III.

CONTRACT
Contract consists of the General Conditions, the Supplementary Conditions, the
Specifications, the Drawings, the Bill of quantities, the Tender, the Letter of Acceptance, the
Contract Agreement.

Figure 7
Contract document
A contract document is the most important in connection with carrying out of the building
construction.
• It is necessary to have a contract in some form or other.
• The forms of contract in Government and Private will be different.
• It differs as per the conditions and requirements of each client.

Contents of contract documents

• Tender Notice or Letter of Invitation
• Copy of Work Order to the Contractor
• Letter of Offer (sent by the contractor / financial bid)
• Articles of Agreement
• General Conditions of Contract
• Appendix (forms & certificates)
• Specifications of Work and Material
• Bill of Quantities
• Contract Drawings

Tender Notice or Letter of Invitation- Tender means an offer to carry out work, that is pre-
described or to supply or purchase goods of prefixed specifications at a price to be quoted the
tenderer.
Letter of offer - This letter is drafted by the architect’s office. The contractor is supposed to
read it carefully and sign it as a mark of total agreement to it. The contractor shall make no
change in the text of the letter. This letter of offer is an important commitment by the
contractor. A specimen letter is given in Appendix. There are several clauses in the letter.
In the 1st clause, a reference is made to the tender notice or a letter of invitation as per
the case. This reference has a legal significance.

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 In second clause, the contractor commits that he has studied drawings, specifications,
articles of agreement and conditions of contract. All these shall be included in the tender
document by the architect’s office, so that the contractor can carefully read them, before
giving the tender offer. Drawings and specifications are prepared in the architect’s office for
each work. “Article of Agreement and Conditions” is a standard document used on every job.
It is prepared by the Indian Institute of architects. It is a very important and useful document,
which is to be studied carefully.
In this clause, the contractor commits that he knows the situation at the work site and
he is ready to work at the rates given by him, under the present site conditions.
There are other clauses, regarding E.M.D. It says that the deposit is without interest.
It also gives period of deposit and further states authority to the architect to forfeit E.M.D.
under certain conditions.

Articles of agreement

It is a written memorandum of the terms of an agreement between two parties – The

Client and the Contractor.
It is a common practice for persons to enter into articles of agreement before starting
construction at the site.
This article will be part of whole contract signed between the Client (or Architect) and
Contractor. This Article will be considered as a preparatory to the execution of a formal
action, whereby it is stipulated that one of the parties shall convey to the other certain
expectations and standards - draft agreement to set mutual responsibilities and scope of
association.

Figure 8

General conditions of contract

It may contain:
Payment Terms
Schedule of Payment
Project Time Line and Milestone chart

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 Electricity and Water supply to the site detail
Uncertain Items of Work
Payment terms
Detail out the total agreed amount of contract and stages of completion or milestone.
Will emphasis the work load and penalties for and delays in completion of the project.
The penalty could range from 2% to 10% depending upon the construction stage and time it
has taken

Schedule of Payment
• This section would contain details about percentage of payment to be paid to the
contractor
on approval of their running-bills or stage completion bills.
• This section of the contract document would also contain the amount of payment
would be released and percentage of amount that would be withheld as security-
deposit or retention amount.
• The running bill would be checked and approved by the architect who would be the
in-charge of the project and site. Hence the role of architect should be clearly
mentioned in the contract and tender documents.

Project Time Line and Milestone chart

• The contractor’s scope of work would be aligned with project management schedule
or architect’s construction management time frame.
• The contractor would abide by the schedule and specification mentioned in the
drawings, BoQ(Bill of Quantity) and contract-document.
• This section would also contain PERT (program (or Project) Evaluation and Review
Technique) and CPM (Critical Path Method) charts.

Electricity and Water supply to the site detail

• Most of the construction contract includes the provision of providing Electricity and
Water Supply at one location at the project site to the contractor.
• These supplies would be chargeable or free-of-cost provided by the client. Particularly
this particular item in the contract and tender document would make great difference
project cost.

Uncertain Items of Work

• This particular provision on the contract document speaks about increase in quantities
or any escalation due any uncontrollable situation.
• The items could be treatment of water or new material supply or even supply of sand.

Specifications of Work and Material

• Specifications describe the materials and workmanship required for a development of
the construction project
• Specifications vary considerably depending on the stage to which the design has been
developed when the project is tendered, ranging from performance specifications
(open specifications) that require further design work to be carried out by the
contractor, to prescriptive specifications (closed specification) where the design is
already complete and no choices are left to the contractor.

• Prescriptive specifications give the client more certainty about the end product when
they make their final investment decision (i.e. when they appoint the contractor),

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 whereas a performance specification gives the contractor more scope to innovate, and
adopt cost effective methods of work, potentially offering better value for money.
• Most projects will involve a combination of performance and prescriptive
specifications. Items crucial to the design will be specified prescriptively (such as
external cladding) whilst less critical items are specified only by performance (such
as service lifts).

Aspects of the works

• Products (by standards, IS Codes, a description of attributes, naming (perhaps
allowing equivalent alternatives) or by nominating suppliers).
• Workmanship (by compliance with manufacturer’s requirements, reference to a IS
Code of Practice or standards, or by approval of samples or by testing).
• Specifications should be structured according to work packages mirroring the
separation of the works into sub-contracts
• This makes it easier for the contractor to price and so may result in a more accurate
tender

Bill of Quantities
• The bill of quantities (BoQ) is a document prepared by the Quantity Surveyor that
provides project specific measured quantities of the items of work identified by the
drawings and specifications in the tender documentation.
• The quantities may be measured in number, length, area, volume, weight or time.
• Preparing a bill of quantities requires that the design is complete and a specification
has been prepared.
• The bill of quantities is issued to tenderers for them to prepare a price for carrying out
the works.
• The bill of quantities assists tenderers in the calculation of construction costs for their
tender, and, as it means all tendering contractors will be pricing the same quantities
(rather than taking off quantities from the drawings and specifications themselves), it
also provides a fair and accurate system for tendering.
• The contractor tenders against the bill of quantities, stating their price for each item.
• This priced bill of quantities constitutes the tenderer's offer.
• As the offer is built up of prescribed items, it is possible to compare both the overall
price and individual items directly with other tenders offers, allowing a detailed
assessment of which aspects of a tender may offer good or poor value.
• This information can assist with tender negotiations.
• The priced bill of quantities will also assist with the agreement of the contract sum
with the successful tender. Provide a schedule of rates assisting with the valuation of
variations. Provide a basis for the valuation of interim payments. Provide a basis for
the preparation of the final account.

Types of Contracts
Classification of Building Contracts may be considered for proper modes of execution
of the building works.
Broadly speaking there are two classifications of contract which are popular with the
architects/engineers namely:
i. Lump-sum contract including one with bonus.
ii. Item rate contract including price rise and clauses.

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Other classes of the contract

i. Cost plus percentage or cost plus fee contract.

ii. Cost plus fixed fee with or without bonus and penalty.
iii. Labour contract.
iv. Demolition work contract.

Method of execution of the work

• Day work: Refer clause 30(4)(c) of I.I.A. form of Contract.

• Piece work
• Daily labour.

Concept of entire contract

The concept of entire contract has got at its foundation on the premises that:
• Contract is indivisible.
• Consideration is one and it cannot be apportioned.
• No part payments can be recovered because of absence of such a provision.
• Obligation of the owner to make payment does not arise till the whole work is
completed.
• Even if the contractor abandons the work and also due to incomplete performance of
the work, it will not entitle the contractor to seek relief for work done on QUANTUM
Merit basis.
• However, in practice one will not find such a form of contract as the contractors are
not willing to do the job unless part payments are assured.

Lump sum contract

• It is an agreement creating an obligation on the contractor to complete the work as
shown on the drawings and described by the specification and special
conditions/specifications if any, subject to incidental variations, supplying all
materials, labour and other implements necessary for a lump-sum or at unit rate per
sq.m of plinth area.

• The above explanation of lump-sum contract creates two sub-classes of contract

namely :
• Lump-sum contract or fixed sum contract.
• Area based contract.
• Lump sum amount is subject to adjustments and payable by the owner as a reciprocal
obligation either in one payment or by installments as may have agreed.
• Involves a total fixed price for all construction related activities.
• Can include incentives or benefits for early termination, or can also have penalties,
called liquidated damages, for a late termination.
• Preferred when a clear scope and a defined schedule has been reviewed and agreed
upon.
Advantages and Disadvantages
Lump Sum Contract (Advantages)
• Low risk on the owner, Higher risk to the contractor
• Cost known at outset
• Contractor will assign best personnel

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 • Contractor selection is easy.
Lump Sum Contract (Disadvantages)
• Changes are difficult and costly.
• Contractor is free to use the lowest cost of material equipment, methods.
• The contractor carries much of the risks. The tendered price may include high risk
contingency.
• Competent contractors may decide not to bid to avoid a high-risk lump sum contract.

Item Rate Contract –Suitability

• The item rate contract is most commonly used for all types of engineering works of
the government undertakings including railway department.
• It is suitable for works which can be distinctly split into various items and quantities
under each item can be estimated accurately.
Item rate contract is also known as unit price contract or schedule contract
• A contractor undertakes the execution of working an item rate basis. He is required
to quote rate for individual item of work on the basis of schedule of quantities (i.e.,
bill of quantities) furnished by the department.
• The amount to be received by the contractor, depends upon the quantities of work
actually performed.
• The payment to the contractor is made on the basis of the detailed measurements of
different items of work actually executed by him.
• This contract deals in measurement of each item of the work as given in the bill of
quantities and sum to be paid is arrived at based on the rates quoted against each item.
In the bill of quantities all the items are described in detail along with the quantities.
• Here the rates are the part of the contract and the quantities can carry the prefix
“approximate”, do not form part of the contract in as much as variations in the
quantities will not vitiate the contract.
Merits
• This method ensures a very detailed analysis of cost and payment to the contractor and
also is based upon detailed measurements of each item actually done, so this method
is more scientific.
• Changes in drawings and quantities of individual item can be made as per
requirements
within agreed limits.
• There is no urgency of providing detailed drawings at the time of awarding the
contract. It can be prepared later on.
• A contractor is asked to write down the rate of individual item in figures and words
both so it is not easy to form a cartel during the submission of tender.
• An engineer can compare the rates quoted by the contractor with that of schedule of
rates prepared by the departments to find out whether the tender is unbalanced.

Demerits

• As by wise anticipation or perhaps outside information, a contractor may quote

high for items that are likely to be increased and low rate for items likely to be
decreased, making an unbalanced tender.
• Comparative statement of item rate tenders are more elaborate and comprehensive
and intelligent scrutiny is required.
• A contractor may quote some items in words excluding paise intentionally in order to
tamper in rates.

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 • The total cost of work can only be known after completion. As such the owner may
face financial difficulty if the final cost is substantially high.
• The scope of saving with use of inferior quality may prompt the contractor to do so.

Cost Plus Percentage or Cost-Plus Fee Contract

• Though not in vogue, this contract creates an obligation on the contractor to supply all
the materials, labour and implements for the execution of the work and the reciprocal
obligation on the owner will be the reimbursement of such cost plus a specified
percentage as profit for his services.
• Leaving aside the advantages and disadvantages of this form, fictitious bills of cement
and steel creeping in, and the arguments being advanced that such materials have been
subject to the process of pilferage, are not ruled out.
• “Whether specified percentage agreed relates to profit element only or also includes
overhead charges”
• This situation will crop up when the contract is of ambiguous nature. If it is specific
no difficulty will arise. The overhead charges and profit depend upon a number of
factors like nature of work, site conditions, status of contractors, site establishment
charges, office expenditure, etc., leaving aside the disputed point of wasteful
expenditure.

Fixed Fee Contract

• A modified form of Cost Plus Percentage contact is cost plus fixed fee contract, the
difference being that here the contractor is paid a fixed fee irrespective of the cost of
labour, materials and other incidental cost.
• This fixed fee whether it covers only the profit or also overhead charges must be made
clear in advance so as to avoid future litigations.
• Since it is irrespective of the cost, it takes the form of a specified sum of money(say
Rs.2 lakhs instead of specified percentage)and usually paid in suitable installments.
• In this type of contract, the contractor is paid by the owner an agreed fixed lump-sum
amount above the actual cost of the work. This fixed fee will include overhead
and profit to the contractor.
• The fees does not vary with the actual cost of the work as in the case of cost plus
percentage rate contract.
Merits
• Since the fixed fee covers the contractor’s overhead charges and profit, the contractor
will try to finish the work as early as possible, so the owner gets the advantage of
early completion.
Demerits
 The contractor is quite indifferent towards the quality of work, maybe he
simply interested in its early completion,
 Close supervision and checking of delivery notes and invoices which it involves,
makes it unsuitable for works where the necessary staff is not available.
 The cost of project is unnecessarily increased because of purchase of materials at
higher prices and engaging costly labour in an attempt to reduce the project time.

Labour contract
• In labour contract, the contractor undertakes contract for the labour portion only
excluding the materials which are arranged at the work site by the department/owner.
• The contractor engages the requisite labour and gets the work done as per drawings
and specifications.

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 • It is an item rate basis for labour portion only and the contractor is paid for the
quantities of work done on measurements of different items of work at the stipulated
rate in the contract agreement.

Merits
• The materials stored by the departments are thus utilized.
• The work done through labour contract is of superior quality as better-quality
materials are arranged by the owner,
• The overall cost of construction may be less, as no profit is paid on the cost of
materials.
• This system is very convenient for private building construction.

Demerits

• The department will have to remain vigilant and watchful over the materials used, as
the contractor may overlook the material wastage involved.
• A large storage area is required to store the various kinds of materials to be used in the
construction under a constant guarding arrangement.
• This system is not suitable for government department.
• Because due to lengthy formalities in procurement of materials, it is very difficult to
supply each material readily to the labour contractor.

Package deal or Turnkey contract

There is a third group of contract which can well be incorporated in the broad
classification of lump-sum contract and that contract is known as package deal or turnkey
contract
In this case the builder / developer contractor purchases the land, employs his
own
architect/engineer and agrees to hand over completed tenements to the employer (usually a
society) against specified rate per sq.m of the area; of course subject to payments by
installments as the work progresses.
This type of contract resembles the contract for sale of the flats/tenements, the
only
distinguishing feature between the two is that to come within the fold of building contract, the
builder purchases the land in the name of the owner and enters the site as a licensee of the
owner to execute the works, whereas in case of contract for sale of flats, the Developers enter
the site without permission of the flat purchasers, may be an individual or a group.
These types of contracts do create a lot of problems to be solved for architects/engineers or
by arbitrators in case of disputes due to care not being taken in advance.

Contractor’s bill
• The payment to the contractors for works or supply or material, road metal and plants
etc. are made on the basis of measurements recorded in the measurement books.
• When the work or supply is completed or sufficiently progressed, the detailed
measurements are taken usually by the section officer and recorded in the
measurement book and an abstract of quantities are prepared and the cost is calculated
at the rate of the contract agreement.
• From the abstract of quantity and the rate, a bill is prepared for payment.

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Bill and Voucher
Bill: Bill is the account of work done or supply of materials made and includes the
particulars and quantities of work done or material supplied and amount due. Reference to
the agreement number, order number are also given in the bill.
Voucher: Voucher is a written document with details which is kept in record as a proof
of payment. For any payment, a bill is prepared and payment is made on the bill, duly checked
and acknowledged by the payee, by signature or revenue stamp as required and after payment
is made, bill becomes voucher which is kept in record.

Types of Bills
• The various standard forms of bills and vouchers are used for payment, according to
the nature of works.
• White forms are used for running bills and yellow forms are used for final bills.
The following are the different types of bills.
• First and Final bill (No running account bill only final bill)
• Running account Bill (payment made in stages)
• Final Bill
• Lump sum contract Bill
• Hand receipt (Temporary)

Lump sum contract Bill &Hand receipt

Lump Sum Contract Bill: In the L.S. contract methods, a number of intermediate
payments are made in L.S. contract running account bill form before final payment is made.
Intermediate payment is made for
(i) value of measure up items of work executed forming part of the contract.
(ii) value of authorized extra work done on account of additions or modifications in the work
executed supported by details in either case.
In the final L.S. bill, the full amount as entered in the contract is paid adding the
amount of authorized extras and deducting authorized omission and the intermediate
payments already made.
Hand Receipt: Hand receipt is a simple form of voucher intended to be used for small
miscellaneous payments and advances for which none of the above forms is suitable. The
purpose of payment and the designation of the officer making payment duly supported by
measurement book entry should be furnished on the hand receipt No agreement is necessary
for payments made through Hand receipt form.
Types of payment
• Payment to contractors are made in a variety of ways, as listed below:
• First and Final Payment
• Running on Interim or ‘on account’ payment.
• Final payment
• Advance payment
• Secured Advance payment

How and when to make payment-

• First and Final Payment: Single payment made for a job or contract on its
completion. Payment finished by one payment after the completion of the
work. Usually applicable for small work.

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• Running or interim ‘on account’ payment: Payment made on a running account to
a contractor for works done or supplies made, duly measured and entered in
measurement book. Effected when only a part of the whole work or supply has been
done and the work or supply is in progress. During the progress of the work, the
contractor is paid from time to time.

• Final Payment: Last payment made to a contractor on a running account, on

completion of this contract and the full settlement of the account.

• Advance Payment: Payment made on a running account to a contractor for work

done by him but not measured. Advance payment is not generally made to the
contractor, but may be made under special circumstances when the work is sufficiently
progressed, but measurement cannot be taken for certain valid reasons. The value of
work done shall not be less than the advance proposed. Detailed measurements shall
be taken as soon as possible and advance payment adjusted in the final bill.

• Secured Advance Payment: Payment made on the security of materials brought by

the contractor to the site of work, when the contract is for the completed items of
work. This type of payment may be allowed by the Executive Engineer in the interest
of work upto an amount not exceeding 75% of imperishable materials. Lime, sand,
paint and varnishes are considered as perishable materials and no advance is
permissible.

Preparation and Examination of Bills

• The bills for payment shall be prepared with respect to the measurements recorded in
the measurement book.
• All entries in the measurement book with regard to the description and quantities of
work or supplies made are checked.
• Arithmetical calculations of the contents or area are verified. When, the bill is on
running account then it is compared with the quantities etc. with the previous bill.
• It is checked whether deduction in respect of the following have been properly made.
• Recovery for advance payment
• Recovery in respect of departmental materials issued to the contractors.
• Hire charges for departmental materials issued to the contractors.
• Amount to be withheld towards security deposit.
• Recovery towards penalty for slow progress, non-return of empty gunny bags
etc.

Payment of bills

• In case of final bills the field officers should certify about the due fulfillment of
contract and satisfactory completion of work.
The memorandum of payment is then made.
• The competent officer records a formal pay order specifying both in words and figures
the net amount payable.
• However, the contractor is required to acknowledge the gross amount payable
inclusive of recoveries proposed in the bill.

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 • When the bill is passed for payment, every page containing the detailed measurement
will be scored out by a diagonal red ink line. The number and date of the voucher for
payment will be entered in the measurement book.

Figure 9

Interim certificates in construction contracts

• Interim certificates provide a mechanism for the client to make payments to

the contractor before the works are complete.
• Interim payments can be agreed in advance and paid at particular milestones, but they
are more commonly, regular payments, the value of which is based on
the value of work that has been completed (this is the actual value of
the work completed, taking into account variations, etc.).
• The amount of these payments is entered onto an interim certificate (generally valued
by the cost consultant, perhaps having taken advice from the Architect) and
the client must honour the certificate within the period stipulated by the contract.
• If the client intends to pay a different amount from that shown on the interim
certificate, then they must give notice to the contractor of the amount they intend to
pay and the basis for its calculation.
• The value of interim certificates is the value of the work completed, less any amounts
already paid, less retention.
• Half of this retention will be released on certification of practical completion and the
other half upon issue of the certificate of making good defects.

• Interim certificates should make clear the amount of retention and a statement should
also be prepared showing retention for nominated sub-contractors if there are any.
• The contract may require that retention is kept in a separate bank account and that this
is certified.
• In this case, the client will generally keep any interest paid on the account.

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 • There may be particular provision to include the value of particularly
costly materials that the contractor has not yet delivered to site. This allows
the contractor to order items in good time, without incurring unnecessary long-term
expense, but does put the client at some risk if the contractor becomes insolvent.

Final certificate

• Final Certificate is issued to the contractor after expiry of defect liability period
calculated from date of virtual completion of work.
• On expiry of defects liability period plus one month for notice on rectification of
defects or submission of all documents containing measurements and valuation within
a reasonable time from the date of virtual completion of work whichever is later,
contract can be rescinded.
• The Final certificate may also authorize release of balance retention money.

Defects Liability Period

• The defects liability period is the period of time within which the contractor is
contractually obliged to return to the construction site to repair defects which have
appeared in the contractor's works.
• The Contractor shall make good at his own cost and to the satisfaction of the architect
all defects, shrinkages or small faults, arising in the opinion of architect from work or
materials not being in accordance with drawings or specification or schedule of
quantities or the instruction of the architects, which may appear within Defects
Liability Period (12 months)

Duties of contractor for Defect Liability

• It is the duty of the contractor to remove the improper works executed due to defective
workmanship or the materials.
• At times the architect or the engineer does not condemn such works during his
inspection visit and the contractor treats the same as seal of approval.
• Subsequently when the defects develop, the contractor usually contends that the
architect had seen the work and he not disapproved of the same at the proper time.
• Still the architect can hold him responsible under the clause of “Defect Liability
Period".
•

• After all, the architects have also human limitations and they do not possess magic
eyes which can penetrate right through the materials to find out their defects.
• Defects may be in the nature of faults, shrinkage or cracks which must have developed
in the works due to materials or workmanship not in accordance with contract.

The Clerk of Works (or Clerk of the Works), often abbreviated CoW, is employed by
an architect or a client on a construction site.
• The role is primarily to represent the interests of the client in regard to ensuring that
the quality of both materials and workmanship are in accordance with the design
information such as specification and engineering drawings, in addition to recognized
quality standards. The role is defined in standard forms of contract such as those
published by the Joint Contracts Tribunal. "Clerks of works" are also the most highly
qualified non-commissioned tradesmen in the Royal Engineers.

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 • The qualification can be held in three specialisms: electrical, mechanical and
construction.
• Historically the Clerk of Works was employed by the architect on behalf of a client,
or by local authorities to oversee public works. The CoW can also be employed by the
client (state body/local authority/private client) to monitor design and build projects
where the traditional role of the architect is within the design and build project team.
Role
• The role, to this day, is based on the impartiality of the clerk of works in ensuring that
value for money for the client - rather than the contractor - is achieved through
rigorous and detailed inspection of materials and workmanship throughout the
building process.
• In many cases, the traditional title has been discarded to comply with modern trends,
such as site inspector, architectural inspector and quality inspector, but the
requirement for the role remains unchanged since the origins of the title.
• The clerk of works is a very isolated profession on site.
• He/she is the person that must ensure quality of both materials and workmanship and,
to this end, must be absolutely impartial and independent in decisions and judgments.
• He/she cannot normally, by virtue of the quality role, be employed by the contractor
- only the client, normally by the architect on behalf of the client.
• His/her role is not to judge, but simply to report all occurrences that are relevant to
the role.
• Clerks of Works are either on site all the time or make regular visits.
They must be vigilant in their inspections of a large range of technical aspects of the work.
This involves:
• making sure that work is carried out to the client's standards, specification, correct
materials, workmanship and schedule
• becoming familiar with all the relevant drawings and written instructions, checking
them and using them as a reference when inspecting work making visual inspections
• taking measurements and samples on site to make sure that the work and the materials

meet the specifications and quality standards.

• Being familiar with legal requirements and checking that the work complies with
them.
• Having a working knowledge of health and safety legislation and bringing any
shortfalls observed to the attention of the resident engineer.
• advising the contractor about certain aspects of the work, particularly when something
has gone wrong, but this advice should not be interpreted as an instruction.

Agreed Liquidated Damages

• There is a penalty for the delay in completion of the work. The owner having invested
in building, if he is not able to utilize the building on account of non-completion of
work on time, he is losing his returns on his total investments.
• Loss per day - Annual interest on the contract amount at 70 % ÷ 365 days
• This amount shall be rounded off to a suitable higher figure and shall be written in
Appendix. The per day amount shall not be too small; lest it will NOT serve the
purpose. Often the owner is nor=t happy with a small ‘per day penalty’, particularly
in case of industrial or commercial projects. Then these calculations shall be made
with higher rate of interest mutually agreed, say 18 % or more. But remember, to make
it a balanced contract, you shall insist to apply the same rate of interest for the delayed

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 payment by the owner to the contractor. In that case, the architect shall correct the rate
of interest printed on all the copies of the contract, with a mutual consent of both the
parties. The architect shall put small signature there.

Damages for Non-completion on Time

 If the contractor fails to complete the work by the date specified in ‘Appendix’ or
within
extended time given by the architect, then the contractor shall pay the owner or allow to
the owner to deduct the penalty from any amount due to the contractor. This amount of
penalty shall be worked out at the rate of interest agreed upon and written in Appendix,
on the contract amount for the period of ‘Extra Time’ taken by the contractor to complete
the project.

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