Post on 05-Apr-2018
8/2/2019 Contract Management & Contract Law
1/52
Overview of Contract Management &
Contract Law
Dr S N RaoDirector, ESCI
8/2/2019 Contract Management & Contract Law
2/52
Contractmanagement
Contract
Types of contractsContract Law
Contract management
Disputes & Resolution
8/2/2019 Contract Management & Contract Law
3/52
Contract
A Promise enforceable by Law
Offer +Acceptance (Legally binding)
To be legally binding as a contract, a
promise must be exchanged for adequateconsideration. i.e., benefit a partyreceives
8/2/2019 Contract Management & Contract Law
4/52
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 lawfulconsideration.
Subject matter must be definite and lawful
8/2/2019 Contract Management & Contract Law
5/52
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.
8/2/2019 Contract Management & Contract Law
6/52
CONTRACTING IN
GOVERNMENTGovernment is, by far, the largest contractor in
any Country, so too in India . Supply products
(purchases ) and services (Consultancy, labouretc.,)
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.
8/2/2019 Contract Management & Contract Law
7/52
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 Article299 of Constitution of India.
8/2/2019 Contract Management & Contract Law
8/52
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
authoriseNeither the President nor the Governor shall be
personally liable_______
8/2/2019 Contract Management & Contract Law
9/52
Types of Contracts
Lumpsum
Item Rate
Cost Plus Percentage
Cost + Fixed Fee
Maximum PriceTurnkey
8/2/2019 Contract Management & Contract Law
10/52
Form of Contracts
Formal & Informal
Express & Informed
Unilateral & Bilateral
8/2/2019 Contract Management & Contract Law
11/52
LAW OF CONTRACT
Freedom of contract
Contract adhesion
Exclusions & Exemptions
Sanctity of Contract
8/2/2019 Contract Management & Contract Law
12/52
CONTRACTS ARE GOVERNED
BYIndian contract Act 1872
( as amended by Act 4 of 2003)
Deals mainly with general and limitingprinciples 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 & ConciliationAct 1996, the sale of Goods Act 1930 are notcovered by the Contract Act
8/2/2019 Contract Management & Contract Law
13/52
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 isconsidered to be a Contract Section 2 (h) of
the Indian Contract Act.
8/2/2019 Contract Management & Contract Law
14/52
All Agreements are Contracts if
they are made by
Free Consent
Party's Competent to Contract
Lawful Consideration
Lawful Objective
8/2/2019 Contract Management & Contract Law
15/52
Contract Management
Contract Organisation
Owner
Contractor
Architects & Designing / Engineer
Suppliers / Sub Contractors
Statutes and Mandates
8/2/2019 Contract Management & Contract Law
16/52
Contract Management ..contd
Management of Contracts
Pre Contract Requirements
Contract Operation
Issues and Problems arising
Disputes & Resolutions
Closure of Contract
8/2/2019 Contract Management & Contract Law
17/52
Contract Management
Pre Award Stage (Tenders)
Award of Contract (Agreement)Performance of the Contract (Execution
Process)
Post Completion of Stage
8/2/2019 Contract Management & Contract Law
18/52
Pre Award Stage(Tenders)
8/2/2019 Contract Management & Contract Law
19/52
Tenders
Negotiated Tenders
Limited Tenders
Open Competition
Mode of PublicationNotice inviting tenders
Submission of Tenders
Irregularities in submissionHow to Treat?
Conditions by contractors in tender
With drawl of Tender
8/2/2019 Contract Management & Contract Law
20/52
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 CLIENTWHETHER FREE OR AT FIXED COST
ESCALATION
LIMITATIONS OF LIABILITIES
8/2/2019 Contract Management & Contract Law
21/52
MODES OF INVITING TENDERS
NEGOTIATED TENDERS
LIMITED COMPETITION
OPEN COMPETITION
8/2/2019 Contract Management & Contract Law
22/52
REQUIREMENTS TO BE FULFILLED
BEFORE INVITING TENDERS
SANCTION TO BE OBTAINED
URGENT WORKS WITH NO TIME
SPLITTING OF WORKS TO BEDISCOURAGED
8/2/2019 Contract Management & Contract Law
23/52
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
8/2/2019 Contract Management & Contract Law
24/52
INFORMATION TO BE PROVIDED IN
NOTICE
QUALIFICATIONS
NAME
EMD
SECURITY DEPOSIT
TIME LIMIT
COST
MODE OF SUBMISSION
DATE, TIME AND PLACE OF OPENING
TENDERS
8/2/2019 Contract Management & Contract Law
25/52
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
8/2/2019 Contract Management & Contract Law
26/52
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
8/2/2019 Contract Management & Contract Law
27/52
Acceptance of Tender
Letter of Intent
Mode of Communication
Date of Acceptance
Revocation of Acceptance
Rejection of Tender
8/2/2019 Contract Management & Contract Law
28/52
Operation of Contracts
Interpretation
Duties / Obligations of Owner
Duties / Obligations of Contractor
Organising the Project Execution
Monitoring the progress
8/2/2019 Contract Management & Contract Law
29/52
Award of Contract(Agreement)
8/2/2019 Contract Management & Contract Law
30/52
ESSENTIAL CHARACTERISTICS
OF A CONTRACTThe terms of the contract must be clear andprecise.
Time is the essence of contracts
The terms of contract should be enforcedstrictly. This responsibility rests with both
parties.
Revision of rates in accepted agreementsduring the currency of such agreement is
prohibited.
8/2/2019 Contract Management & Contract Law
31/52
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
8/2/2019 Contract Management & Contract Law
32/52
GENERAL CONDITIONS OF
CONTRACTFormulated in advance
Not individually negotiated
Any ambiguity in the interpretation ofclauses is likely to lead to litigation, loss
of resultant goodwill and waste of time.
8/2/2019 Contract Management & Contract Law
33/52
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
8/2/2019 Contract Management & Contract Law
34/52
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
8/2/2019 Contract Management & Contract Law
35/52
Performance of the Contract
(Execution Process)
8/2/2019 Contract Management & Contract Law
36/52
Problems & Issues
Interpretation of Contract
Handing over site
Materials Issue and use
Drawings & Designs
Payments
8/2/2019 Contract Management & Contract Law
37/52
Deviations in Contracts
Escalation of rates
Extra Items
Extra Quantities
Change of Specifications
Time over runs & Extensions
Loss to Owners / Neighbours properties
Disputes & Resolution
8/2/2019 Contract Management & Contract Law
38/52
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
8/2/2019 Contract Management & Contract Law
39/52
EXTENSION OF COMPLETION
PERIODGranting of extension of time is howevera matter of discretion. While so doing
care should be taken to ensure that thecontract was not placed on timepreference terms.
Extension with or without financialimplications.
8/2/2019 Contract Management & Contract Law
40/52
VARIATIONS IN QUANTITIES
World Bank conditions : For a particular item ifdifference is more than 25% provided the changeexceeds 1% of initial contract price, the Engineer shalladjust the rate to allow for the change.
If the quantity exceeds the above, it will be referred tothe Employer. The rate in BOQ shall be used. If it doesnot correspond to any item in BOQ, the contractor shalloffer the quotation. Finally mutually agreed rate is paid.
Supplemental rates -as per agreement conditions.
8/2/2019 Contract Management & Contract Law
41/52
Is failure to perform an obligation arising out of
the contract.
Total Breach
Partial Breach
Anticipatory Breach
BREACH OF CONTRACT
8/2/2019 Contract Management & Contract Law
42/52
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
8/2/2019 Contract Management & Contract Law
43/52
Failure to handover possession of the site tothe 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
8/2/2019 Contract Management & Contract Law
44/52
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.
8/2/2019 Contract Management & Contract Law
45/52
Abandonment or total failure to complete
Delay in completion
Defective design, materials and / orworkmanship
Failure to submit planned programme
Unauthorised sub-contracting
Contd
BREACHES BY CONTRACTOR
8/2/2019 Contract Management & Contract Law
46/52
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 otheragencies.
8/2/2019 Contract Management & Contract Law
47/52
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
8/2/2019 Contract Management & Contract Law
48/52
-An absolute necessity or compulsion,
circumstances beyond ones control
Natural Calamities
Civil War
Strikes
FORCE MAJEURE
8/2/2019 Contract Management & Contract Law
49/52
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
8/2/2019 Contract Management & Contract Law
50/52
Department Contractor Syndrome
Not understanding even genuine grievances
Claims as a matte of extra profit not genuine
8/2/2019 Contract Management & Contract Law
51/52
Post Completion of Stage
Disputes arising out - DisputeResolution
8/2/2019 Contract Management & Contract Law
52/52
THAN Q