UNIT III CONTRACT MANAGEMENT

1. INDIAN CONTRACT ACT, 1872

The law relating to contracts in India is contained in Indian Contract Act, 1872. The Act
was passed by British India and is based on the principles of English Common Law. It is
applicable to all the states of India except the state of Jammu and Kashmir.The objective of the
Contract Act is to ensure that the rights and obligations arising out of a contract are honored
and that legal remedies are made available to those who are affected.

1.1 ESSENTIAL ELEMENTS OF CONTRACT

The following are the essential elements of a Contract as defined in Section 10 of the Indian
Contract Act, 1872.

1. Agreement - Offer and Acceptance

The parties to the contract should have a mutual understand regarding the subject-
matter of the contract. There must be a "lawful offer" and "lawful acceptance" thus
resulting in an agreement. The parties must have agreed to the subject-matter in the
same sense.

2. Legal purpose

There must be an intention among the parties that the agreement should be attended to
by legal consequences and create legal obligation. Agreements of social or domestic
nature do not contemplate legal relations.

3. Lawful Consideration

Consideration means 'something in return'. In every legal contract, there must be

something in return. An agreement is legally capable to be enforced only when each of
the parties to it gives something and gets something. The consideration should not be
unlawful, illegal, immoral or opposed to public policy.

4. Capacity to contract

Every person who enters into a contract must be competent. In other words, the person
should be of the age of majority, should have a sound mind, and must not be disqualified
from any law to which they subject. Minors, lunatics, unsound and intoxicated persons
are incompetent to enter into a contract. However, there are exceptions as defined in
Section 68. In case of an exception the minor or lunatic is not personally liable.

5. Consent to contract

All the parties must have agreed upon the subject matter of the agreement in the same
sense. Section 14 says that if the agreement is induced by coercion, fraud
 misinterpretation or mistake, it is said to be "no free consent" and such a contract is
voidable and cannot be enforceable by law.

6. Lawful object

If the object in the agreement is unlawful, the agreement is void.

E.g.: The landlord cannot recover rent through court of law when he knowingly lets his
house to carry on prostitution.

7. Certainty

Every agreement of the contract must be certain. If the agreement is not certain or
incapable of being made certain, it is void.

8. Possibility of Performance

Every contract must be capable of performance. Otherwise, the agreement is void. An

agreement to do an impossible act whether physically or legally, is void.

9. Not expressly declared void

The agreement must not have been expressly declared to be void under the Act.
Examples of such agreements are restrainment of trade, marriage, legal proceedings
and wagering agreements. Such agreements are not enforceable by law.

10. Legal formalities like Writing, Registration etc.

A contract may be oral or in writing according to the Indian Contract Act. In certain
special cases the agreement must be in written. In some cases like contracts by
companies, selling or buying of shares etc., the contract must be registered.

1.2. DEFINITIONS FROM ACT

 Contract
As per the Indian Contract Act,1872, a "contract" is an agreement enforceable by law.
The agreements are not enforceable by law are not contracts. An "agreement" means
'a promise or a set of promises' forming consideration for each other. And a promise
arises when a proposal is accepted. By implication, an agreement is an accepted
proposal. In other words, an agreement consists of an 'offer' and its 'acceptance'.

 Offer
An "offer" is the starting point in the process of making an agreement. Every agreement
begins with one party making an offer to sell something or to provide a service, etc.
When one person who desires to create a legal obligation, communicates to another
 his willingness to do or not to do a thing, with a view to obtaining the consent of that
other person towards such an act or abstinence, the person is said to be making a
proposal or offer.

 Acceptance
An agreement emerges from the acceptance of the offer. "Acceptance" is thus, the
second stage of completing a contract. An acceptance is the act of manifestation by the
offeree of his assent to the terms of the offer. It signifies the offeree's willingness to be
bound by the terms of the proposal communicated to him. To be valid an acceptance
must correspond exactly with the terms of the offer, it must be unconditional and
absolute and it must be communicated to the offeror.

 Agreement
An "agreement" is a contract if 'it is made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and is not expressly
declared to be void'. The contract must be definite and its purpose should be to create
a legal relationship. The parties to a contract must have the legal capacity to make it.
According to the Contract Act, ―Every person is competent to contract who is of the age
of majority according to the law to which he is subject, and who is of a sound mind, and
is not disqualified from contracting by any law to which he is subject". Thus, minors;
persons of unsound mind and Persons disqualified from contracting by any law are
incompetent to contract.

 Consent
Consent is very important part of the contract. The contracts become Void if
misrepresentation, mistake or anything like this the fraud will be committed .Incase of a
breach of a contract specific performance is granted but it has various exceptions to it,
depending on the situation. If the general essentials ingredients of a contract are
fulfilled, a valid legal contract is formed and it becomes affective from date it is signed.

 Consideration
Mutual and lawful consideration for agreement, it should be enforceable by law. Hence,
intention should be to create legal relationship. Agreements of social or domestic
nature are not contracts, Parties should be competent to contract, and contract should
not have been declared as void under Contract Act or any other law is also important
elements of a valid contract. The contract becomes Void if any of these elements are
not fulfilled.
2. DOCUMENTS FORMING A CONTRACT

The contract document consists of the contract agreement (on non-judicial stamp paper of
prescribed value) and the following set of documents, each page of which is signed both by the
owner and the contractor.

a) Cover Title Page: It contains the name of work, name of owner, name of contract,
contract agreement number, contents etc.

b) Contents Page: It contains the contents of the agreement with page references.

c) Notice Inviting Tender (NIT): It contains a brief description of work, estimated cost of
work, date and time of receiving the tender, amount of earnest money, security money,
time of completion etc.,

d) Tender Form: It comprises bill of quantities, contractor’s rates, total cost of work, time
for completion, security money to be deposited and penalty clauses etc.

e) Schedule of Issue of Materials: It contains the list of materials to be issued by the

department or owner to the contractor with rates and place of issue.

f) Drawings: These comprise a complete set of fully dimensioned drawings including

plans, elevations, and sections detailed drawings and site plan.

g) Specifications: It is not practicable to include detailed information of each item of work

in the limited space of description in the bill of quantities. As such detailed specifications
form a part of the contract agreement. Specifications should be clear and precise
covering all items of the bill of quantities. Following specifications are normally included
in the contract document.

i. General Specifications: These specify the class and type of work quality of
materials etc, in general for the work as a whole.

ii. Detailed Specification: These give detailed description of each item of work
including material and method to be used along with quality of work manship required.

h) Conditions of Contract: The terms and conditions of contract specify the following.

i. Rates of each item of work inclusive of materials, labour, transport,

plant/equipment and other arrangements required for completion work.

ii. Manner of payment of contractor including running payment final payment,

refund of security money etc.

iii. Time of completion of work.

iv. Proportionate progress to be achieved.

 v. Penalty for poor quality and unsatisfactory work, lack of proportionate progress
and for delay in completion.

vi. Extension of time for completion of work.

vii.Engaging other agency at contractor’s cost and risk.

viii. Termination of contract.

ix. Subletting of the work.

x. Changes in design/drawings etc and valuation of variations.

xi. Arbitration for settlement of disputes.

In addition to the above, performance and payment bonds are also sometimes considered as
part of the contract document. All the above stated documents collectively constitute a contract
document.

3. TENDERING AND CONTRACTUAL PROCEDURES

3.1 TENDER

• Offer to do the work for a certain amount of money (firm price), or a certain amount
of profit (cost reimbursement or cost plus).

• Tendering is the process of making an offer, bid or proposal, or expressing interest in

response to an invitation or request for tender.

• Bidding is the process of submitting a proposal (tender) to undertake, or manage the

undertaking of a construction project.

• Organizations will seek other businesses to respond to a particular need

• Select an offer or tender that meets their needs and provides the best value
for money.

• Generally based on a bill of quantities, a bill of approximate quantities or

other specifications which enable the tenders attain higher levels of accuracy,
the statement of work

3.2 TENDER PROCESS

Comprises of seven major steps

1. Determine the type of tender

a) Open Tendering
 • invitation to tender by public advertisement.

• no restrictions placed on who can submit a tender,

• suppliers are required to submit all required information

• evaluated against the stated selection criteria

b) Select Tendering

• open to a select number of suppliers

• short list sourced from an open tender

• compilation of businesses that the organization has worked with

previously

c) Multi-stage Tendering

• used when there are a large number of respondents

• at each stage in the process, the suppliers are culled to those who
are most suited

d) Invited Tendering

• organization contacts a select number of suppliers directly and

requests them to perform the contract

• generally used for specialist work, emergency situations or for low

value, low risk and off the shelf options,

After selection tender may be issued through

 Expressions of interest (EOI) - used to shortlist potential suppliers before

seeking detailed offers.

 Request for information (RFI) - used in the planning stage to assist in defining
the project, however, not used to select suppliers.

 Request for proposal (RFP) - used where the project requirements have been
defined, but an innovative or flexible solution is needed.

 Request for quotation (RFQ) - invites businesses to provide a quote for the
provision of specific goods or services.

 Request for tender (RFT) - an invitation to tender by public advertisement open

to all suppliers.

2. Request for tender is prepared

 – Outlines what is required, the contractual requirements and how interested ones
should respond.

– Description of the goods and services to be procured

– Conditions of tender

– Evaluation criteria

– Submission content and format

– Process rules and information: this may include things such as the deadline for
submission

– Conditions of Contract: Draft contract conditions

3. Tenders are invited

– identify organizations and government agencies likely to need your products and
services.

– contact organizations regularly to find out if there are any future tender
opportunities

– Government agencies and departments often provide a list of future tenders on

their websites

– Open tenders are published in newspaper advertisements

4. Suppliers respond

After obtaining necessary documentation, suppliers

– Attend any pre tender briefing sessions being conducted

– Clarify any uncertainties with the client

– Plan their response in accordance to the prescribed directions

– Prepare response including all the necessary details and documentations

– Submit response in the right format, on time and at the right location

5. Evaluation and selection

– The bid analysis team (Procurement Project Team), assess all components of all
bids.

– To ensure the bid is compliant, and that all parts are complete, then to compare
and assess all parts, to identify the best value for money bid overall
 – The evaluation procedure occurs in three distinct stages; Financial, Technical
and Capacity Assessment

6. Notification and debriefing:

When a contract has been awarded, the successful tenderer will be advised in
writing of the outcome. Unsuccessful tenderers are also advised and offered a debriefing
interview.

7. Contracts established and managed:

Generally a formal agreement will be required between the successful tenderer

and the relevant agency.

4. STAGES OF AWARDING CONTRACT

1. The stage of awarding construction contract is dependent of the methods of delivery of

the project.
2. In the tradition way of delivery, contract documents are prepared after the completion of
design. Generally designer helps the owner to prepare estimate of the project.
3. If owner maintains an engineering department, an estimate is prepared by the
engineering department.
4. Specification of the items used for construction is very important from point of view of
quality of design and quality of construction. Specification is generally prepared by the
designers.
5. During the design, designer may take owner advice in preparing specification of the
items.
6. The drawing and specification prepared by designer form the basis for the awarding
contract.

The complete process of awarding contract can be summarized as follows.

1. Preparation of contract document.

2. Advertising the tender, tender notice.
3. Submitting Tender by contractor.
4. Study of the tender by owner
5. Clarification regarding conditions or specifications
6. Preparing comparative list
7. Awarding contact

5. CONTRACT ADMINISTRATION

Contract administration is the process of ensuring that the seller’s performance meets
contractual requirements. On larger projects with multiple product and service providers, a key
aspect of contract administration is managing the interfaces among the various providers. The
legal nature of the contractual relationship makes it imperative that the project team be acutely
aware of the legal implications of actions taken when administering the contract. Contract
administration includes application of the appropriate project management processes to the
contractual relationship(s) and integration of the outputs from these processes into the overall
management of the project

The project management processes that must be applied include:

 Project plan execution: to authorize the contractor’s work at the appropriate time.
 Performance reporting: to monitor contractor cost, schedule, and technical
performance.
 Quality control: to inspect and verify the adequacy of the contractor’s product.
 Change control: to ensure that changes are properly approved and that all those with a
need to know are aware of such changes.

5.1 INPUTS TO CONTRACT ADMINISTRATION

1. Contract.
2. Work results. The seller’s work results—which deliverables have been completed
and which have not, to what extent are quality standards being met, what costs have
been incurred or committed, etc
3. Change requests. Change requests may include modifications to the terms of the
contract or to the description of the product or service to be provided.
4. Seller invoices. The seller must submit invoices from time to time to request
payment for work performed

5.2 TOOLS AND TECHNIQUES FOR CONTRACT ADMINISTRATION

1. Contract change control system. A contract change control system defines the
process by which the contract may be modified. It includes the paperwork,
tracking systems, dispute resolution procedures, and approval levels necessary
for authorizing changes
2. Performance reporting. Performance reporting provides management with
information about how effectively the seller is achieving the contractual
objectives.
3. Payment system. Payments to the seller are usually handled by the accounts
payable system of the performing organization

5.3 OUTPUTS FROM CONTRACT ADMINISTRATION

1. Correspondence. Contract terms and conditions often require written

documentation of certain aspects of buyer/seller communications, such as
warnings of unsatisfactory performance and contract changes or clarifications. .
 2. Contract changes. Changes (approved and unapproved) are fed back through
the appropriate project planning and project procurement processes, and the
project plan or other relevant documentation is updated as appropriate. .
3. Payment requests. This assumes that the project is using an external payment
system. If the project has its own internal system, the output here would simply
be ―payments.‖

6. GENERAL CONDITIONS OF INDIAN CONTRACTS

Contract: include contract agreement, letter of acceptance, letter of tender,

specifications, drawings, schedules, tender, appendix to tender, bill of quantities.

Parties and persons: party, employer, contractor, engineer, contractor representative,

employers' personnel, contractors personnel, sub- contractor, DAB (dispute adjudication
board), FIDIC.

Dates , tests, periods and completion:include base date, commencement date, time
of completion, test on completion, taking over certificate, defects notification period,
performance certificate, day

Money and payment:Accepted contract amount, contract price, cost, final, interim
payment certificate, currency, provisional sum, retention money,

The main definitions that are included in and repeated in the articles of general conditions
are:

• Employer : The party named in the Contract as the "FIRST PARTY" who will enter into
contract with the Contractor for the execution of the Works covered by the Contract, or
any other party authorized by the Employer to exercise the powers and obligations of the
First Party, provided that the Contractor will be informed accordingly in writing

• Contractor : The person, company or joint venture named as Second Party in the
Contract whose Tender has been accepted by the Employer and with whom the
Employer has entered into Contract, and includes the Contractors personal agents and
his legal successors

• Engineer: The Consulting office, or Engineering office or Engineer or any other technical
body appointed from time to time by the Employer to exercise in whole or in part the
 powers of the Engineer in accordance with the Conditions of the Contract provided that
the Contractor shall be accordingly notified in writing.

• Engineers Representative- Any resident engineer, or clerk of works appointed by the

Engineer from time to time

• Contract- The documents constituting these Conditions (Parts I and II), the
Specification, the Drawings, the Bill of Quantities, the Tender, the Letter of Acceptance,
the Contract Agreement, and such further documents as may be expressly incorporated
in the Letter of Acceptance or Contract Agreement (if completed).

• Contract Sum- The sum stated in the Letter of Acceptance as payable to the Contractor
for the execution and completion of the Works and the remedying of any defects therein
in accordance with the provisions of the Contract, subject to such additions thereto or
deductions therefore as may be made under the provisions of the Contract.

• Equipment is the Contractor’s machinery and vehicles brought temporarily to the Site to
construct the Works.

• Site- The land and other places provided by the Employer or designated as such where
the Works are to be executed, and any other places specifically designated in the
Contract as forming part of the Site.

• Approval: written approval sanctioned by the client

• Time (calendar / working days): including work schedule details and completion

7. TYPES OF CONTRACT

1. Lump-sum contract: This is a single fixed price contract. In this contract, contractor agrees
to perform specified job for fixed sum. The owner provides the contractor exact specification of
the work. In this contract both the parties try to fix the conditions of the work as precisely as
possible.

Advantages:

a. Owner is aware of the cost of the project before the project construction starts.
b. It avoids a lot of details and accounting by both owner and contractor.
c. Contractor gets free hand to execute the work.
d. If this contract is used with design-construct method of delivery, contractor gets
opportunity to use value engineering.

Disadvantages:

a. It is very difficult to accommodate any charge in design and specification.

b. This contract is as good as the accuracy of the contract document. If errors exist
in the contract document, the contract need to be renegotiated and hence more
risk is involved from the owner ride.
 c. In the case of unforeseen hazard during the construction, contractor may be put
in adverse situation.

2 .Unit price contract: In this type of contract, the price is paid per unit of the work carried out.
There are different variations of this type of contract. Some of them are mentioned below.

1. Bill of quantities contract: In this type of contract owner provide the drawing,
quantities of work to be done and specification. The contractor bid based on the unit
cost of the items of construction. The contractor overhead, profit and other expenses
can be included in the unit cost of the item of work. This type of contract provides
owner a competitive bid.
2. Schedule of rate contract: Many a time, the quantity of work to be executed is not
known before. Contract is signed based on the unit cost of the item of work.
Generally more items are inserted in the contract than to be executed because it
becomes sometimes difficult to exactly specify all the items. There is no guarantee
that all the items mentioned will be used in the construction. This type of contract are
widely used in underground work, flood control and road constructions. Advantages
and disadvantages of this type of contract in the same as the bill qualities contract.
3. Cost plus contract: In this contract, the payment is made based on the work
carried out plus the fee which includes overhead, profit etc. Sometimes a cap is put
on the type of contract by provided maximum and minimum cost limit such as
guaranteed maximum cost contract. If project cost exceed this limit, contractor is
responsible for that. The advantage of this type of contract is that considerable
overlap is providing between design and construction. Hence the project can be
executed in the fast-track basis. This contract is suitable for the work where it is
difficult to define the task to be done before the awarding the contract.

Advantages

• Suitable for competitive bid

• Easy for contract selection and Early start is possible
• Flexibility : quantities and scope can be easily adjusted

Disadvantages

• Final cost not known from the beginning (BOQ only is estimated)
• Staff needed to measure the finished quantities and report on the units not
completed.
• Unit price sometime tend to draw unbalanced bid

3. Turn-Key Contract: A turn-key contract is an integrated contract in which all works

pertaining to various disciplines such as civil, electrical, mechanical etc. are in the hands of a
single contractor called the main contractor. The main contractor can sublet the contact to
subcontractors who are specialists in their respective fields. In this contract, the main advantage
to the owner is that he need not coordinate the work of different contractors. The main
contractor is responsible for all kinds of jobs starting from planning to commissioning stage. The
owner takes over the entire work (which is fully operational and of proven performance) from the
main contractor.
 Advantages

 Strains for the owner is completely eliminated

Disadvantages

 10 % contract profit is added and contract cost gets increases

 Accounts (or) payment cannot be checked for the quality

4. Labor: Contract is for labor part alone materials and machineries will be supplied by the
owner .Contractor is paid for quantities of work done on measurement of different items of work
at stipulated rate

5. Material: Contract is for supply of materials alone within the specified time.Contractor quotes
the rates of materials including carriage and delivery charges and local taxes

6. Equipment: Contract is done exclusively for equipment.

7. Maintenance: Contract only for maintenance work, for example, AMC (Annual Maintenance
Contract).

8. Cost Plus Fixed Fee Contract: Cost plus fixed fee contract is desirable when the scope and
nature of the work can at least be broadly defined. The amount of fee is determined as a plump
sum from a consideration of the scope of work, its approximate cost, nature of work, estimated
time of construction, manpower and equipment requirements etc. The contractor in this type of
contract is selected on the basis of merit rather than the fee alone.

Suitability

i) This type of contract is suitable for works required to be completed expeditiously

and where it is difficult to foretell what difficulties are likely to be encountered.
ii) This contract is also suitable for important structures where the cost of
construction is immaterial.

Advantage

i) In this type of contract, actual cost is to be borne by the owner. Therefore, the
contractor performs the work in the best interest of the owner resulting in good
quality work.
ii) The work can be taken in hand even before the detailed drawings and
specifications are finalised.
iii) Changes in design and method of construction if needed can be easily carried
out without disputes.
iv) The work can be executed speedily.

Disadvantage

i) This form of contract cannot be adopted normally in case of public bodies and
Government departments.
 ii) The final cost of the work is not known in advance and this may subject the
owner to financial difficulties.

9.Cost plus Percentage of Cost Contract: In this type of contract, instead of awarding the
work on lumpsum or item rate basis, it is given on certain percentage over the actual cost of
construction. The actual cost of construction is reported by the contractor and is paid to him by
the owner together with a certain percentage as agreed earlier.

The suitability merits and demerits of this type of contract are similar to cost plus fixed fee
contracts. An additional demerit is the tendency of the contractor to increase the cost of work to
earn profit by way of percentage of enhanced actual cost.

10. Cost plus Sliding Fee: Actual cost is given and fee is sliding based on profit or reduction in
project cost amount will be given (Owner will fix approximate estimate of project cost).If project
cost increased fees will be reduced If same normally 10 % given If reduced additional Bonus will
be provided

Advantage

 Contractor will try to minimize the project cost

Disadvantage

 Quality monitoring is required

11. Percentage Contract: Owner will prepare Estimate, rate, total quantity and total amount is
prepared most accurately and most probably. Tender will be called for here contractor has to
furnish at what percentage contractor is ready to do the work

Advantages

 Complete rate analysis is given by owner itself and only single value has to be
quoted
 Easy comparison can be done by owner and minimum amount chosen

12. Negotiated contract: Only by negotiation contract is given to contractor this is normally
employed under war times and Emergency etc. This may be any of the contract type. In this
type of contract, negotiation across the table takes place between representatives of the owner
and the main contractor for project cost and other conditions of contract. In this type of contract,
detailed projects specifications are arrived at by discussions between the owner and the main
contractor and consultant. A negotiated contract involves extended discussions for finalization
as a competitive contract. Most of the consultancy projects of World Bank are negotiated
contracts.
8. IMPORTANT SITE DOCUMENTS

The keeping of good comprehensive records is very important.

Records serve three basic purposes:

(a) They provide information for the administration of the Contract, and in particular, for the
evaluation of work done for payment.

(b) They provide the management with necessary information on progress, the level of
resources and the condition of the Works, on which engineering and management decisions
may be based.

(c) They provide information on the history of the Works; so that facts are available for the
evaluation of claims or resolution of disputes should these arise.

1. CONTRACT DOCUMENTS

A certified true copy of the signed contract documents, including a set of the original
contract drawings should always be kept in the site office.

2. RECORD DRAWINGS

One set of drawings should be kept separate from the set of original contract drawings
the latter being kept intact for reference only.

3. SITE DIARY

The site diary is one of the most important records for a contract, its primary aim being to
record facts. It should therefore contain an accurate and concise record of the progress
of work, plant and labour employed, weather and site conditions, and any occurrences
which affect the progress and/or quality of the work, including the extent to which they
are affected. In addition, comments on causes of delays and disruptions to normal
progress should be noted where appropriate. The post and name of site supervisory
staff who carries out the inspection and the works inspected shall be recorded. The
Inspector of Works is normally responsible for keeping the site diary.

4. SITE MEASUREMENT BOOK

Measurements should be entered with reference to the method of measurement stated

in the Contract. Entries should be made by the site supervisory staff regularly and signed
by authorised representatives of both the Contractor and the Engineer.

5. PROGRESS CHART

A progress chart should be maintained in the site office and brought up-to-date at least
once a month. The chart should be drawn up so as to show clearly the actual progress in
relation to the programme submitted by the Contractor. For complex contracts, a master
chart showing overall progress and several charts showing progress on different
Sections of the Contract may be necessary. No standard form will suit all contracts and a
different chart should be devised for each contract.

6. INCLEMENT WEATHER

General weather conditions are recorded in the site diary. On days of inclement weather,
an additional daily report should be completed by a member of the site staff

7. SITE INSTRUCTIONS

Instructions given to the Contractor on Site should be issued on the standard form. One
copy of instructions should be handed to the Contractor’s representative, one copy
should remain in the instruction book kept in the site office and one copy should be sent
to the project office for the contract file

8. DAYWORKS

The General Conditions of Contract requires the Contractor to submit, and the
Engineer’s Representative to agree (or reject with reasons), daily records of labour, plant
and materials employed on any work executed on a daywork basis.

9. INVENTORY OF FURNITURE AND EQUIPMENT

The standard form should be used for recording the receipt by the Engineer’s
Representative of equipment and furniture provided under the Contract. A copy of this
record must be kept in the site office.

10. MINUTES OF MEETINGS AND CORRESPONDENCE

Minutes of meetings with the Contractor, including monthly meetings, meetings with
utilities, rate fixing meetings etc., and all correspondence with the Contractor will form
part of the records of the Contract and must therefore be kept in the site office and,
where necessary, in the project office files.

11. RECORD PHOTOGRAPHS

The main purposes of taking photographs are:

(a) To provide a visual record of the conditions of the Site and surroundings before and
during the course of the Contract,

(b) To record particular features of the work, especially which will later be covered, and

(c) To provide material for publicity or training.

 12. MATERIALS TESTING

Records of tests on materials used in the Contract should be kept. Standard forms
should be used whenever applicable:

13. MISCELLANEOUS RECORDS

(a) Piling records
(b) Record for soil and rock conditions
(c) Settlement and movement records
(d) Concrete casting records
(e) Bar bending schedules etc.

9. IMPORTANCE OF STANDARDS AND CODES IN CONTRACT DOCUMENTS

In the recent times, the commercial activities associated with the construction industry are highly
complex and the standard forms of contracts have integrated into the day-to-day transactions of
most agreements

It has become the common practice in procuring contractors, consultants or architects.

According to Banwell Report (1964), the construction industry should formulate and use a single
standard-form contract for its entire projects.

The use of standard form of contract for all type of construction projects is not realistic, but for
similar type of project has been seen to be indeed can be very beneficial.

The purpose of standardising contract forms is mainly to specify the chief variables concerning
the construction processes and activities

It so happens in most projects that actual work done by the contractor differs from as specified
in the contract. And these alterations are a major source of many conflicts and disputes. In
such cases, standard forms contain arrangements as to how to manage these variations.

Standard forms of contract are mostly published by an authoritative body of the industry,
recognised by all the parties involved, outlining the terms and conditions which sets the
parameters for the proceeding of the work.

These forms are not subjected to any negotiation and amendments and are suitable for wide
array of similar projects and works.

The initial set of standard forms was formulated by the government department of UK for works
in the public sector.

Inspired from it various standard forms of construction contracts were formulated, including the
ones by ICE 7 (Institute of Civil Engineers), NEC 3 (New Engineering Contract), JCT (Joint
Contract Tribunal), FIDIC (International Federation of Consulting Engineers), AIA (American
Institute of Architects), EJDC (Engineers Joint Contracts Documents Committee), etc.
Advantages

 Standard forms originate from different sectors of construction industry for various
reasons. They have been devised as an output of a process of negotiation between
various sectors of the industry; hence, they represent a compromise between the
interest groups of the industry
 As numbers of interest groups are involved and considered in the formulation of
standard contracts, there is better possibility of fair and balanced risk allocation among
the parties involved
 The prime reason that inclines construction personnel to adopt standard form of
contracts is familiarity. The major advantage of using a standard contractual form is that
by repetitive use of the document one becomes familiar with its content, and hence is
conscious of both its strengths and drawbacks.
 The contractual complexities associated with any type of contract are often rather typical
to understand.
 This familiarity with the content and clauses of the contract leads to lesser number of
disputes and misunderstandings.
 Precedent is another important factor In the scenario when a disputed project is taken to
court, the standard contracts enable the lawyers to advice their clients regarding the
probable result of the case, as judges are bound to follow the previous decisions.
 Another factor which attracts personnel towards standard contracts is that it reduces the
focus on specific contractual terms during the bargaining process.
 These forms are helpful in reducing the cost linked to tendering and contract
administration.
 Standardisation of the contract forms provides basic legal frameworks which recognise
the rights, obligations and duties of the parties and highlights the ambit of the powers
and duties of the contract administrator.
 Furthermore, standardisation of contracts leads to higher degree of certainty and
fairness during tendering process.
 FIDIC and other similar standard forms of contract are favourable to the construction
industry as they facilitate the saving of both time and cost - two success criteria for any
type of construction projects.

10. CAUSES OF DISPUTES AND CLAIMS

The following areas most often lead to disputes and claims:

1. Plans and specifications that contain errors, omissions, and ambiguities

2. Plans that have not been properly coordinated

3. Incomplete or inaccurate responses or nonresponses to questions or problems presented by

one party in the contract to another party
4. Inadequate administration of an owner’s, architects’, or contractor’s responsibilities

5. Unwillingness to comply with the intent of the drawings by the owner, architect, or contractor

6. Site conditions that differ materially from those represented in the contract documents

7. Unforeseen subsurface conditions

8. A change in conditions

9. Discrepancies in the plans and/or specifications

10. Breaches of contract by any party

11. Disruptions to the normal pace of construction by disputed change orders, acceleration of
the work, or lack of decisiveness by the architect, owner, or contractor

12. Delay of the work caused by any party to the contract

13. Inadequate financial strength on the part of the owner, the contractor, or any of the
subcontractors or vendors