disputes and claims in engineering contracts - causes and remedial measures (56 slaytlık sunum)

7/23/2019 Disputes and Claims in Engineering Contracts - Causes and Remedial Measures (56 Slaytlık Sunum)

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Disputes and Claims in EngineeringContracts - Causes and Remedial

Measures

Dr. S Nagabhushana Rao

Director, ESCI



DISPUTE

“An assertion of a right by one party and a

repudiation thereof by another”

Reasons for Dispute –

•

Gap in Interpretation and understanding theContrat

• !reah of Contrat

•

“"ore #a$eure” % Causes beyond the Contro&of '(ner ) Contrator

• *uantu+ #erit – Co+pensation for the (or,

done



As per Setion -. of Indian Contrat At/

- A&& agree+ents are ontrats if they are

+ade by the free onsent of parties

o+petent to ontrat0 for a &a(fu&

onsideration and (ith a &a(fu& ob$et and

are not hereby e1press&y de&ared to be

2oid3

4A5ID C'6TRACT



Is +ethod by (hih the sense or +eaning of (ord is

understood3

Authenti Interpretation

“Custo+ary” or “Usua&” interpretation

“C&ose”0 “Strit” or 5itera& interpretation

“E1tensi2e” or “5ibera&” interpretation

I6TERPRETATI'6 7IT8'UT PR'PER #EA6I6G 5EADS

T' DISPUTES

I6TERPRETATI'6



Is fai&ure to perfor+ an ob&igationarising out of the ontrat3

• Tota& !reah

• Partia& !reah

• Antiipatory !reah

!REAC8 '" C'6TRACT



• Abandon+ent or tota& fai&ure to

o+p&ete either to start (ith or+id(ay in e1eution3

• De&ay in o+p&etion of the (or,s

• Defeti2e (or,

C'##'6EST !REAC8ES '"

C'6TRACT



• "ai&ure to hando2er possession of the site to the

Contrator

• De&ay in supp&y of (or,ing dra(ings0 detai&s0

designs and deisions

• De&ay in supp&y of +ateria&s

• 'rdering suspension or stoppage of (or, or

entering (ith the progress of (or, in any +anner3

• "ai&ure ) De&ay in +a,ing pay+ents of R3A3 !i&&s0

e1tra ite+s0 e1ess 9uantities0 in&uding

sett&e+ent of fina& bi&&3

Contd:

!REAC8 !; T8E '76ER



• "ai&ure)De&ay in no+inating speia&ist

subontrators and supp&iers3

• De&ay aused by other agenies e+p&oyed at the

site of (or, by the o(ner in addition to the

ontrator3

• 7rongfu& dedution of &i9uidated da+ages )

pena&ty3

• Ter+ination of ontrat (rongfu&&y and i&&ega&&y3

• "ai&ure ) De&ay in appointing arhitet or anEngineer or in fi&&ing the 2aany3



• Abandon+ent or tota& fai&ure to o+p&ete

• De&ay in o+p&etion

• Defeti2e design0 +ateria&s and ) or

(or,+anship

• "ai&ure to sub+it p&anned progra++e

!REAC8ES !; C'6TRACT'R



• "ai&ure to insure as re9uired

• "ai&ure to e+p&oy 9ua&ified engineers

• "ai&ure to +aintain and sub+it &abour reports

• Pay+ent of unauthorised (ages

• "ai&ure to ta,e safety preautions

• Causing da+age to property of (or, of otheragenies3



Contrator to do (or, and supp&y +ateria&s

i+p&iit&y underta,es/

• To do (or, in (or,+an &i,e +anner that is (ith

are < s,i&&

•

To use the +ateria& of good 9ua&ity and (herespeifiations of 9ua&ity are agreed this (i&& +ean

good of their e1pressed ,ind3

• !oth the (or, and +ateria& (i&& be reasonab&y fit

for the purpose for (hih they are re9uired3

CONTRCTOR!S IM"#IED

CONDITIONS



• Genera& Da+age – pro1i+ity <

Re+ote

• Speia& Da+age

• 6o+ina& Da+age

• E1e+p&ary or 2inditi2e Da+age

DA#AGES ARE C5ASSI"IED AS

U6DER



• E2ery !reah of Contrat entit&es the in$ured party

to da+ages for the &oss he)her suffered3

• The in$ured party +ust be entit&ed to &ai+ the

2a&ue of the (or, done in (hih ase he is said to

sue upon a “*uantu+ #erit”3

• The in$ured party +ay obtain an order for speifi

perfor+ane of the ontrat or an in$untion to

restrain its breah3

• Standard "or+ Contrats in&ude pro2isions of

forfeiture (hih ta,e effet upon a breah of

ontrat3

RE#EDIES '" !REAC8 '"

C'6TRACT



PR'4ISI'6S '" 5A7 – C'6SE*UE6CES

'" !REAC8 '" C'6TRACT

Indian Contrat At – Chapter 4I

Sec.$% - &nli'uidated Damages

Sec. $( - #i'uidated Damages

Sec. $) - Compensation *or an+damage hich a person

ho right*ull+ rescinds the

Contract.



• It +ust be pro2ed that a ontrat e1ists

•

It +ust be pro2ed that defau&ting party (as under anob&igation to perfor+ that part (hih is a&&eged to

ha2e been breahed3

• The party +a,ing the a&&egation shou&d pro2e there

is a breah of ontrat or on grounds of anyaudition of ontrat3

• It +ust be pro2ed that the breah of ontrat

aused “&oss or da+age” to the in$ured party3

Contd:

ESSENTI#S CONDITIONS TO E &#I##ED/ IN0&RED "RT/ OR ENTIT#EMENT TO

DM1ES



• It +ust be further pro2ed that &oss or da+age

aused by the breah of ontrat natura&&y arosein the usua& ourse of things fro+ suh breah3

• The fat that the parties to the ontrat ,ne(0

(hen they +ade the ontrat0 suh &oss or

da+age to be &i,e&y to resu&t fro+ the breah of it+ust be estab&ished3

• It has further to be pro2ed that the &oss or

da+age sustained by reason of breah is neither

re+ote nor indiret3• The in$ured party has to estab&ish that he did

ta,e preautions to +itigate the &osses to the

+a1i+u+ e1tent possib&e



• Depri2ing the Contrator of the right to hisprofits upon (or, (hih (as ne2er arried

out3

• Redution in Contrators profit or inrease in

ost of (or, done due to !reah of Contrat3

DA#AGE ASSESS#E6T



DE5A; I6 C'#P5ETI'6 'R TER#I6ATI'6

'" C'6TRACT #A='RIT; '" CASES5EADI6G T' DISPUTES ARE/

• Co+p&etion of (or, getting de&ayed due to breahof ontrat by o(ner3

• Contrator treats hi+se&f disharged fro+ furtherperfor+ane due to breah of serious nature3

• '(ner ter+inates ontrat by granting – non%granting e1tension of ti+e i&&ega&&y3

• The Contrator o+p&etes or pending o+p&etionof the (or, o++enes &ega& proeedings forreo2ery of da+ages aused for de&ay ino+p&etion3



•

5oss of o2erheads and profit

• Diret &osses on aount of id&e &abour0

+ahinery and e9uip+ent reduingproduti2ity3

• Inreased ost of +ateria&s and &abour3

C'6TRACT'R E6TIT5E#E6T T'

DA#AGES DUE T' !REAC8 '"

C'6TRACT



83' profit perentage 1 >>>Contrat Su+>>>>>>> 1 Period of De&ay in (ee,s

-.. Contrat period in (ee,s

8UDS'6 "'R#U5A "'R

5'SSES DUE T' DE5A;



"ore #a$eure

• The contract ma+ e2cuse non-per*ormanceo* the Contract 3part or 4hole5 hereper*ormance is rendered impossible b+

speci*ied una6oidable causes7• 8ct o* 1od9

• 8The :ueen!s enemies9

• 8;is Ma<or9• 8orce Ma<eure9



:uantum Meruit = Compensation *or

• 84or> done or ser6ices rendered hen pricethereo* is not *i2ed b+ contract9.

• 4hen the organisation orders modi*ications inscope o* or> in6ol6ing additional cost, i* thecontract is silent or is not suitabl+ modi*ied, thecontractor is still eligible *or claimingcompensation.

Subraman+an ;s Tha+appa 3?@A?5 B SCR AA%

1angapath+ ;s Truda+a Sam+ 3?@AB5 IR Mad %()



Arbitration is the sett&e+ent of dispute by the deision

not of a regu&ar and ordinary ourt of 5a( but of one or

+ore persons a&&ed arbitrators3

Advantages – Effiient0 E1peditious0 Eono+ia&

substitute to ourt ations3

Disadvantages – 5ega& prinip&es +ay be 2io&ated0

ru&es of e2idene +ay be (ai2ed0 in$ustie3

RITRTION = RITRTION CT?@(



CSE ST&D/ - I



• Foundation Co. Vs. State of New York

(233 N.4 177) (196)

• Contra!tors were as!end to resort to 7

sta"e #u$#in" o#erations Vs Sin"%eo#eration #ro&ided in Contra!t.

• Court 'e%d t'e !ontra!tors !an !%ai$

uantu$ erit



Case Stud+ II



• Citi*ens Nationa% +ank of eridian Vs

, , -%oss Co!k /n!.

(243 S0 2d.67) (1967)

• n eistin" +ank +ui%din" was to e

dis$ant%ed and a new ui%din" to e

!onstru!ted at t'e sa$e site in (ississi##i)

• fter de$o%ition t'e !ontra!tor found a

!onf%i!t etween eistin" ui%din" foundation

and t'e new foundations (o&er%a##in").5e$o&in" o%d foundations resu%ted in etra

!ost and !%ai$ed etra under :uantum

Meruit



:uantum Meruit9

• +ut t'e !ontra!t !ontained a !%ause

t'at o%d foundations s'ou%d e

re$o&ed ored if found ne!essar8

• :'e Court 'e%d t'at re$o&a% of o%d

foundations was !onte$#%ated 8 t'e!ontra!t and 'en!e no !ase for

uantu$ eruit.



Case Stud+ III



-3 !ai&ing out (ater for CC -/?/-.@ RCC -//B infoundations

3 "ooting "or+u&a 8) A-A A-A F not

aepted

3 Change in roof height fro+ -. to -

B3 8eight of S&ab -H abo2e Ground 5e2e& 6ot

fro+ base+entF



?3 Re%ereting the "or+ (or, dis+ant&ed by

neighbours

H3 C&ai+ for CC -//B for urbing instead of

-//HF – differene in ost3

3 Cost of doub&e entering – done at the

instane of dept3

J3 Cost of Stee& e1tra onsu+ed – differene in

theoretia& o%effiient atua&s3



K3 Interest for de&ays in pay+ents < refund of

"SD et3

-.3 Id&e &abour0 +ahinery0 '8 Charges

--3 E1tra for (or, e1euted beyond the period of

agree+ent

-3 Reo2ery (rongfu&&y +ade / retifiations0

e1tra ost



CSE ST&D/ - I;



LM 7or, is a(arded to LA for a onsideration

of 3 Crores

• Period of Co+p&etion / -J +onths

• Date of Co++ene+ent / -3B3K

• Date of Co+p&etion / .3?3KH

• De&ay / - +onths

• C&ai+s preferred but re$eted by Depart+ent3

• 7ent in for Arbitration



•

6ot handing o2er Clear site

• 6ot furnishing dra(ings in ti+e

• 6ot pro2iding strutura& designs

• Changes +ade in "oundation designs

1RO&NDSreach o* Contract b+ Department b+

causing dela+s and otherimpediments.



• 6o P&ae to du+p E1a2ated soi&

• De&ay in supp&y of stee& by depart+ent

• De&ay in +a,ing part pay+ents

• 6on% pay+ent of "ina& !i&&

• Change of Speifiations in doors ) (indo(s

•

Interferene by other Contrators0 et3



?. Claim toards compensation *or the

loss sustained due to rise in prices *or

the or> done be+ond agreement

period

?,$@,(,A%.

B. Claim toards pa+ment o* Sales Ta2 on

4or> Contract

?%,A@,A?%.

%. Claim toards pa+ment o* e2tra

o6erhead and establishment charges

be+ond the agreement period

)%,$),%.

(. Claim toards pa+ment o* interest on

dela+ed pa+ment

?@,%%,()?.

Contd:



). Claim toards re*und o* di**erence in

cost o* cement beteen design mi2

and nominal mi2),B,BB?.

A. Claim toards re*und o* di**erence in

cost o* empt+ cement bags collected

b+ the corpn. 3di**erence beteen

1unn+ "ol+thene ag5

?,(),A@.

Claim toards re*und o* e2cess

amount collected b+ the Corpn. On

electricit+ consumption

?$,$?.

$. Claim toards pa+ment o* loss o*

pro*it due to illegal entrustment o*

part o* the contractual or> to the

third part+.

?,@%,%($.

Contd:



. Claim toards pa+ment o* loss

o* pro*it on due to illegaldeletion o* greement items

$,($,A(.

@. Claim toards pa+ment o*

'uantities o* or> done in

e2cess o* greement 'uantities

A(,B$,BA?.

?. Claim toards di**erence in

rates *or supplemental items

%(,%A,@.

Contd:



??. Claim toards di**erence o* cost

e2ecuted other than the

agreement speci*ications butpaid *or treating it as agreement

item and also some o* the items

not recorded and paid *or

BA,)?,?$(.

?B. Claim toards pa+ment o*pro6isional *inal bill along ith

interest

?,,.

?%. Claim toards re*und o* EarnestMone+ Deposit

?,$%,B.

Contd:



?(. Claim toards re*und o**urther Securit+ Deposit

,?,(%$.

?). Claim toards re*und o*illegal reco6eries proposed

in the C.C. )th inal ill

(,)A$.



;is#ute 5eso%ution

• State$ent of fa!ts

• -rounds for !%ai$s

• ,aw a##%i!a%e to t'e !ase

• uantu$ of ;a$a"e Co$#ensation



THAN Q



MODES O IN;ITIN1 TENDERS

NE1OTITED TENDERS

#IMITED COM"ETITION

O"EN COM"ETITION



TENDER DOC&MENTS TO E RED/ EOREIN;ITIN1 TENDERS

NOTICE IN;ITIN1 TENDERS

STNDRD ORM O TENDER SCFED&#E O :&NTITIES O 4ORG

COM"#ETE SET O DR4IN1S

COM"#ETE SET O S"ECIICTIONS

ESSENTI# RCFITECT&R# DR4IN1S



INORMTION TO E "RO;IDED IN NOTICE

:&#IICTIONS

NME

EMD

SEC&RIT/ DE"OSIT

TIME #IMIT

COST

MODE O S&MISSION

DTE, TIME ND "#CE O O"ENIN1 TENDERS



"RE"RTION ND S&MISSION O TENDER

"&RCFSE O #NG TENDER ORM

ST&D/ O TENDER DR4IN1S

;ISIT TO TFE SITE O 4ORG RO&1F ;ERIICTION

N#/SIS O RTES

DECIDIN1 TFE "ERCENT1E

4ORGIN1 O&T TFE #&M"S&M

CFECGIN1 O&T TFE RTES

CO"IES O DOC&MENTS



IRRE1&#RIT/ IN S&MISSION O TENDER

&NSI1NED TENDER M/ E INDIN1

ESTIMTES S OERS RE INDIN1

"/MENT O ERNEST MONE/

4ITFDR4# O TENDER "RIOR TO ITS CCE"TNCE

"RE :&#IICTION O TENDERS



C'6TRACT

As per Indian Contrat At -J is “An agree+ent

enforeab&e by &a(” Setion LhF3

AGREE#E6T

“A pro+ise or a set of reiproa& pro+ises

neessari&y in2o&2es a +ini+u+ of persons3 A

person (ho +a,es the proposa& is a pro+isor0 a

person (ho aepts the proposa& is a pro+isee”3

Contrat an be 'ra& or 7ritten



C&assifiation of Contrats –

• "or+a& and Infor+a& Contrats

• E1press and I+p&ied Contrats

• Uni&atera& and !i&atera& Contrats



ESSE6TIA5S '" 4A5ID C'6TRACT AS PER

SEC3 -. '" I6DIA6 C'6TRACT ACT

• There +ust be agree+ent or +eeting of+inds

• The agree+ent +ust be bet(een partieso+petent to enter into a ontrat

• The parties +ust gi2e their free onsent

• The Agree+ent +ust be supported byonsideration (hih +ust be &a(fu&

• Sub$et +atter of the agree+ent +ust be

definite and &a(fu&3



7ho are not o+petent to enter

Contrat

•#inor

• 5unati

• #e+bers of Par&ia+ent &egis&ature0 et3



A&& Agree+ents are Contrats if they are

+ade by

•

"ree Consent

• PartyNs Co+petent to Contrat

• 5a(fu& Consideration

• 5a(fu& 'b$eti2e



• Sope of 7or,

• Shedu&e of &ist of (or, or ite+s of (or,

• Genera& Conditions

• Speia& Conditions

• Speifiations

• 6otie of Tender0 Correspondene to

aeptane and &etter of aeptane

Contents of Contrat Agree+ent



• Co&&et aurate basi data

• #ore ti+e to a&&otted for proper p&anning

• A9uisition of 5and prior to o++ene+ent

• Rea&isti period of o+p&etion

• '+it nothing +ateria& and a2oid repetition

• C&arity in e1pression beyond the reah of

per2ersion

I+portant Points for Drafting Agree+ents



• 5u+psu+

• Ite+ rate

• Perentage rate

• !'T fa+i&y Contrat

• Design < !ui&d

• Turn,ey < EPC

Types of Contrats

disputes and claims in engineering contracts - causes and remedial measures (56 slaytlık sunum)

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