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CONTENTS
• Construction Contracts
• Agreement & Contract
• Objectives of Construction Contracts
• Characteristics of Good Contract
• Contract Management
• FIDIC
• Registration and Licensing
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Construction Contracts
• A contract is an agreement between two or more parties
for a specific purpose. For the specific case of
construction, it is an agreement between the owner and
the contractor to get a facility built.
• There may be other contracts in a construction contract, such as the
contract between a supplier/sub-contractor and the main contractor.
Construction Contracts
• Entering into a contract usually progresses through
three stages:
• 1. Invitation
• 2. Offer
• 3. Acceptance
1. Invitation to Treat (Tender)
• A first party (A) makes an invitation to another party (B)
to consider entering into a contract for a stated purpose.
In a construction contract, the owner usually invites
contractors to bid by making bidding documents
available to them.
2. Offer (Bid)
• Party B, having thoroughly considered the conditions
attached to A's invitation, may decide to act on the
invitation by making an offer. For instance, the
contractor may decide to submit a bid; by the bid, they
offer to build for a price and is at liberty to state his
conditions.
3. Acceptance
• Party A concludes the contract by accepting B's offer. A
contract is then signed between the two parties and the
work, in the case of construction, executed according to the
contract conditions.
Agreement
• Every promise and every set of promises, forming the
consideration for each other, is an agreement.
• A proposal once accepted makes an agreement
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Contract
An agreement enforceable by law is a
contract.
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What is Difference between an
Agreement and a Contract ?
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All the Contracts are agreements
but
all the Agreements are not Contracts
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TYPES OF AGREEMENTS
• The owner-contractor agreement formalizes the
construction contract
• The owner select the type of agreement that will be signed
• The agreement generally includes a description of the
project and contract sum
• Other clauses pertaining to completion date, bonus and
penalty and any other items that should be amplified, are
included
TYPES OF AGREEMENTS
• Type of agreements generally used are as follows:
• Lump-sum agreement
• Unit-price agreement
• Cost-plus-fee agreement
Why Construction Contracts
Basedupon obligations and rights, there are two or
more main players (parties to a contract):
Client
Rights and obligations
Contractor
Obligation and rights
Third Player – The Engineer
Moderator
Contract management
Neutral
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Objectives of Contracts in
Construction
• Describe scope of work
• Establish time frame
• To establish payment mechanism
• To develop progress monitoring mechanism
• Define the role and obligations of each of the party
involved in the contract agreement
• Identify risks and develop risk mitigation plans
• Minimize disputes
• Defining the methods and guidelines for resolutions if a
dispute is observed during the currency of contract.
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The Contract life cycle
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Construction Contract Law
Construction law is a branch of law that deals with matters
relating to construction engineering and its allied fields.
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What Does Construction Contract Offer
Construction Contract Law defines:
Law and Government
The Sources and Hierarchy of Law
Basic Legal Principles
Obligation and Rights of contractual parties
Project Delivery Systems
Construction Contracts
The Procurement Process
Subcontractors and Suppliers
Time for Performance
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What Does Construction Contract
Offer
Construction Contract Law defines:
Contract Administration
The Payment Process
Changes to the Work
Termination of the Construction Contract
Construction Insurance
Liability for Defective Construction
Disputes
Claims / Damages
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The Contract Management
Contract Management could be defined as a multi-stage
process that goes on through the entire duration of the
contract and ensures that the parties meet their contractual
obligations in order to deliver the specific objectives
provided in the contract.
(National Council for Construction - Training Manual )
The Contract Management
The contract management entails compliance with laws,
regulations, policies, court decisions, etc.,.
Contract management is, first and foremost, a
relationship management process.
Contract managers enable and assist people and
organizations to unite and cooperate to their mutual
benefit.
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The Contract Management
Why Contract Management?
To make sure that the objectives of the contract (delivery
of services or execution of works) are met in a timely
fashion and value for money is achieved.
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Forms of Contracts
• Forms of contract usually follow the type of contract. A
form may be prepared by different organizations.
• Contract forms can be classified under:
• International forms - FIDIC for example
• Local Forms
• Company/organization forms
• Forms of contract need specific adjustment to suit project
situations.
FIDIC forms of Contract
Standard forms of contract for
civil engineering projects
which are used globally.
It is important to remember
that the FIDIC forms represent
a starting point for the
preparation of a construction
contract.
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FIDIC forms of Contract
• FIDIC is the International Federation of Consulting
Engineers. Its members are national associations of
consulting engineers
• Most widely used standard conditions for the construction
contract.
• Used by World Bank, EBRD, EIB …
The FIDIC Development and
Implementation
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FIDIC forms of Contract
• Red book / construction
• Yellow book / design/build
• Silver book / turnkey projects
• Green book / short form of contract
• Gold book / design, construct & operate
• White book / project management
FIDIC
4th Edition
1987
Reprinted 1988 with editorial amendments
Reprinted in 1992 with further amendments
2017
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The FIDIC Implementation in Pakistan
PAKISTAN ENGINEERING COUNCIL
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PEC Website
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PEC Website
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PPRA
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