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CONSTRUCTION CONTRACT
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CI and its Laws
CI related Public bodies and
Private Organizations
Construction Projects
Regulatory Frameworks
(Delivery System, Procurement,
Now we will see Construction
Contract & Claim related laws
2
Writing is usually not necessary to
create a contract. Many everyday
contracts are made without words, for
example when shopping at the
supermarket. A contract made by
spoken and not written words is an
‘oral contract’.
• Others, if any;
Contents of a Contract Documents
The Commercial Part
• Others, if any
Tender & Contract Documents
The Technical Part
Duress
‘Duress’ is the compelling of a party to consent to a
contract by threats of grave imminent harm to such
party or his ascendants, descendents or spouse
Duress can have threefold aspect
A contract aspect leading to invalidation
A tort aspect leading to compensation for damages
A penal aspect leading to punishment under the Penal
Code
False statement
• false information to another where he knows that
the latter acts upon the information
Discussion on FIDIC conditions of contract
•
Users
Contractor
Regulatory/Statutory
bodies Suppliers
Client
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The general public
Contracts
Why? to protect parties against
defaulting by their contracting party,
if so provide adequate
compensation:
Facilitate smooth functioning of the industry
It is one way of managing risk!
• Most (common contracts) are meant to
share risks among parties
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Contracts
Risk transfers in contracts
Project
Owner
Risk Banks
Risk
General
Contractor
Risk
Risk
Sub-Contractor
Insurance
Risk
The Contractor
The Consultant
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Contract Relationships
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Major types of contracts common in
Construction
Client
Contractor Consultants
“Works" Contract “Service" Contract
Suppliers
“Goods” contracts
The procurement procedures, evaluation criteria adopted, etc vary substantially
among the above procurements 27
Contents Function and broad outline of contents
Number Heading
Agreements and contract data
Form of Offer and This form formalizes the legal process of offer and acceptance. The following provisions are
Acceptance common to most agreement forms:
Identification and full address of the signing parties, short description of the project and the
work, date of commencement and signature, completion time of the project, the contract
price, and enumeration of contract documents constituting the entire agreement.
Standard or General States the applicable conditions of contract and associated contract specific data that collectively
Conditions of describe the risks, liabilities and obligations of the contracting parties and the procedures
Contract: for the administration of the contract.
Particular or Special This document provides more specific and relevant information and conditions to a particular
Conditions of project. It is a supplementary and modified section of the general conditions of contract.
Contract Special conditions include additional owner requirements.
Pricing data
Activity Schedule / Bill of Records the contractor's prices for providing supplies / services / engineering and construction
Quantities works which are described elsewhere in a specification within the Scope of Work section
of the contract.
Scope of Work
Technical Specifications Specifies and describes the supplies, services, or engineering and construction works which are
& Methods of to be provided and any other requirements and constraints relating to the manner in which
Measurement the contract work is to be performed.
Drawing These are intended to describe the size and dimensional requirements of the project. Many
professionals are involved in developing drawings. These include the architectural,
structural, sanitary, mechanical, electrical, topographic survey, land profile, and detailing.
Miscellaneous
Appendix to Construction Comprises tabulated and narrative information of the project such as amount and liquidated
Agreement: damages, interest rates, completion time, amounts of bond and insurances, defects liability
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period, retention, progress payments, advance payment, etc. Some of this information
might be left blank to be filled by the contractor or might be readily provided by the client.
Contents Function and broad outline of contents
Number Heading
Agreements and contract data
Form of Offer and This form formalizes the legal process of offer and acceptance. The following provisions are
Acceptance common to most agreement forms:
Identification and full address of the signing parties, short description of the project and the
work, date of commencement and signature, completion time of the project, the contract
price, and enumeration of contract documents constituting the entire agreement.
Standard or General States the applicable conditions of contract and associated contract specific data that collectively
Conditions of describe the risks, liabilities and obligations of the contracting parties and the procedures
Contract: for the administration of the contract.
Particular or Special This document provides more specific and relevant information and conditions to a particular
Conditions of project. It is a supplementary and modified section of the general conditions of contract.
Contract Special conditions include additional owner requirements.
Pricing data
Activity Schedule / Bill of Records the contractor's prices for providing supplies / services / engineering and construction
Quantities works which are described elsewhere in a specification within the Scope of Work section
of the contract.
Scope of Work
Technical Specifications Specifies and describes the supplies, services, or engineering and construction works which are
& Methods of to be provided and any other requirements and constraints relating to the manner in which
Measurement the contract work is to be performed.
Drawing These are intended to describe the size and dimensional requirements of the project. Many
professionals are involved in developing drawings. These include the architectural,
structural, sanitary, mechanical, electrical, topographic survey, land profile, and detailing.
Miscellaneous
Appendix to Construction Comprises tabulated and narrative information of the project such as amount and liquidated
Agreement: damages, interest rates, completion time, amounts of bond and insurances, defects liability
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period, retention, progress payments, advance payment, etc. Some of this information
might be left blank to be filled by the contractor or might be readily provided by the client.
International Construction
Contract
FIDIC
Conditions of Contract
for Construction
The GCC
Why GCC:
Helps in a fair and adequate method of handling construction
projects;
Many of the terms of the standard conditions of the contract
may have been tested by courts and hence can be relied upon
to provide similar protection to all who use them;
Reduces time and effort exerted in preparing contracting
documents
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Major terms covered in GCCs &PCCs will be
discussed later
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Contract Relationships
The Client:
Is the project initiator and usually the owner
Is responsible for appointing the Consultant (“The
Engineer”)
Selects the Contractor
Ensures the Site is available for the Contractor
Agrees to any necessary changes to the Contract
Arranges payments as required under the Contracts to
both the Contractor and Consultant
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Contract Relationships
Roles and Responsibilities
The Contractor:
The Engineer:
Is not party to the construction Contract, but to a separate
agreement with the Client
Is required to exercise all reasonable skill, care and diligence
and act fairly as an intermediary between the Client and the
Contractor
The Conditions of Contract define the powers and
responsibilities of the Engineer. These powers and
responsibilities involve two distinct roles”
o the Engineer acts as a
representative of the Client, e.g.
issuing drawing; giving
permission for sub-contracting
o the Engineer acts independently,
such as valuer, certifier and
adjudicator 36
Contract Relationships
The Engineer:
Acts as a Certifier
37
Contract Relationships
Rights
To be notified of the appointment of Engineer’s
Representative and assistants
To require the Contractor to complete a Contract Agreement
To require the Contractor to provide a Performance Security
To be jointly named on insurance policies
To be consulted by the Engineer on determinations of
additional costs and/or extensions of time
To take out insurances (at the Contractor’s cost) in the
event of the Contractor’s failure to do so
To deduct Liquidated Damages for delay from payments due
to Contractor
To employ others to carry out remedial works if Contractor
doesn’t do them
To terminate the Contract upon the outbreak of war
To proceed to arbitration if dissatisfied with an Engineer’s
decision
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Contract Relationships
Obligations
To appoint the Engineer
To define those duties of the Engineer which require prior
approval
To make the Site available
To make available site investigation data
To be responsible for his own workmen on Site
To define time(s) for completion
To make payments within 28 days of receipt of Interim
Payment Certificates
To attempt to reach amicable settlement prior to arbitration
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Contract Relationships
Rights
To be notified of the appointment of Engineer’s
Representative and assistants
To be consulted by the Engineer on determinations of
additional costs and/or extensions of time
To seek consent for work at night or on rest days
To give notice of substantial completion
To be paid the value of the Works determined by
measurement
To receive payments within 28 days of receipt of Interim
Payment Certificates
To proceed to arbitration if dissatisfied with an Engineer’s
decision
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Contract Relationships
Obligations
To execute the Works with due diligence, remedy defects, and provide all
things required
To take full responsibility for operations and methods
To execute and complete the Works in accordance with the Contract and
comply with the Engineer’s instructions
To accept instructions only from the Engineer
To submit a programme and (if required) method statement
To submit a revised programme if requested
To provide full-time superintendence and representative, and replace the
representative if required by the Engineer
To replace any person when required by the Engineer
To take out necessary insurances
To comply with statutes etc. and indemnify the Employer against penalties
To keep the Site clear
To suspend the Works if instructed
To expedite progress if required by the Engineer
To submit detailed particulars of claims
To submit monthly statements of amounts due
To attempt to reach amicable settlement prior to arbitration 41
Contract Relationships
Rights
To exercise the authority to be implied from the Contract
To delegate powers to the Engineer’s Representative
To issue instructions to the Contractor as necessary
To request a revised programme
To withdraw approval of the Contractor’s representative if
necessary
To require replacement of any member of the Contractor’s staff if
necessary
To instruct tests on materials
To instruct a suspension of the Works
To notify the Contractor to expedite progress
To make variations he considers appropriate
To value claims in the absence of details from the Contractor
To correct or modify Interim Payment Certificates
To certify if the Contractor is in default 42
Contract Relationships
Obligations
To obtain the Employer’s specific approval when required
To appoint the Engineer’s Representative
To determine additional costs and/or extensions of time when
appropriate
To issue the Taking-Over Certificate or instruct the contractor to
complete outstanding works
To make variations he considers necessary
To value variations
To determine the value of the Works by measurement
To prepare Interim Payment Certificates
To issue the Defects Liability Certificate
To give an Engineer’s Decision within the stipulated time stated in
the Contract 43
FIDIC Parts I and II
Part I – General Conditions.
Part II – Conditions of Particular
Application.
Employer’s Rights I
To be notified of the appointment of Engineer’s
Rep. and assistants 2.3
To give consent to assignment of the Contract
3.1
To require the Contractor to complete a Contract
Agreement 9.1
To require the Contractor to provide a
Performance Security 10.1
To be named jointly on insurance policies 21.2
To be consulted by the Engineer on
determinations of cost & EoT (Various)
Employer’s Rights II
To take out insurances (at the Contractor’s cost)
in the event of the Contractor’s failure to do so
25.3
To deduct Liquidated Damages for delay from
payments due to Contractor 47.1
To employ others to carry out remedial works if
Contractor doesn’t do them 64.1
To terminate the Contract upon the outbreak of
war 65.6
To proceed to arbitration if dissatisfied with an
Engineer’s decision 67.1
Employer’s Obligations
To appoint the Engineer 1.1
To define those duties of the Engineer which require
prior approval 2.1
To make available site investigation data 11.1
To be responsible for his own workmen on Site 19.2
To give the Contractor possession of the Site 42.1
To define time(s) for completion 43.1
To make payments within 28 days of receipt of
Interim Payment Certificates 60.10
To attempt to reach amicable settlement prior to
arbitration 67.2
Contractor’s Rights I
To be notified of the appointment of the
Engineer’s Representative and assistants 2.3
To be consulted by the Engineer on
determinations of additional costs and/or
extensions of time (Various)
To seek consent for work at night or on rest days
46.1
To give notice of substantial completion 48.1
Contractor’s Rights II
To be paid the value of the Works determined by
measurement 56.1
To receive payments within 28 days of receipt of
Interim Payment Certificates 60.1
To proceed to arbitration if dissatisfied with an
Engineer’s decision 67.1
To terminate employment under the Contract in
the event of default by the Employer 69.1
Contractor’s Obligations I
The obligations of the contractor, under
the said conditions of contract, may be
generalized as follows.
Completion obligation;
Quality performance obligation;
Timely performance obligation;
Obligation to provide securities, &
insurance;
Obligation to supply information & notice;
Administrative obligation;
Obligation up on or after completion;
Contractor’s Obligations I
To execute the Works with due diligence,
remedy defects, and provide all things
required 8.1
To take full responsibility for operations and
methods 8.2
To execute and complete the Works in
accordance with the Contract and comply
with the Engineer’s instructions 13.1
To accept instructions only from the Engineer
13.1
To submit a programme and (if required)
method statement 14.1
Contractor’s Obligations I