- ~~. .~. ~. $ -, - - .. _-

...,Single part I'

~150/-Annual II~ 700/- .

Vol. 8 T~~uARY,., 2011

1. Index , 00 •••••••••••••• -" •• ,.<' 1 ~ 16

2. .Journal ~ "., .., ,. 1 - 16(Articles, Reviews)

"3. Acts, Rules and Notifications oo.n •• 1 - 32(Central and A.P. State Acts, Rules & Notificatlons)

4. All India Law Digest ,. n •••• '1 ~ 16(Digest of Supreme Court and other High Courts)

I avoui .£'~ T"·J-,",,et·~ ~.,./ "'........ J·lJ ·

(and compilation o/Statiiles) by

Abdui MUflBBm

-..._._ J(. .

.is going to be class legislation and not areasonable classification. Hence, whoever abetsto commit suicide is to be disqualified from

RNAL 13

inheriting the properry of victim of abettedsuicide.

So, if a person guilty of abetment tocommit suicide is excluded from the processof inheritance, the public morality would be

. better served and kept up. Therefore it ishigh time for the Legislature to consider to passlegislation making abetment to commit suicidea brround for disqualification from inheritance.

CONTRACT LAW AND CONSTRUCTION INDUSTRY

By-Dr. MUKUND SARDA,

Principal and Dean, New law College,Bharatiya Vidya Peet University, ~

Pune

1. All construction works take birth in acontract. An agreement enforceable bylaw is a contract'. Thus a contract........................... , - ,.. ..-,- ,. . .

requires an agreement which isenforceable by law. An agreementconsists of two essential requisites:-

(1) A proposal or offer from oneparty; and -

(2) Its acceptance by the other.

2. Mere agreerrlenr is not contract unlessit fulfils the following conditions :-

(1) The parties to the agreement mustpossess contractual capacity;

(2) The agreement must be supportedby consideration;

(3) The parties must enter into the3!-,rreementof their free consent; and

(4) The object of the agreement mustbe lawful

1. See for details Section 2(1\) Gfthe IndianContract Act 1872.

3. All agreements will not becomecontract.runless they give rise to legalobligations,

'-

Proposal has two essential requirements,namely willingness of the party to makea proposal and signifying it to theother. In order words, the proposal/offer must .be communicated. Thus,in an agreement of the parties; astipulation to settle their businessmatters mutually and not to haverecourse to legal proceedings (orjurisdiction of Courts being barred washeld not to be a contract, as theintention to create legal obligations wasexcluded'.

..",'

5. An offer may be specific or general.In all contracts of Government orpublic work, it will be of general offer,while a specific offer is made to a'specific individual',

2 Rose Frank Co. t~R Crompton, (1923) 2 KB3. See for details Carlill Il. embolic Smoke Ball.Co"

(1893) 1 QB 256.

29 2011-AllD Janu~ry

~14~ ~J~O~U~R~N~A~L~· ~'6. An offer differs from an invitation to

an offer, which are really offer fornegotiation," such as tender notices,catalogues, announcement to hold anauction and others. When the personmakes an offer in terms of the tendernotice and if accepted by the otherparty, it. ripens into a contract, whichis evidenced. by the contract document.\X1henpublic authorities enter intoinnumerable contracts such as LIC orRailway, they usually make recourse to"Standard form of contract" whereall the terms and conditions are in fineprint. These contracts often excludeor restrict the parties from liabilities..

In such contract, when reasonablenotice is given of terms and conditions,the party cannot plead that he was ~unable to read or being illiterate notbound by them. He must get itunderstood with the help of others.In the present day, \X1orldBank fundedcontract documents are being usedffheInternational Civil Engineering Contract

. Forms)" - FIDIC. Professional bodieslike the NICI\1AR have also formulateda contract document. It has the benefitof uniform interpretation.

7. A contract document is one. whichembodies the tenus and conditions ofcontract. All the acts and deeds are

rregulated as per the terms andconditions of the contract.

8. In the case of Government there arespecial rules relating to competency toenter into a contract. In the case ofUnion Government, it must beexpressed in the name of the Presidentof India and executed. on behalf ofPresident in such manner that Presidentmay direct. In the case of StateGovernment it must be in the nameof the Governor and executed on

-4, FIDIC (Federal International Des International

Consulate)

behalf of the Government in themanner as the Governor may direct'.

9. TIle initial steps taken before enteringinto a contract can be stated asfollows:-

(1) Publication of tender notice by theauthorities;

(2) TIle person, who wishes to respondto tile notice, purchases tile tenderdocument and prep.ares tile tenderdocumen t. After prepara tionsubmits tile same within the dateand time stipulated in the manner

,prescribed; and

(3) The submitted tender bids areopened arid acceptance letter)ssent,which results in the conclusion ofthe abrreement/ contract.

10. The tender notice states the nature ofwork, value put in the tender, the time

....of completionHofwotk~eari1est moneyto -be deposited including the cost oftender forms and its availability, andthe date and time of the submissionof tender. The party submitting thetender must abrree_to abide by thetender notice. The tender purchase .document must contain the details like,number of bids per bidder, cost ofbid document," details of purchase oftender document and also thequalifications to be possessed by thebidder.

11. The bidding document must consistof instructions to bidder, forms ofbid and qualification information,conditions, content, data of thecontract, specifications; drawings, billof quantities and forms of securities,

5. See 'for details 299 of the Indian Constitutionand Appendix 4 of the AI'. Financial CodeVoUI. '111c document is written on a stamppaper, registered/not registered as the case maybe.

2011-AILD January

.i

i\

. i

'\.•.,

~~ ~ J_O_U_R_N_A__L ~15bid price, mode and currency ofpayment and validity of the bid, andcases of unsuccessful bids beingreturned including cases of forfeitingof the deposits, TIle bidders maygive alternate proposals and also the. format and signing of bid,

TIle contractor's acceptance and non-acceptance of adjudicator proposed by .the owner as well as acceptance ofrules and regulations.

.12. ll1t~qualification information may relate

to place of business and registration,value of work done for the last (5)years including the quantity of work.Existing commitments and on-goingworks including the. work for whichbidsh"v~b.e<;~sllbmitteo, plant andmachinery, qualifications, experience andsufficient evidence of access to financialsources.

13. TIle bids have to be' submitted to theperson concerned, . together withenvelops placed within the deadlineprescribed. A person is entitled towithdraw the bid before acceptance.

14. TIle bid opening process is confidential......1'ht! p~ receiving the bid is entitled

to accept or reject the bids, afterduly' examining the bios July evaluatingthem and Jomparing with other bids.

.. In the matter of acceptance relating topublic work, high quality work atcompetitive rates should be the

. .'cntenon,

15.The acceptance of the bid iscommunicated by the notification ofaward, requiring the party· to sign theagreement within the time limit.Performance security, besidessubmission within time limit in theprescribed form, together with advancepayment and security have to be given.

16.. A contract usually consists of

(a) Letter of acceptance;

(b) Contractors bid and Contract data;

(c) Notice to proceed with the work ,

(0) Conditions of contract, specificationsand drawings;

(e) Other documents listed in thecontract data, and

(~Obligations of the contractor. obligations of the Engineer and of

the employer. -

17. For breaches of contract, liquidateddamages can be awarded as stated inthe contract document (for whole ofWork-Milestone) as per the contractlaw, the total amount of damages shallnot exceed the amount ~stated incontract document". .

18. For fundamental breach of contract ,the contract can be terminated.Compensation can be recovered forthe value of work done, advancepayment and other recoveries includingtaxes - percentage of work notcompleted will be taken into account.In the event of termination byemployer, value- of work done ,reasonable cost of removal ofequipment. and personnel including costof protectmg and securing the work,advance payments and recovering aswell taxes are to be taken into account.

19. Risk management arises for employeras well as the contractor. They haveto take appropriate policies inaccordance with law of insurance.

20. The disputes arising out of or inrelation to contract will be decided asper contract document, prominentlyby the departmental authority entrusted

6. For details see Sections 73 and 75 Of the IndianContract Act.

31 2011-AllO January

· ~ .•.. , . ".~.~ ".~--,~. '

_16~ ~J~O~U_R_N_A__L ~with power to decide or alternativelyby adjudication. Finally, the mattermay go even to Court at the instanceof agbtrieved party. TI1e adjudicationwill be conducted in accordance withthe provisions of the Arbitration Actand procedure as made applicable inthe contract document.

21. The abl"feementshould not be contraryto law, moral or public policy.

22. Contract law defines the followingtypes of contract :-

(i) Valid

(11) Void

(ill) Voidable

(tv) Unenforceable

(v) Quasi-contract

However, in construction contract,thefollowing types are in vobrue :-

(i) Piece Rate Work

(11) I tern Rate Contract

(ill) Lump-sum Contract

(tv) Cost-plus Contract

"-:··(v)Turnkey Contract

(a) Piece-Rate Wot~ :

Under this, the owner provides all thesite facilities, equipment, services andtook TIle. payment is based on piecesor units done. This type is prevalentin independent jobs.

(b) Item Hate Contract :

TIle payment will be for the actualquantity of work completed and

measured periodically. This makes theparties quite safe.

(c) Utnp-SIIPI Contract :

A fully described and specified workto be completed in all respects and afix sum is offered. The price will bedistributed over a few main items ofwork on 'a percentage basis. In somecases, where there is no quantity ceilingand no pre-determination of thequantity to be executed, it will bedisadvantagious to the contractor.

(d) Cost pIllS Contraa :

This system provides for reimbursementof the actual cost plus and fixedpercentage of the cost towardscontractors over-head and profits. Inthis system, parties will have completesatisfaction in respect of payment, asno dispute occurs. .

(e) . Tumkg Contract :

ft:isaTu~p~~~~ contract for acomplete project or a plant inCludingengineering, procurement including allrequirements of the work. The lump-sum amount shall be decidedreasonably, . fixi~g values 'for majorworks, which will be done before thecontract is awarded.

23. In conclusion, it may be stated that theparties should be aware of all therequisites of a valid contract and signthe contract after fully realizing theirrights and liabilities. Undue haste insigning without proper reading ofvarious clauses of the contract, willexpose the parties to unbearable risksand losses. Abbreviations in the/contract documents should be avoided,as their significance may not .fullyknown to the parties.

32 201 i-mn January

<,

\\,..