Contract management_Infrastructure Engineering and Management (2170611) (Semester-7), Civil Engineering

Prepared By
Prof. Ashish Makwana
Civil Engg. Dept.
Prof. Ashish Makwana 1

PRESENTATION
OUTLINE…
Engineering contracts and its formulation
Definition and essentials of a contract
Indian Contract Act 1872
Types of contracts and clauses for contracts

TERMINOLOGY RELATED TO
CONTRACT MANAGEMENT
• Clerk of works
• Arbitration
• Damages
• Equipment
• Bank guarantee
• Day work
• Extra item
• Initial contract price
• Contingencies
• Deviation
• Frustration of contract
• Defect
• Compensation events
• Defect liability period
• Contract data
• Bill of quantities
• Surely
• Negotiation
• Sub-contractor
• Work order
• Variations
• Start date

TYPES OF CONTRACT
MANAGEMENT
• Lump-sum contract
• Item rate or unit price contract
• Cost plus fee contract
• Turnkey fee contract
• Build-own-operate and transfer (BOOT)
contract

CONTRACT MANAGEMENT
PROCESS
• Pre-Contract Award Management
• Post-Contract Award Management

Pre-Contract Award Management
• Drafting the contract specification
• Planning the contract strategy
• Setting the evaluation criteria
• Making research of the marketplace
• Communicating with the potential contractors
• Using pre-qualification document to select
customers requesting tenders and evaluating
them
• Making tender negotiations
• Recommending tender for award
• Awarding contract

Post-Contract Award Management
• Helps in ensuring that the services or goods
supplied by the contractor are in accordance
with the terms and conditions and fulfill the
requirements of the contract.
• Helps in providing clear and documented
evidence, where necessary, to involve any non-
compliance procedures.
• Helps in measuring the total performance
difficulties and alternative course of action that
can be taken to remove those difficulties.

• Helps in taking corrective actions to prevent the
arising of similar problems in future.
• Ensures proper communication between the
service provider and contractor.
• Ensures that cost are monitored and kept in line
with contract rates and approved budgets.

MEANING OF
PERFORMANCE OF CONTRACT
• A contract creates obligations. 'Performance' of
contract means the carrying out of obligation
under it.
• The parties to contract must either perform or
offer to perform their respective promises unless
such performance is dispensed with or excused
under the provisions of the Indian Contract Act
or some law.
• "Performance of contract" means fulfilling of their
respective legal obligations created under the
contract by both the promisor and the promisee.

TYPES OF PERFORMANCE
• Actual Performance: Where a promisor has
made an offer of performance to the promisee
and the offer has been accepted by the
promisee, it is called an actual performance.
• Attempted Performance: Where a promisor has
made an offer of performance to the promisee,
and the offer has not been accepted by the
promisee, it is called an attempted performance.

WHO MAY PERFORM A
CONTRACT?
• Agent
• Third Persons
• Promisor Himself
• Joint Promisor's
• Representative

ASSIGNMENT OF CONTRACT
• Modes of Assignment of Contract
1. Assignment by act of parties
2. Assignment by operation of law

Case
• A. Assignment of
contractual liabilities.
• I. In case the contractual
obligation involves personal
ability
• II. (a) If the contract does
not expressly or impliedly
provide that the contract
shall be performed by the
promisor only.
Rule
• I. Such obligation cannot be
assigned.
• II. The promisor may
transfer his liability to a third
party with the consent of
promisee and the transferee
by entering into a tripartile
agreement.
• III. The promisor or his
representative may employ
a competent person to
perform such obligation but
even the promisor remains
liable to the promisee for
proper performance
1. Assignment by act of parties

Case
• (b) If the contract expressly
provides that the contract
shall be performed by the
promisor only.
• B. Assignment of
contractual rights
• I. In case of contractual
rights involving personal
skill.
• II. Actionable claim
Rule
• Such rights can be assigned
subject to all equities
between the original parties.
• Such rights cannot be
assigned.
• Such claims can away be
assigned by an instrument
in writing. Notice of such
assignment must also be
given to the debtor.

2. Assignment by Operation of Law
Case
• I. In case of death of any
party
• II. In case of insolvency of
any party
Rule
• The rights and obligations
(other than those of
personal nature) of the
insolvent party pass on to
the official Receiver of
Assignee
• The rights and obligations
(other than those of
personal nature) of the
decreased party pass on his
legal representatives.

DISCHARGE OF CONTRACT
• Discharge of contract means termination of
the contractual relationship between the
parties.
• A contract is said to be discharged when it
ceases to operate, i.e., when rights and
obligations created by it come to an end.
• In some cases, other rights and obligations
may arise as a result of discharge of contract,
but they are altogether independent of the
original contract.

DOCTRINE OF SUPERVENING IMPOSSIBILITY
OR DOCTRINE OF FRUSTRATION
• It has been observed by the Court that "In fact
impossibility and frustration are often used as
interchangeable expression".
• The English law on supervening impossibility is
called 'Doctrine of frustration'.
• The Indian law on supervening impossibility has
been laid down.
• The courts in India have believed that since Indian
law on the subject is quit explicit and
comprehensive, there is not need to consider the
application in India of English rule of 'frustration' in
any situation.

Basis Agreement Contract
1.
Constituent
Offer and its
acceptance constitute
an agreement
Agreement and its
enforceability
constitute a contract
2. One in
other
Every agreement need
not necessarily be a
contract
All contracts are
necessarily
agreements
3. Creation of
legal
obligation
An agreement may or
may not create a legal
obligation
A contract necessarily
creates a legal
obligation
4. Binding Agreement is not
concluded or a binding
contract
Contract is concluded
and binding on the
concerned parties.
AGREEMENT

BREACH OF CONTRACT
• A contract is said to be broken if a party to it
renounces his liability under it expressly.
• Once it becomes established that the contract has
been broken, it stands discharged by breach. The
party breaking the contract becomes liable to face
consequences towards the other party as laid
down in law.
Types of Breach of contract
• 1. Actual Breach: i. On Due Date of Performance,
ii. During the Course of Performance
• 2. Anticipatory Breach: i. Expressly by Words
Spoken or Written, ii. Impliedly by the Conduct of
one of the Parties

REMEDIES FOR BREACH OF
CONTRACT
• Meaning of Remedy: A remedy is the course of
action available to an aggrieved for the
enforcement of a right under a contract.

Remedies Available to an Aggrieved Party
• Rescission of Contract
• Suit for quantum Merit
• Suit for Specific Performance
• Suit upon Damages

KINDS OF DAMAGES
• Liability to Pay Nominal Damages
• Ordinary Damages
• Liability for Special Damages
• Damage for Deterioration caused by Delay

RULES REGARDING AWARD
FOR DAMAGES
• Damages for Attributable Losses
• Cost of Suit
• Limited Damages
• Mitigation of Losses
• Stipulation for Liquidated Damages or
Penalty
• Compensation not Penalty
• Damages in case of Contracts of Sale of
Goods

INDIAN CONTRACT ACT 1872
Section Short Title Summary
37 Obligation of
parties to
contract
All parties must perform their promises and
obligations.
If one party alone performs that party
acquires a right of action against the other
party who is guilty of breach.

55 (a) Effect of failure
to perform at a
fixed time in
contract in which
time is (i) essential,
(ii) not essential
(b) Effect of
acceptance of
performance at
time other than
that agreed upon.
(a) (i) The contract or so much of it as
has not been performed becomes void
at the option of the promisee.
(ii) The contract does not become
voidable but the promisee is entitled to
compensation from the promisor for
any loss occasioned to him by such
failure.
(b) The promisee cannot claim
compensation for any loss by the non-
performance of the promisor at the time
of such acceptance. He gives notice to
the promisor of his intention to do so.

51 Promisor not
bound to perform
unless reciprocal
promisee ready
and willing to
perform.
When a contract consist of reciprocal
promises to be simultaneously
performed no promisor need perform
his promise, unless the promisee is
ready and willing to perform his
reciprocal promise.
53 Liability of party
presenting event
on which the
contract is to take
effect.
Contract contains reciprocal when one
party prevents the other party from
performing his promise.

53 Liability of party
presenting event
on which the
contract is to take
effect.
Contract becomes voidable at the
option of the party so prevented.
Prevented party is entitled to be
compensated by the other party for any
loss.
56 Agreement to do
impossible Act.
An agreement to do an act impossible
in itself is void.
Doctrine of frustration.
Both the parties are excused from
performance.
Unforeseen act - Act of God - Natural
disasters - Wall between countries -
Legislative action.

73 Compensation for
loss or damage
caused by breach
of contract.
When a contract has been broken, the
party who suffers by such breach is
entitled to receive from the party who
has broken the contract, compensation
for any loss or damage caused to him
thereby, which naturally arise in usual
course of things from such breach or
which the parties knew, when they
made the contract, to be likely to result
from breach of it. Such compensation is
not to be given for any remote and
indirect loss or damage sustained by
reason of the breach.

73 Compensation for
failure to discharge
obligation
resembling those
created by
contract.
When a obligation resembling those
created has been incurred and has not
been discharged any person injured by
the failure to discharge, it is entitled to
receive the same compensation from
the party in default, as if such person
had contracted to discharge it and had
broken his contract.
Explanation: In estimating the loss or
damage arising from a breach of
contract, the means which existed of
remeding the inconvenience caused by
the contract must be taken into
account.Prof. Ashish Makwana 30

74 Compensation for
breach of contract
where penalty
stipulated for.
When a contact has been broken, if a
sum is named in the contract as the
amount to be paid in case of such
breach or if the contract contains any
other stipulation by way of penalty, the
party complaining of the breach is
entitled, whether or not actual damage
or loss is proved to have been caused
thereby to receive from the other party
who has broken the contract
reasonable compensation not
exceeding the amount so named or as
the case may be, the penalty stipulated
for.

CONTRACT DOCUMENT
• The specification
• The special conditions of contract (SCC)
• The agreement
• The contract agreements
• The general conditions of contract
• The bills of quantities (BOQ) if applicable

THANK YOU

Contract management_Infrastructure Engineering and Management (2170611) (Semester-7), Civil Engineering

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