QSCT
Unit -6
Contract and Arbitration
Definition: -
- An agreement enforceable by law is called as contract.
- It is undertaking by person or formed to do any work under certain terms and conditions.
- The contract invariably follows proposal from one party and it acceptance by other.
- In absence of any above element of contacts is become valid i. e. Without legal effects or Voidable
- Contract is the public work department is concerned like written undertaking for execution of work or supply of material or performance of any service connect there with accepted and registered by competent authority on behalf of Union or state government.
- To execute the work as per agreement and according to specification.
- To execute the work by using latest machinery, techniques and also experienced person.
Following agreement are made for the valid contract.
a) That the contract shall made by parties competent to contract.
b) That the contract is become by free consent of parties.
c) That there shall define proposed and it acceptance.
d) That contract shall be made so that considering and Object is lawful
a) Parties competent to contract: -
- A person competent to contract provided.
- He satisfied the condition of age on basis new law.
- No contract shall made by less important authority who is not been directed.
- Person said is the sound mind for making contract provided he is understand it and forming rational judgement as effects upon his interest the time when perform the contract.
- He is not disqualified from this contracting by law which he is subject.
b) Free consent of parties: -
- Two or more person are said to agree when they are agree of same thing in same sense. Then consent is said free.
- It not causes by under influence then the relations between in two parties performing contract are not such one of parties in positions to dominate to other and uses that position to obtain an unfair advantage over other.
- It not caused by fraud.
- It not caused by presentation.
- It not caused by mistake, where both parties do agreement under mistake, than agreement is avoidable.
c) Definite proposal and it’s acceptance: -
- Terms of contract is precise and definite and there must not be more than one meaning.
- When one person signed to another person so that he wants to something, he said to make proposal.
- The communication of proposal work is complete, when comes to knowledge of person to whom it is made.
- The acceptance is absolute disqualified and it shows in some usual and reasonable manner.
d) The consideration or object are lawful :-
- The consideration of agreement is said to become lawful if forbidden or such nature that, if permit defeat the provision of any law or involved or implies injured to person or property of another or regarding as immoral by court.
e) Meaning shall be certain: -
- Agreement the meaning of which is certain or capable of being mode certain.
- In case of contractors fail to progress of work or the contract for reasons best known to him.
- In the event the contractor failing to complete the work within given period.
- If the contractor: -
1) Assigned his contract or try to do
2) Because unable to pay one debts.
- If contract is found carrying out work nor in accordance with contract drawing specifications of engineers to supply skills workmen and specified materials or fail to make good defect in work spite of receiving notice from engineer per representative of employer to effect.
- A contract is terminated also by employer due to change of policy non availability of work site or any other administrative reason before starting the work.
- A contract is terminated with free consent of the both parties.
- To terminate the contract register notice is served on contractor framing the charge for violation of clause or term and condition of contract allowing fixed time usually 7 to 14 days.
A) Item rate contract.
B) Lump sum contract.
C) Cost pulse percentage rate contract.
This all contracts explain as follows: -
A) Item rate contract: -
- It is also called as unit price contract or schedule contract.
- For item rate contract, it important that contractors are required to fix rates individuals item of work on basis if schedule of item quantities.
- This schedule indication full nomenclature of item as per sanction amount estimate the quantities and there unit.
- The final total of amount tender for work is drawn.
- This contract are followed by railway department.
Advantage: -
- The form of contract is more detailed analysis of cost the contractor and it more scientific.
- The departmental officer is work out of schedule of quantities of such item of work and also contractors are to work out rate of each item.
- Contractor work out of rates of all item of schedule in order it put tender. So that unworn tables rates tender are avoided and it leads to smooth progress and timely completed of work.
Disadvantage: -
- The basis type of contract is item wise rate of offers by the contractor.
- But, item wise amount which calculated by contractor by multiple the each item of quantities with rate may be incorrect so that sometimes incorrect provide by contractor in his own interest.
- As the quantities may rising or decrease, contact of nature required careful consideration by engineer before it entered into the anticipation outside information a contractor is quoted high price for item are likely to require in increase quantities and low prices for item to decrease.
B) Lump sum contract: -
- A lump sum contract means of procuring construction and still most common form of construction contract.
- Under this contact single lump sum price for all work is agreed before work begin.
- The departmental schedule rate for various item are providing with it regular payment of contractor in respect of item of work involved for any addition and alternate not covered original work.
Advantage: -
- Owner know beforehand exactly what work will cost.
- In terms of addition and alternation details measurement of work done are not required to record.
- Hence, difficulty arise in marking intermediate payment to contractor so that he tried to complete the entire work quickly as possible to get earlier payment result quick complete of work.
Disadvantage: -
- Under such contract is essential that work accurate and complete show as drawing and describe in specification and that full information to condition should available, otherwise disputes can arise simply.
- Difficulty arises in making any intermediate payment, generally a certificate is given by responsible officers to effect that general measurements, he has satisfied himself that value of work is not less than specified amount in conforming with contract agreements.
- Although often used in conjunction with schedule of pries,
- It not suitable form of contract where considerable addition or variation are expected.
C) Cost pulse percentage rate contract: -
- In tendering for work on ‘ cost plus' basis the contractor is paid actual cost of work, plus on agrees percent in addition, to allow for profit.
- This type of contract is generally used when conditions such labour rates and materials brate are liable to vary.
- In adopted this system of tendering no ‘Bill of quantity’ of ‘schedule of rate' to frame but owner or the department which carefully define actual cost and record exactly what is exactly permissible in cost of work.
Advantage: -
- Contract is quickly withdraw, agree and also work of urgent nature put in hand finished without delay.
- The type of contract is suitable when work can not be executed by other type of contract at competitive rate during executed by other type contract rate due to uncertain and fluctuations in market rate of labour and material.
Disadvantage: -
- Close supervision and checking of delivery notes and bill which it involves make it unsuitable of work where necessary staff is not available.
- It is contractor advantage to make the cost as high as possible by wasting material and employing inefficient workmen, as contractor take little risk and his profit is assured.
- This form of tender is net popular with contractor, depicts fact they can not lose on it, it tends to spoil the dashing qualities of carry out of work.
a) Earnest money: -
- If submit tender the contractor to deposit certain amount 2℅ of estimate cost with department as earnest money to given the guarantee of tender.
- This amount is for check so that contractor refuses to accept the work or run away when his tender is accepted.
- In case the contractor refuse to take up work his earnest money forfeit, Earnest money of tender whose tender has not accept is refundable.
b) Security money: -
- On acceptance of tender, the contractor has to deposit 10℅ of tender amount as security money with department which is inclusive of earnest money already deposited.
- This amount is check so that contractor fulfil all terms and conditions of contract and carrier out the work to it specification and maintain progress and complete the work in time.
- If contractor fail to fulfill the terms of contract his whole or part of security money is forfeited by department.
- The security money is refunded to contractor after the satisfaction complete of whole work after specified time after one rainy season or six of completion of work.
- Instead collect all security money in one installment before starting the work can be collection by deduction from the running accounts bill contractor.
- Usually the earnest money is taken as part of security money and balance amount of security money is collected by deduction from running account bill of contractor at 10℅ of every running bill up to extent of 10 ℅ of total cost of whole work.
c) Time as an essence contract: -
- A time of essence clause that is one party to contact which is perform it contract obligation at specific date and time as required in order to complete performance to other party contract.
- If in any case when party of contract promise to do certain things that time or before special period of time and fail to do promise before period time or special time, the contract become violent if intention of party that the time is essence of contract.
- Contract of all sort specify date for performance various obligation and some absent of some specify date are usually in implied term calling for performance within reasonable time.
- It used with regularly in order area of law, particularly real estate and sale good where the court general apply a strict approach in enforcing this clause.
- Some important point which make in time is the essence of contract.
1) Where the parties have expressly agreed to treat it essence of contract.
2) Where delay operates as injury.
3) Where the nature and necessary of contract requires to construction.
Government have provided the tender form of contract there own standards conditions.
1) Amount of security deposit.
2) Compensation for delay.
3) Contractor remains liable to pay compensation.
4) Extension of time.
5) Completion certificate.
6) Payment certificate.
7) Monthly bill.
8) Payment of bill.
9) Department of materials.
10) Execution of work in accordance with drawings and specifications.
11) Alternation of design and specification.
12) No compensation for alternation.
13) Compensation in case of bad work.
14) Works to opened for inspection.
15) Notice before the work is covered.
16) Maintenance period up.
17) Care of department tools and plant.
18) Labour.
19) Work on Sunday.
20) Changes in Constitution.
21) Arbitration.
- FIDIC is the federation international design ingenieurs council.
- It some general conditions and guidelines for entering contract as follows: -
1) General provision of contract.
2) Right of claim of employer.
3) Instructions and duties of engineers.
4) General obligation and application of contractor.
5) Definition and objection, payment of nominations sub contractor.
6) Facilities for staff and labour and labour law.
7) Plant, material and workmanship.
8) Test on completion.
9) Employer taking over.
10) Defects liability.
11) Measurements and evaluations.
12) Variations and adjustment.
13) Contact price and payment.
14) Termination by employer.
15) Suspension and termination by contractor.
16) Risk and responsibility.
17) Insurance.
18) Force majeure.
19) Claims, dispute, arbitration.
- This FIDIC document is treated as Bible for entering into contract in Western countries.
- Similar to FIDIC document government of India- ministry of statistics and programs implemented have frame and publisher in year of 2005 standard contract clause for domestic bidding contract.
Addition conditions are inserted in conditions of contract according to character of work to carry like Insurance, lighting and watching, etc.
a) Alterations: -
- The engineer in charge reserve the right to make any change in omission from and addition or substitute for original design, drawing, specifications and instructions are necessary in opinion of engineers in charge during program of work and which is give to him in writing and signed by engineer in charge.
- Such that omission, change, or substitute shall be deemed to have formed aa work including in original tender and contract to be bound to carry out the work.
- The time of complete to extend proportion by engineer in charge due to above reason.
- The rate of such addition or alternation work shall be work out with following provisions: -
1) Same rate if any specified in tender, if not.
2) The departmental schedule of rate at time of acceptance of contract, with contract percentage, if none of above.
3) By analysis worked out from the basic rate of materials and labour provided in current schedule of rate and if basic rate is not schedule the from current market rate without application of said contract percentage.
- In event of any dispute regards rate, the decision of superintendent engineer if circle shall be final and binding. Each such strip of land is called as belt.
- The depth of front belt of judicial ascertain on consideration to what depths of land does maximum value extend.
- Then relationship related value and depth of each belt to front belt is finalized.
- Ascertain rate per sq. m of land of first belt, the value of each belt is worked out.
- Multiple area of each belt by their related rate per unit area.
- After summing up value of each belt value of entire plot land can be known.
- This system of valuation is called as belting method of valuation.
- Normally, the land is separate into three belts, the depth of second belt is 1 ½ time that front and depth of third belt is at 1 ½ time depth of seconds belt or depth remaining after second belt is considered as depth of 3rd belt.
- When load has very great depth be 4 th belt. The depth of each belt is ascertained on rental basis or his servants to any office or person of government in any way connection in contact.
b) Extra item: -
- Item of work are not included in accepting tender are to sanction by and paid for executive engineer.
- The amount of each extra item should be within amount upto Rate, 10,000/-
- The total cost of all extra item within the amount up to executives engineer is empowering to accept tender.
- The rate extra item, which fairly comparative with similar item already includes in accepting tender be decided by executive engineer after the convince the contractor.
- The work extra item should carry by contractor after receiving formal written orders from engineer in charge of work.
- The rate of extra item are subject to careful scrutiny by division accounts before they sanctions and paid by competent authority.
c) Defective work: -
- In site construction the nature and type of defects can vary dramatically.
- The minor defect in construction of building can easily correctly before building handed over employer, while significant details which occurs long after arises due to bad workmanship.
- At the end defect liability period, the contractor administrator form schedule of defects and also list out defect have not observed.
- The contractor is any extent rectify fault within given particular time.
d) Sub letting: -
- In no case contractor is assist or subject work without written approved of executive engineer.
- If he sublet his contract or trying to do, hence executive engineer may there upon issue a notice in writing of contractor rescinded the contract and his security deposit shall stand forfeiting and absolutely disposed of government and in addition the contractor not be recover Or paid for work execution under contract.
- The defect and liability is incorporate.
- It is responsibility of contractors to remove defective work execution due to bad workmanship.
- Generally such work may pass unnoticed at time of inspection of work by architect or engineer appointed by owner,
- If work is carried out rapidly and improper manners the defect are developed after complete of work.
- The defect and maintenance clause provided for rectification of defect, that noted either during and after execution of work, by contractor of his own cost.
- Contractor is not liable for any normal wear and tear that occurs during maintenance or defect liability period.
- Security deposit of contractor is to refund only after defect liability period.
- It amount of compensation payable by contractor to owner or government to delays construction having no relationship with real damage.
- If contractor fail to complete to work within prescription time in tender then contractor which is pay to owner or government the sum state in liquidation damage for such default and not as penalty for every day to excess period taken between the date of complete the tender specific.
- The payment or deduction of damage which not relieve the contractor form his obligation and liability under contract.
- It before completion of whole work, any part of work is occupied or used by owner or government and duly certified by engineers in charge the liquidator damage for delay shall reduce in proportion in which value of part so certified the value of whole work.
- It has no relation with tender amounts but depends upon the amount of claims the contractor.
- The amount which can withheld from any other contract under same engineers in charge.
- This means for fulfillment of any claim this tender.
- This have no relations with maintenance period and release after completion.
- It is part payment or payment on accounts of your compensation made in advance of any final settlement.
- The amount that your accept this payment is subtracting from total sum payable by defendant at end of your ease.
- Once you have calculated your can change back to standard options for complete year.
- You can re- estimate as many times as you like, until your final interim payment date.
- In this type payment is made on running account to contractor for work done is not measured.
- Certified printed on R/A bill is sign by sub divisional officers.
- The lump sum amount is paid on account of several item is specified item of part 3 of bill.
- The advance is adjusted to subsequent bill in which actual measurements have taken.
- In which made on security of materials to the site of work.
- The material which is imperishable nature and indenture in form – 31 is sign by contractor before an advance can sanction by division officers.
- Details amount of advance is kept in form 26 -A and attach to R/A bill.
- No record is kept in measurements book of quantities of materials.
- Certified print on form 26-A however to signed by S. D. O.
- As the material are consumed in work and measure for payment the recovery is effected through R/ A bill.
- Final bill is made within three months from date issues of certified of final completion.
- Following point are considered to prepare the final bill as,
1) The work is complete as per specification and site is left clean. Ni damage is caused to other properties and no defect is apparent. A certificate of physical completion has recorded in relevant measurements book by sub divisional or divisional office.
2) The measurements recorded are accordance with method prescription in contract like dimensions are recorded as per drawing. Deduction for void ,etc , have deposited by contractor in good condition, limitations of quantities for purpose of bill specialty in contract is duly observer, then measurements record and abstract of bill drawn in measurements book is accepted and signed by contractor in taken such acceptance.
3) The bill is drawn in prescription form print on yellow paper. The rate of item of work, actually done and measured are not excess is provided of contract. All formalities like sanctions of extension of time, rate of additional or substitute item etc have been according to competent authority.
- It is settlement of dispute to decision not is taken as regular and ordinary court of law but one or more person chosen by parties themselves called as arbitrator,
- This arbitration is domestic court where arbitrator act as judge.
- The arbitrator can either proceed on basis of knowledge or taken evidence and then give his decision on such Incidence.
- The misinterpretation of project plan and contract clauses are closed to come in course of new construction implementation and various other reason enumerator earlier, dispute like to come between two parties.
- These types disputes are only solved by through law court or arbitration our complex and based law system make judgment through law court extremely time consuming up to 20 year.
- Department officer should themselves make every effort to appoint an arbitration for quick disposal of such cases it should understand this progress of important and national development projects are jeopardizing to want timely settlement of such problems.
- To administer to any party of arbitration aggression in the option arbitrator.
- To administer pledged to parties and witnesses appearing.
- To state special particular case for opinions of court.
- To correct of mistake in award arise from exception.
- To make the award alternative or qualified.
- The arbitrator must be judicial and impartial i. e. The arbitrator which not related personally to any parties and he will be free from ill feeling of any parties.
- He can person who has expert knowledge in particular branch of professional and matter of dispute.
- He have undeniable, high integrity, un shaken faith in justice.
- The person who not below the rank superintendent engineer which selected generally arbitrator.
- Arbitrator which be important and fair to both disputes parties during arbitration process.
- He has to play of role of third party and disinterested judge of process of arbitration
- He must given equal opportunity to both disputes parties which collection evidence.
- The arbitrator should consciously and always abide by norm of natural justice and equality while carry out arbitration proceedings.
Following two type of arbitration: -
a) Voluntary arbitration.
b) Compulsory arbitration.
Above type is explain as follows,
a) Voluntary arbitration: -
- In this arbitration, is the binding Adversarial Dispute Resolution process in which dispute parties choose one or more arbitrator to hear dispute and to tender a final decision or award after expedition hearing voluntary arbitration implies that two contending parties, unable to compromise their difference by themselves which help of mediator or conciliator, agree to submit dispute bro impartial authority, whose decision they are ready to accept.
- This type reference is called as ‘ voluntary reference’ for parties themselves voluntary to come settlement an arbitration machinery.
- The essential elements in voluntary arbitration are, the voluntary submission of dispute to arbitrator.
- The subsequent attendance of witness and investigation, the enforcement of awards is not necessary and binding because there is no compulsive.
- Voluntary arbitration may be special needs for dispute rise under agreement.
b) Compulsory arbitration: -
- In this arbitration, is a non binding, adversaries dispute resolution process which is one or more arbitration hear argument, weigh evidence and issue a non binding judgments on merits after expedited hearing.
- The arbitrator decision address only dispute legal issues and applies legal standards, Either party is rejected ruling and request Trial De Novo in court.
- Compulsory arbitration is the parties are required to accept arbitration without any willing ness on this part.
- When one of parties to industry dispute feel aggressive act in other, it may apply to appropriate government to refer to dispute to adjudication machinery.
- This type of reference of dispute is known ‘ compulsory or Involuntary’ reference, because reference in such circumstances which not depend on the contending parties.
- Legal obligation arise of professional error negligent act during the course of practice of husband craft.
- Under the law England and Wales, professional liability arise in general in three distinct way, namely in contact, under some particular statute as well as consultant, contractor, public authority or other organizations which they are employed.
- Contact and equivalent internal order are mean of linking design and construction of all civil engineering projects.
- The first part of this guide review construction contract strategy, type of contract, term of payments, contract documents and model conditions of contract.
- The second part of introduction to model form of contract agreements by institutions of civil engineer and other.
- A little knowledge of that profession liability law is essential in contact management.
- The law of contract is based on all above. It govern civil obligations and liability free enter in between person, legal person.
- Under English law contract are not legally it,
1) It has an illegal aims.
2) It prohibited by law, for instance if it.
3) Interfere with administration of justice.
4) Affect the safety of state.
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