221ECE009

CONSTRUCTION CONTRACTS
METHODS AND EQUIPMENT
PROGRAM ELECTIVE 2
Module 1
Contracts Requirement of Contract, Elements of Contracts based on Indian
Contract Act (1872), Types of Contracts based on Stakeholder responsibilities,
Project Delivery Models – (Turnkey, EPC and PPP Models), Standard forms of
contract - (FIDIC, NHAI and CPWD), General conditions of the contract for
construction.
MODULE 2
Contract Administration Project Documentation, Submission and approval of
documents, Permits and approvals, Construction claims and disputes, Potential
major claim areas, The Bid Proposal Process and the Potential for Disputes,
Modes of resolving disputes, Understanding of Arbitration and Conciliation Act
1996 with latest amendments
MODULE 3
Contract Management Discharge of contract, Breach of contract, Tendering
issues, Risks in construction contract, Regulatory aspects and ethics, Intellectual
property act, Law of Torts, General Construction specifications, Commercial
Construction Specifications, Bonds, Types of Bonds, Insurance, Workers
compensation Insurance, Commercial general liability insurance, Builders risk
insurance.
MODULE 4
Construction Methods Horizontal Systems – Hand - set slab forms, Table forms,
Vertical Systems – Wall forms, Column forms, Combined Horizontal and Vertical
Systems – Tunnel Form Systems, TrenchSafety. Cost effective construction
methods - Prestressed concrete construction - 3D printing. Precast Flat Panel
System-3D Volumetric Construction-Flat Slabs-Hybrid Concrete Construction-
Precast Foundations-Insulating Concrete Formwork-Soil stabilisation methods
Module 5

Construction Equipment Dozers and graders, Scrapers, hydraulic excavators,

Draglines and Clamshells. Concreting equipment - Crushers – feeders – screening
equipment – batching and mixing equipment – hauling, pouring and pumping
equipment – transporters. Equipment for compaction- Pneumatic Tired Rollers,
Impact Compactors, Compaction Wheels, Intelligent compaction. Trucks and
Hauling Equipments - Capacities of Trucks and Hauling Equipment – Calculation
of truck productivity.
Module 1- Contents
● Contracts Requirement of Contract,
● Elements of Contracts based on Indian Contract Act (1872),
● Types of Contracts based on Stakeholder responsibilities,
● Project Delivery Models – (Turnkey, EPC and PPP Models),
● Standard forms of contract - (FIDIC, NHAI and CPWD),
● General conditions of the contract for construction.
Indian Contract act
• The Indian Contract Act, 1872 prescribes
the law relating to contracts in India and
is the key act regulating Indian contract
law.
• The Act is based on the principles of
English Common Law.
• It is applicable to all the states of India.
AGREEMENT
• The Indian Contract Act 1872, section 2(e), defines an
agreements as "every promise and every set of
promises, forming the consideration for each
other is an agreement.“
• A promise is essentially an offer or a proposal, made by
a person or an entity, towards another.
• The assent of the other, results in the acceptance of
the offer; thereby creating an agreement.
Offer
• When one person signifies
to another his willingness to
do or to abstain from doing
anything

Acceptance
• When the person to whom
the proposal is made,
signifies his assent there to,
the proposal is said to be
accepted.
Promise A Proposal when accepted becomes a promise.
In simple words, when an offer is accepted it
becomes promise.

Promisor When the proposal is accepted, the person

and making the proposal is called as promisor and the
promisee person accepting the proposal is called as
promisee.

Offeror-Accepter
PROMISOR-PROMISEE
Considerati When at the desire of the promisor, the promisee
on or any other person has done or abstained from
doing something such act is called a
consideration for the promise. i.e. something in
return.
Agreement Every promise and set of promises forming the
consideration for each other.

Agreement = Promise +Consideration

 CONTRACT

An agreement enforceable by Law is a

CONTRACT
Void contract
A contract becomes void when it is not enforceable by law.

VOID CONTRACT AGREEMENT

 For offending any law
 For immoral purpose
 Against public policy
 Impossible to perform
ELEMENTS OF CONTRACTS
1. Minimum two parties
2. Offer and acceptance
3. Intention to create legal obligation
4. Lawful consideration
5. Competent parties
6. Free consent
7. Lawful object
8. Not expressly declared void
9. Certainly and possibility of performance
10. Legal formalities
1. Minimum Two Parties
• At least two parties are necessary to form a contract .
• One person cannot enter into a contract with himself.
2. Offer and acceptance
• There must be an offer and an acceptance to the offer , resulting into
an agreement.
3.Intention to create legal obligation
• The parties must intend to create legal obligation.
• The party is ready to accept the legal consequences if he or she does
not perform his part of the contract.
4.Lawful consideration
• An agreement is legally enforceable only when each of the parties
thereto gives something and get something, that is consideration.
• It must not illegal or fraudulent or immoral or opposed to public
policy
5. Competent parties
• The parties to a contract must be competent, that is , of the age of
majority over 18 yrs of sound mind.
6.Free consent
• All the parties must give their free consent to form a valid contract.
• Consent means that the parties must agree about the subject matter
of the agreement in the same sense and at the same time.
7. Lawful object
• The object of the agreement must not be
✔ fraudulent; or
✔ Involves or implies injury to the person or property of another; or
✔ The Court regards it as immoral, or opposed to public policy.
• In each of these cases, the consideration or object of an agreement
said to be unlawful.
• Every agreement of which the object or consideration is unlawful is
void.
 8.Not expressly declared void
• An agreement expressly declared to be void under section 24 & 30

• Section 24 in The Indian Contract Act, 1872. 24. Agreements void, if

considerations and objects unlawful in part. —If any part of a single consideration
for one or more objects, or any one or any part of any one of several
considerations for a single object, is unlawful, the agreement is void
9.Certainty and possibility of performance
• The terms of contract must not be vague or uncertain.
• If an agreement is vague and its meaning cannot be ascertained, it
cannot be enforced.
10. Legal formalities
• Generally the contract may be oral or in writing.
• Certain contracts are required to be in writing and may even require
registration.
TYPES OF CONTRACTS
Main Contracts/head contracts
• prime contractor works for the whole project,
• a prime contractor usually makes more money per project.
Subcontracts
• subcontractor only works for part of the work
• However, a subcontractor may work on more projects over the same
amount of time, so their annual pay heavily depends on scheduling
and demand
Based on characteristics
A. The method by which the contractor is selected.
B. The method by which payment for the work under the contract is
evaluated.
C. The method by which responsibility for the technical and
administrative aspects of the work is allocated.
A. The method by which the contractor is
selected.
• The principal has two options when selecting the contractor
1. By a competitive tendering procedure
• Number of tenderers are invited to submit bids against a common set of
enquiry documents.
• Most widely used form of engineering contracts.
2. By direct negotiation with a selected contractor
• Principal negotiates directly with a contractor to arrive at a mutually
satisfactory agreement to undertake the work.
• Suitable for work for a highly specialized nature or
• Limited number of contractors experienced in the work
3.Combination of these methods

• Tender can be invited from a shortlist suitable contractors.

B. The method by which payment for the work under the contract
is evaluated.

• There are four basic methods of payment

1. By lump sum
2. By schedule of rates
3. By part lump sum , Part schedule of rates
4. By cost plus
1.By lump sum
• Either ‘fixed’ or ‘subject to cost adjustment’
• Fixed price contract- the contractor accepts responsibility for all
fluctuations in cost and charges due to
• Escalation
• Delays
• Other reasons
• No additional payment will be made to cover such cost.
• ‘Subject to cost adjustment’-Provision may made for
• additional payments due to fluctuations in wages and conditions
• Cost of delays outside the contractors control
2.By schedule of rates

• The contractor is paid for the work actually done at pre-agreed unit
rates.
• Also called as ‘Payment By Quantum Meruit’
• In this type of contract it is important that the items in the Schedule
of rates or Priced Bill of Quantities cover the whole of the work.
• It is used where the nature and extent of the work can accurately
defined but quantity of cannot.
3.By part lump sum , Part schedule of rates
• Part of work under the contract may be covered by a lump sum, Part of
it paid for under schedule of rates.
4. By cost plus
• Also called Cost reimbursement contract
• Contract amount PLUS (+) a fee to cover overhead cost and profit.
• The fee can be done of the following :
• A fixed sum
• A fixed sum with a profit sharing arrangement
• A fixed sum with a bonus arrangement
• A fixed fee with a sliding-scale adjustment
• A percentage of the costs
C. Classification by Technical and administrative responsibility

• Based on tasks are :

• Project management and coordination
• Engineering
• Design
• Documentation
• Construction /installation/Supply
• Procurement
• Supervision
• Construction
C. Classification by administrative
responsibility
• Based on responsibilities
1. Engineering (only) Contract
2. Engineering /Procurement Contract
3. Construction/supply/ Installation Contract
4. Engineering /procurement/Construction contract
5. Construction management contract
6. Turnkey contract
Procurement Contract

• A procurement contract is a legally binding agreement between a

purchaser (your company) and a supplier (your vendor).
• It describes what goods or services are expected to be provided by
the vendor, specifications such as delivery dates or quality control
requirements, and payment terms.
• A well-designed procurement contract is the foundation for a
successful and long-lasting supplier relationship.
• It allows both parties to ensure they’re fulfilling obligations by
communicating them explicitly and in writing.
TYPES OF CONTRACT
1. Design and build contracts
2. Management contracts
3. Construction management contracts.
1. DESIGN AND BUILD CONTRACT
• Designed for construction projects where
the contractor carries out both the design
and construction works.
• Design and construction aspects are
contracted with a single entity known as the
design builder or design build contractor.
• Design builder is usually the general
contractor, in many cases it is also the design
professional, architect or engineer.
• This system is used to minimize the project
risk for an owner.
2. MANAGEMENT CONTRACTS
• The characteristics of a management contract are that
the client engages the management contractor to
participate in the project at an early stage, contribute
construction expertise to the design and manage the
construction .
• The management contractor is not employed for the
purposes of undertaking any of the works, but solely
for managing the process.

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Management contracts
• In effect, management contracting is a
procurement method consisting of 100% sub-
contracting. Every item of building work is sub-
contracted to works contractors.
• The opportunity for the contractor to become part
of the design team arises not from the contract
structure but from early appointment and the
pattern of liability and responsibility outlined in
the contract.
Contractual relationships in management contracting
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 USE OF MANAGEMENT CONTRACTING
1. The employer wishes the design to be carried out by an
independent architect and design team.
2. There is a need for early completion.
3. The project is fairly large.
4. The project requirements are complex.
5. The employer, while requiring early completion, wants
the maximum possible competition in respect of the price
for the building works.

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Construction management contracts
• A construction management contract is a specific type of agreement
that governs the relationship between a client (often the owner of a
construction project) and a construction management firm or
professional.

• This contract outlines the roles, responsibilities, and terms that will
guide the construction management services for a project.