guarantees.
e)Effect on any other provisions of the contract.

12. Change in Facilities(Contd)

The Purchaser and the Contractor shall mutually agree upon all related
points of the change proposal. On such agreement Purchaser shall
intimate to the Contractor whether or not to proceed with the change.
If the Purchaser and the Contractor can not reach agreement on the
price for the change and/or equitable time for completion or any other
matters related to such change proposal, Purchaser may still instruct
the Contractor to proceed with the change.
The Contractor to proceed with the change as per such instruction by
the Purchaser. However, all issues need to be settled within 90 days
from the date of issue of instruction to the Contractor to proceed with
the change, failing which matter can be referred to arbitration.

13. Pricing the Change Proposal

For EPC contracts in which detailed engineering and BOQ is given by
the Purchaser any change in quantity will be regulated as follows.
a)Items for which rates are available in the purchase order, total
additional quantity upto +25% of the original purchase order value
ordered within CDD will be paid at purchase order rate plus price
adjustment.
b)For additional quantity beyond +25% of the purchase order value, any
quantity ordered beyond CDD and for other new items, will be paid at
FOR site price + 15%.
c)Any deduction in purchase order quantity will be done at purchase
order rate.

14. Time for Extension

Time for completion shall be extended if the Contractor is
delayed in the performance by reason of any of the following :a) Any change in the facilities.
b) Any occurrence of force majeure.
c) Any suspension order given by the Purchaser.
d) Any delay in approval of drawing.
e) Any default of the contract by the Purchaser.
f) Delays attributable to the Purchaser.
g) Any delay in issuing Erection Completion Certificate.

15. Time Overrun

In the event of delay in completion and
handing over of the facilities beyond CDD by
the Contractor due to specific site related
issues for which Purchaser is responsible, the
Contractor shall be entitled to compensate for
additional expenses for extended stay at site
to the extent required for such reasons in
addition to extension of time.

16. Suspension of Work

Purchaser may order the Contractor suspend the
work by giving notice for the following reasons :
a) On account of any default of the Contractor.
b) For proper execution of the facilities or part
thereof.
c) For safety of the facilities or part thereof such
notice should clearly specify :
i)Which performance (work) to be suspended.
ii)Effective date of the suspension
iii)Reasons thereof.

16. Suspension of Work(Contd.)

The Contractor shall be entitled to an extension of
the time equal to the period of every such
suspension plus 25% based on above reasons.
If suspension period exceeds 30 days, the
Contractor shall also be entitled for compensation.
Contractor may demobilize resources if suspension
period exceeds 30 days.
However, the Contractor is not entitled for
extension/compensation, if any default of the
Contractor.

17. Prolonged Suspension

If suspension order given by the Purchaser, other
than the reason of the Contractors default or breach
of the contract and Contractors works get
suspended for more than 90 days then the
Contractor may give a notice to the Purchaser for
resumption of works (within 28 days of receipt of
notice).
If the Purchaser fails to do so within such period,
the Contractor may by a further notice to the
purchase to delete such part or whole of the
facilities, as termination of the contract.

No claim for deletion portion of the work by

the Contractor.

18. Resumption of Work

Once permitted, the Contractor and the
Purchaser shall jointly examine the facilities,
plant and material affected by the
suspension.

19. Foreclosure of Contract

After acceptance of the tender/during execution of
work, the Purchaser shall decide to abandon or
reduce the scope of work.
The Purchaser or Engineer-In-Charge shall give
notice to the Contractor for foreclosure of contract.
Upon receipt of the notice, the Contractor shall :
a)Cease all further work.
b)Terminate all sub-contract.
c)Stop all further purchasing and/or sub-contracting.
d)Remove all Contractors equipment from the site.

19. Foreclosure of Contract(Contd)

In such cases, the Purchaser shall have the option to
take over Contractors material or any part thereof.
In the event of foreclosure of the contract under
GCC, the Purchaser shall pay to the Contractor.
The full amount of contract rates, properly
attributable to supplies completed and/or the part of
the facilities executed by the Contractor as of the
date of foreclosure.

20. Termination of Contract in full or Part

The Purchaser without prejudice to any other right
may terminate the contract forthwith as a whole or
only such item of work in default, in the following
circumstances.
a)The Contractor shall offer or agree to give to any
person in the Purchasers service any gift or
consideration of any kind as an inducement.
b) The Contractor shall enter into contract with the
Purchaser in connection with which commission
has been paid or agreed to be paid.
c) The Contractor shall obtain a contract with the
Purchaser as a result of wrong tendering.

20. Termination of Contract

in full or Part(Contd)
d) Adopts or has engaged fraudulent practice.
e) Adopts or has engaged in coercive practice.
f) Being an individual or if a firm, any partner
thereof, shall at any time be adjudged insolvent.
g) Being a company, shall pass a resolution or the
court shall make an order for the liquidation of its
affair.
h) Shall suffer an execution being levied on his
goods.
i) Attempt to assign, transfer or sub-contract the
entire works or any portion thereof without the
prior written approval of the Purchaser.

20. Termination of Contract

in full or Part(Contd)
In the event of default by the Contractor, the
Purchaser may without prejudice to any other right,
give a notice to the Contractor in the following
circumstances : If the Contractor
a) Has abandoned or repudiated the contract.
b) Has without valid reason failed to commence
work.
c) Persistently fail to execute the contract.
d) Refuse or is enable to provide sufficient material
services etc.
e) At any time makes default in proceeding with the
works with due diligence.

20. Termination of Contract

in full or Part(Contd)
f) Commits default in complying with any of the
terms and conditions of the contract.
g) Fail to deliver the stores.
h) Fail to complete the facilities and hand over it.

21. Termination of Contract on Death

If the contractor is an individual or a

proprietary concern and the individual or the
proprietor dies or if the contractor is a
partnership concern and one of the partners
dies then unless the purchaser is satisfied that
the legal representative of the contractor are
capable, the purchaser shall be entitled to
cancel the contract as to its incomplete part
without the purchaser being in any way liable
to pay any compensation to the estate, of the
deceased contractor and/or surviving
partners.

22. Settlement of Dispute

Settlement by mutual consultation
If any dispute arise between the purchase and the
contractor in connection with the contract regarding
its existence, validity or termination or execution at
the facilities, the parties shall seek to resolve any
such dispute or difference by mutual consultation.
In case parties fail to resolve such dispute or
difference by all such mutual consultations then the
either party may give a thirty(30) days notice to the
other party conveying its intention to commence
Arbitration.

23. Settlement of Dispute (Contd)

Settlement by Arbitration
Any dispute in respect of which notice of intention to
commence Arbitration has been given, shall be finally
settled by arbitration.
Consequent to issue of notice of intention to
commence Arbitration by either party, both the
purchase and the contractor shall appoint one
Arbitrator each. These two Arbitrators shall agree
between themselves and shall appoint third
Arbitrator. The issue in dispute shall then be referred
to these Arbitrators. The decision either by consensus
or by majority of these three Arbitrators shall be final
and binding on both the parties.

23. Settlement of Dispute (Contd)

Settlement by Arbitration(Contd)
For contract awarded to a foreign contractor or to a
consortium in which the Foreign contractor is the
lead partner, Rules of Conciliation and Arbitration
of the International Chamber at Commerce shall
apply to Arbitration proceedings.
For contract awarded to public sector enterprise, all
matters in dispute to be settled through arbitration
shall be referred to the permanent Arbitration
mechanism (PAM) of the Dept. of Public
Enterprise, Govt. of India.