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1. What are the major traits of turn-key type contracts?

A turn-key contract is a business argument in which a company is given the responsibility


of planning and building a product that can generate cash flow for the client upon the
completion.
A primary benefit of a turn-key contract is that the solution is ready to use as soon
as the project is completed. The client also normally does not pay for the solution until it
is finished. A primary drawback is that the contractor designs and develops the solution
which minimizes the client’s ability control project details.
Characteristics of the turn-key type contracts:
 Merging missions conception and executions of the work in one person.
 The overall obligations assumed by the contractor to the client to deliver a free
equipment work.
 A project in perfect working.
 One contract between the client and the contractor.
 The contractor assumes the full implementation of the work.
2. What are the major traits of unit type contracts?
Unit type contracts may be used for the routine contracted services. Service requirements
where the total value of the contract can be calculated by multiplying identical units of
work by a fixed unit price.
Characteristics of the unit type contracts:
 The requirements of the services are clearly defined.
 The total demand for the services is not certain.
 A legal commitment for the services required.
3. Contrast turn-key type contracts with those of unit type contracts?
In a turn-key contract the whole responsibility of Architectural Engineering Design,
Procurement and the construction is transferred to the contractor. Sometimes, owner tend
to give construction turn-key contracts only, where Architectural Engineering Design is
run by a separate agency. Before awarding turn-key contract the owner usually give a
detailed requirement to the contractor. The contractor, in general, quotes a fixed price or
quotes price per square foot of built up area for a given specification. These rate usually
includes all the work until handover. Once the contract is awarded , the rest of work shell
is contractor’s responsibility. Payment terms are mutually agreed between the contractor
and the owner. Since all the responsibilities lies with the contractor, a lot of time saves
for the owner.
In the unit type contract, an estimated quantity of bill of quantities is prepared.
Estimated quantities are surveyed or verified by an Architect. The estimated quantities
are then shared with contractors for quotation. Contractors enter unit prices against the
estimated quantities of work. The contract is based on estimated quantities of work items
and unit price for each of these work items. Payment is made on the basis of units of
work actually done and measured in the field multiplied by their unit prices.
4. Is the owner right in demanding the price reduction of the $30000 Frigidaire?
The law of demand states that conditional on all else begin equal, as the price of a good
increases, quantity demanded decreases conversely as the price of the good decreases,
quantity demanded. In other words the law of demand describes an inverse relationship
between price and quantity demanded of a good. So the owner right in demanding the
price reduction of the $30000 is not so fair to decrease the price which decreases the
demand of the product as well.
5. Is the contractor right in refusing the price reduction of the $30000 Frigidaire?
Yes. In our opinion the contractor is right in refusing the price reduction because the
owner demand for the cost reduction is contractually not justified. The contractor
estimated the cost of $30000 for the cooling device. The owner has agreed and signed the
contract and so the contractor provided the cooling device from a special industrial
Frigidaire in Germany which is meeting the contract requirements.

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