CONTRACT MANAGEMENT

Tarandeep Singh
NICMAR

??? C O N T R A C T ???
Sell

Firearms

License Holder
NON License Holder

Build

a House on land not belonging to owner

Construction of 50 storey in 2 days
Marriage with a minor
Bridge construction by INFOSYS
Civil works in lieu of cessation of contract of a
competitor

CONTRACT THE NEED

Business

transactions & Deals

Governed by customs, conventions and religious

practices
With modern business environment, growth of
civilization and advanced societies TROUBLE

Regulate

the dealings between individuals or

organizations
Transactions, dealings and business
operations need to be regulated by law to
stabilize the civic and business activities
Thus laws of contract two or more parties

CONTRACT - DEFINED

A legally enforceable agreement between two or

more persons which creates an obligation to do or
not to do something

Promises or sets of promises

Legal remedy for breach

Bad deals are OK

May not be against public policy or illegal

AGREEMENT
Agreement

between two parties - existence.

An enquiry from one party for products or
services and the
Proposal by the other party to provide the
same.
Offer when accepted by the first party
becomes an AGREEMENT.

AGREEMENT

CONTRACT

Agreement becomes a CONTRACT on conditions

Free consent of both the parties;
Parties competent as per law to sign a contract;
The consideration is lawful;
The objective of the agreement is within legal
bounds;
The agreement is not declared void on valid
grounds;
The agreement complies with the provisions of law
regarding attestation and registration.

ELEMENTS OF CONTRACT
Offer

- a clear offer by one person or

organization to another
Acceptance - the other party must accept the
whole offer without conditions
Capacity - demonstrated by each party
Consideration - each party gives to the other
as the agreed price for the others promises
Legality - intend to create legal relationship

IMPORTANT POINTS
Mutual

understanding
Intent measured by reasonable person
standard
Terms should be definite
Who, what, where, when, why, how
Duration of contract
Termination of contract

PART II
INDIAN CONTRACT ACT - 1872

INDIAN CONTRACT ACT 1872

Basically, a person is free to contract on any terms

he chooses
ICA 1872 - Codifies the way we enter into a contract,
execute a contract, implement provisions of a
contract and effects of breach of a contract.
Provides a framework of rules and regulations which
govern formation and performance of contract
Whenever two parties write in the contract, the
conditions therein cannot exceed or cross the limits
and conditions set in the Indian Contract Act

ICA IMPORTANT PROVISIONS

Agreement

Promisor and Promisee

Offer (definite terms) and Acceptance (full and
unconditional)
Proper communication and acknowledged

Legal

Relationship
Lawful Consideration

absence of consideration unenforceable

Consideration be lawful

Free

Consent

ICA IMPORTANT PROVISIONS

Competent

Parties

Parties to be capable of contracting

Not prevented by law in entering the contract

Proper

Objective
Illegal Agreement
Certainty of Performance

Terms to be certain and no ambiguity

Performance not to be impossible

Legal

Formalities

Written, registration and stamp duty

TYPES OF CONTRACTS
Valid

Meets all essential criteria

Void Contract ceases to exist
Voidable Repudiated at the option of either
party
Illegal Object or consideration is illegal
Unenforceable Quite valid but impossible to
enforce
Based on Performance
Executed and Executory

TYPES OF CONTRACTS

Express or Implied

Contingent Contract

Expressly agreed upon conditions

Based on conduct of the parties
To do or not to do something, if events connected does or
does not happen

Engineering Contracts

Fixed Price
Unit Price
Cost Plus
Design/Build Contracts
Turnkey
Fast Track

VALID TENDER - PERFORMANCE

Important

conditions of validity of tender

Unconditional offer against tender enquiry;

Tender offer must be for full scope of work;
Tender offer by party or person willing and
capable of performing;
Tender offer in proper form - to correct person,
time and place of delivery;
Inspection of goods allowed
If there are several joint Promisees, tender offer
may be made to any of them;

WHO SHOULD PERFORM

Promisor himself must perform, like painting of portrait
or complicated surgery or very personalised business
or investment advice.
An agent of a Promisor may perform the contract,
without adversely affecting the promise made to the
Promisee.
Even third party can perform the Promise if accepted by
the Promisee as adequate
If Promisor dies, the legal representative will have to
perform.
In certain cases, there may be several promises and all
the joint Promisors are required to perform to fulfil the
contract.

TIME AS ESSENCE OF CONTRACT

Non

performance within time Void contract

Time is not the essence

Promisor does not perform the contract within the

normally stipulated time,
the contract does not become voidable.
Promisee can claim compensation for the delayed
performance.

Mention

of Time as Essence be made in the

contract essential

ASSIGNMENT & DISCHARGE

ASSIGNMENT

Rights and liabilities transferred

Assignment with or w/o consent
Personal nature cannot be assigned
Assignment by law - death or insolvency

DISCHARGE

Rights and liabilities end

Reasons
proper performance
agreement
replacement of old contract by new;
lapse of time under Limitation Act;
breach of contract by one of the parties;
impossibility of performance;
operation of law regarding death/insolvency/merger

BREACH OF CONTRACT

Remedies for breach by contractor

Rescission of Contract

Suit of Damage

As much as earned". Performance of one contract by one party

Specific Performance

legal suit can be filed

Quantum Merit

Aggrieved party can rescind and claim for compensation

In case of breach of certain contracts, compensation in monetary

terms is not enough. In such cases, the court directs the
defaulting party to perform its part rather than awarding any
damages.

Injunction

Stay order by court

PART III
CONTRACT MANAGEMENT

CM & PM

PM - every aspect of Project Execution

award to completion and even commissioning

within the stipulated time and budget m
men and material, equipment and financial resources
utilized in the most optimum manner

CM - All the above issues

Angle of contractual commitment

Contractor to the client through the contract document
Issues arising out of failure of contractor or the client
sustain those promises made under the contract

CM DURING TENDERING STAGE

Understanding the legal commitment entered by contractor

during tendering for a project, by accepting the contract if
awarded.
Studying the detailed clauses of contract document issued by
client, including general, special and particular conditions of
contract.
Appreciating the impact of contract clauses on satisfactory
execution of the project along with legal and financial
implications.
Responding to financial aspects of tendering processes, such as
earnest money and bearing the cost of tender preparation.
Obtaining necessary clarification for doubts about contract
conditions during pre-bid meeting or correspondence with the
client.
Inquiring about project site conditions and obtaining adequate
information about ground conditions and geological data.

AWARD OF CONTRACT

Agreeing to various terms and conditions of contract by careful

scrutiny on award of contract.
Attending to financial issues such as release of performance
security and Bank guarantee if mobilisation advance is released
Obtaining suitable EAR/CAR insurance policy as stipulated in the
contract with additional features to protect its interests.
Submitting detailed planning schedule to the client as per
contract conditions, covering planning of men, material and
equipment.
Conducting post-award site investigation to check any site
variation with respect to data provided by client to ascertain
possibility of any genuine claim due to changed conditions.
Raising suitable invoices for release of mobilisation advance by
client against suitable bank guarantee.

EXECUTION PHASE

Monitoring the progress of project and reporting to the client in

the agreed format every week/fortnight/month.
Preparing monthly billing/Invoicing based on correct
measurement of work as per correct rules of measurement and
unit rates.
Noticing any variation in the quantity and scope of work during
bill preparation and modifying the invoiced amount accordingly.
Recording any additional or extra over and above the basic
scope of work and timely raising the matter with client for rate
agreement and billing
Raising claims based on client authorised changes made in the
scope of contract after obtaining the written amendment.
Providing detailed work-out and back-up documentation to
substantiate the claim to obtain client's acceptance.

PROJECT COMPLETION
Reconciling

all certified and uncertified

invoices during for final billing after checking
for any missed out work during earlier billing.
Settling claims arising out of all approved and
agreed changes and variations which are not
displayed by client.
Preparing presentation to be made to Dispute
Resolution Boards and/ or Arbitration to
defend and settle claims made during
execution which were not disputed by client.

DATA BASE
External Issues
i) Weather record including rain, temperature, humidity, fog and any other
unusual natural conditions, on any particular day.
ii) Record of any adverse news or events likely to affect the project, such as
strikes, riots or hostilities and acts of God, such as earthquakes, landslides,
typhoon or any other catastrophe.
B) Internal Issues
i) Record of work force with main contractors and sub-contractors everyday.
ii) Record of major plant and equipment at site, owned, hired or provided by
sub-contractors.
iii) Record of main activities, such as, concrete and steel work done everyday.
iv) Notes on unexpected ground conditions at site and action taken to
overcome the same.
v) Records of accidents - major or minor - including details of injury and
damage to the property.
vi) Notes on correspondence with insurers and any claims raised with them.
vii) Delays noticed in the receipt of material, consumables, plant and
equipment.
A)

DATA BASE
C) Issues with Client
i) Notes on discussion with client's representative or engineer and receipt of
approved drawings or instructions.
ii) Records of instructions or letters received from engineer or his deputy.
iii) Dispatch of confirmation of verbal instructions from clients.
iv) Record of request for attending measurements and failure, if any, to attend
the same by client.
v) Requests to client for attending inspection and testing and failure, if any, to
attend the same.
vi) Any communication regarding invoices, certificates and payments, etc.
during submission and approval.
vii) All letters, notices required to be sent to client as per applicable contract
conditions.
D) Issues with Sub-contractors and Suppliers
i) Transactions with sub-contractors/suppliers including sub-contract orders,
letters and communications.
ii) Confirmation of verbal communications.
iii) Measurement and inspection of sub-contracted work.
iv) Record of invoices, certificates and payments made to them.

DATA BASE
E) Issues with Other Agencies
i) Feedback to bankers or financiers as required.
ii) Visit to site by Government authorities, Press and any other
publicity media.
iii) Record of any other visitors and notes on discussions with them.
F) General Issues
i) Special marking of all events and records which may give rise to
claim for extension in time and for increased cost.
ii) Copying the important records at site to Contract Department at
Head Office for comments from them and to create extra copy at
H. O. in case of loss of record at site.
iii) Record of discussions with senior management people from
Head office for obtaining guidance on policy matters.
iv) Maintaining the safety of all records for future information and
settlement of all claims.