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Contract management sys

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Contract Management

Contract Management

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  • 1. CONTRACTS MANAGEMENT
  • 2. • Contract law is based on the Latin phrase pacta sunt servanda i.e. ‘promises must be kept’.• History : During ancient times, Bartering, the way by which contract was taking place.( (Grains V/s Cattle) (Clothes V/s Fruits), Consideration- Return Promise)• Todays time : we enter into contracts so many times in a day that ‘contract’ has become an indispensable part of our life. (Purchase of milk, TV, electronics goods, house, services, telephone, internet, transport etc
  • 3. CONTRACTS• No individual or section of people can be fully independent or self-reliant in a developed society. One needs other’s help. To enforce commitment in this mutual give and take, one enters into written agreement with the other party.• Contract : Legally binding exchange of promises or agreement between parties enforceable by law.
  • 4. INDIAN CONTRACT ACTINDIAN CONTRACT ACT, 1872: Determines the circumstances under which the promises made by the contract shall be legally binding on them. Offer + Acceptance = Agreement Agreement + Enforceability at law = Contract
  • 5. • ESSENTIALS ELEMENTS of CONTRACT – Offer and its acceptance – Free consent of both parties (not caused by coercion, undue influence, fraud, misrepresentation or mistake) – Mutual and lawful consideration for agreement – It should be enforceable by law (hence, intention should be to create legal relationship) – Parties should be competent to contract – Object should be lawful – Certainty and possibility of performance – Contract should not have been declared as void under Contract Act or any other law• Communication, acceptance and revocation of proposals
  • 6. • Void Contract (An agreement not enforceable by law is said to be void) – Agreement by incompetent person ( power of attorney , Legal owner) – Parties under mistake of fact ( Agreement to sale the goods on ship which has already sunk) – Unlawful object or consideration – Agreement without consideration – Agreement in restraint of marriage – Agreement in restraint of trade – Agreement in restraint of legal proceedings – Uncertain agreement [Agreement to sell valves, oil etc.] – Wagering agreement [ eg. Election which party will win ] – Agreement to do an impossible Act [Frustration- renting of hall which was burned subsequent to contract, death of party, change of law- import goods banned)• Consequences of Breach of Contract – Compensation / Penalty is payable for breach of contract.
  • 7. Remedies for breach of Contract• Rescession of the contract ( Non supply of items, payment need not to be done)• Suit for damage (Compensation to injured party)• Suit upon quantum merit ( as much as earned -as part supply or part performance)• Suit for specific performance ( Land , used vehicles)• Suit for injunction (sale of property to another person X after agreeing to sell it to Y)
  • 8. • CLASSIFICATION of CONTRACTS – According to formation: a) Express contracts b) Implied contracts c) Quasi contract• TYPES OF CONTRACT – Based on the scope of work required to be executed in CMM, NPCIL: (a) SUPPLY CONTRACT (b) ERECTION CONTRACT (c) SERVICE CONTRACT – Based on the method of execution : (a) LUMP SUM CONTRACT (b) ITEM RATE CONTRACT (c) RATE CONTRACT [DGS & D- Only Rates & Period fixed but not qty. ] (d) RUNNING CONTRACT [DGS & D- Apart from rates & period qty is also fixed] (e) COST PLUS CONTRACTS (f) TURN-KEY CONTRACTS
  • 9. • CASE STUDIES
  • 10. General Conditions of Contract
  • 11. GENERAL CONDITIONS OF CONTRACT1. INTRODUCTION2. SUBJECT MATTER OF CONTRACT3. GUARANTEES AND LIABILITIES4. CONTRACT EXECUTION5. CHANGE IN CONTRACT ELEMENTS
  • 12. INTRODUCTION1. Preamble2. Definitions3. Interpretation
  • 13. SUBJECT MATTER OF CONTRACT1. Scope of Facilities2. Time for Completion3. Contractor’s Responsibilities4. Purchaser’s Responsibilities5. Payment6. Price Adjustment7. Terms of Payment8. Taxes & Duties9. Securities
  • 14. GUARANTEES & LIABILITIES1. Completion Time Guarantee2. Defect Liability3. Functional Guarantees4. Transfer of Ownership5. Care of Facilities6. Indemnity7. Limitation of Liability8. Insurance9. Change in Laws & Regulations10. Force Majeure11. War Risks
  • 15. CONTRACT EXECUTION1. Representatives2. Work Program3. Subcontracting4. Subletting & Assignment of Contract5. Design & Engineering6. Procurement
  • 16. CONTRACT EXECUTION (…Contd.)7. Installation8. Insurance9. Quality Assurance, Inspection, Acceptance & Rejections10. Completion of Erection and Pre- Commissioning of The Facilities11. Commissioning & Operational Acceptance of Facilities
  • 17. CHANGE IN CONTRACT ELEMENTS1. Change in Facilities2. Extension of time for completion3. Foreclosure of Contract4. Suspension of Site Works5. Determination/ Cancellation/ Termination of Contract in full or part6. Settlement of Disputes7. Secrecy
  • 18. 1. PREAMBLE1. The scope of the contract in brief.2. The status of the General Conditions of Contract in the contract.3. The authority in NPCIL to exercise the rights and discretions for and on behalf of NPCIL.
  • 19. 2. DEFINITIONSThe words and phrases may have differentmeanings depending upon the context they areused. Therefore, it is necessary to defineexclusive meaning of some important words andphrases used in the contract.Some of the important definitions are :
  • 20. "Contract" or "Purchase Order" shall mean thecommunication or document signed for and on behalf ofthe Purchaser by an Officer duly authorised confirmingthe acceptance of Tender or Offer of the contractor forand on behalf of the Purchaser on the terms andconditions mentioned or referred to in the saidcommunication and other documents including TenderDocument, Terms and Conditions of the contract andsuch other documents as may be expressly incorporatedin the Contract by reference.“Contractual Delivery Date” shall mean the stipulateddate on which the contractor shall attain ‘completion’ ofthe Facilities, as specified in the purchase order.
  • 21. “Contractual Mile Stone Date” shall mean thestipulated date on which contractor completeintermediate mile shall stone of despatch, erection,testing etc. as specified in the Special Conditions ofContract (SCC) / Purchase Order.“Contract Price” shall mean the price as specified in“Section A – Item and Price Schedule” of the Contractsubject to such addition and adjustment thereof ordeduction there from, as may be made pursuant to thecontract.
  • 22. “Defect Liability Period” shall mean the period ofvalidity of the warranties given by the contractorduring which the contractor is responsible fordefects with respect to the facilities or the relevantpart thereof as provided in GCC clause 6.4 (DefectLiability).“Effective Date” or "Commencement Date" shallmean the date of issue of Purchase Order on whichthe contract shall come into force.
  • 23. "Excepted Risks" are the risks due to war, hostilitiesor warlike operations (whether a state of war bedeclared or not), invasion, act of foreign enemy &civil war, rebellion, revolution, insurrection, mutiny,usurpation of civil or military government, civilcommotion, nuclear reaction, nuclear radiation,radioactive contamination, or any other occurrencesthat a contractor could not insure against, insofar assuch risks are not normally insurable on theinsurance market and are mentioned in the generalexclusions of the policy of insurance taken out underthe contract.
  • 24. "Latent Defect" shall mean a defect, inherentlylying within the material or arising out of designdeficiency, which do not manifest themselves and/orwas not reasonably discoverable during DefectLiability period.
  • 25. 3. Interpretation Priority of documentsPurchase contract issued by NPCIL comprises anumber of documents all forming part of thecontract. There may be overlapping areas addressedin more than one document. For the purpose ofinterpretation, the priority of documents are given inthe GCC in the following order :-a)The contract agreement/Purchase Orderb)Special Conditions of Contract (SCC)c)General Conditions of Contract (GCC)d)Tender document excluding (b) & (c)
  • 26. Purchaser’s RepresentativeFor commercial matters :Authorised Officer of C&MM –SGM/GM/AGM/DGMNodal Agency for contract execution for alltechnical matters :Project Manager from Procurement/IndentingGroup.All Site related activities :Engineer-In-Charge as designated byPD/CCE
  • 27. Subject Matter of Contract 1.Scope of FacilitiesGeneral overall scope of EPC/SupplyContract(s) are specified in the respectiveGCC. For EPC Package, the scope isdefined right from design, engineering,procurement, manufacture, shop testing,quality assurance, transportation, unloadingand storage at site, all site work - erection,commissioning, performance, testing andhanding over.
  • 28. 1. Scope of Facilities (…contd.)Unless specifically excluded in the contract,the Contractor has to supply the materialsthat may not have been specificallymentioned in the tender/contract but that canbe reasonably inferred being required for theContractor to attain completion of hisobligation.
  • 29. 2. Time for CompletionTime is the essence of the contract.Failure to deliver in time is construed asbreach of contract.A breach in contract entitles the partysuffering from such breach to claim damagesfrom the other party who has breached thecontract.
  • 30. 2. Time for Completion(..contd)In EPC Contract, in addition to overallcompletion date, intermediate milestonedates for supply/part installation can also bespecified in the contract. These milestonedates are enforceable contractually and theContractor can be made to pay damages(LD) for not adhering to these milestonedates.
  • 31. 2. Time for Completion(..contd)However, in the event of overall completionwithin the final CDD, damages recovered fornot adhering to intermediate milestone datesare refundable to the Contractor.
  • 32. Contract Price and Payment Contract Price1. For contract(s) with contractual delivery period upto 12 months, the contract price shall be firm.2. For contract(s) with contractual delivery period exceeding 12 months, the contract price shall be subject to price adjustment either in positive or in negative side.
  • 33. Contract Price and Payment (…contd) Price Basis1. Price of supply items shall be on safe delivery basis to site.2. Basic price (except for civil works) shall be exclusive of all taxes and duties.3. For civil works, prices are inclusive of all taxes and duties.
  • 34. Contract Price and Payment (…contd) Price Basis4. For indigenous supply items break-up shall be shown between Ex-works price and safe delivery charges (i.e. inland transportation and transit insurance).5. For imported supply items break-up shall be shown as FOB Price, ocean/air freight and marine insurance, port handling/customs clearance (excluding customs duty), inland transportation and inland transit insurance.6. Price of commissioning/start-up spares shall be inclusive of basic price of the main equipment.
  • 35. Contract Price and Payment (…contd) Contract Currency1. For contract awarded through global tendering, foreign as well as Indian bidders can quote their price in Indian rupees and/or in any other three freely tradable foreign currencies, for supply items and expatriate field labour/ Supervisor for site work.2. For other prices like transportation charges (both import and indigenous), transit insurance, port handling charges, erection & commissioning etc. and civil works in Indian rupees.
  • 36. Contract Price and Payment (…contd) Price Adjustment Component of price eligible for price adjustment1. Ex-works of price indigenous plant and equipment including spares.2. FOB price of imported plant and equipment including spares. For the above (1) & (2) Price Adjustment ceiling of 20% of the total Ex-works/FOB price in respective contract currencies shall apply.3. Erection and commissioning price.4. Civil works price.
  • 37. Contract Price and Payment (…contd) Component of price eligible for price adjustment5. No price adjustment is allowed on spares, tools, tackles and accessories. Engineering charges, testing charges, analysis charges etc. payable separately shall also not be eligible for price adjustment.
  • 38. PRICE ADJUSTMENT FORMULA FOR SUPPLY PORTIONThe price adjustment formula to be applied to the ex-works/ FOB price- component of the supply items shallbe as follows: EC ( F + a.Ml f1+ b.Nl f2 + c.Ol f3+ d.Pl f4+ e.Ql f5+ lb.Ll flb ) M0 N0 O0 P0 Q0 L0 f = Z0 Z1Subscript ‘1’ refers to the indices/ exchange rates as on:a)90 days prior to the date of dispatch for labour component, andb)The expiry of 2/3rd period from the date of purchase order to the date of dispatch, for material component.
  • 39. PRICE ADJUSTMENT FORMULA FOR ERECTION PORTIONIndian Currency portion of the Erection &Commissioning ServicesThe formula for calculation of the monthly pricevariation of the cost of erection portion of theworks is indicated and explained below: E1 = E0 (0.25 + 0.75F1) F0
  • 40. Ex-works/FOB component of the Items (excluding spares, tools and tackles)
  • 41. 7. Terms of PaymentFor supply –(a) 10% advance on unconditional order acceptance.(b) 60% on pro-rata basis on despatch of items to site.(c) 20% on receipt of items at site.(d) 7.5% on handing over of facilities to the Purchaser.(e) 2.5% on completion of material accounting.Spares –(a) 75% on despatch of items to site.(b) 25% on receipt and acceptance of items at site.
  • 42. 7. Terms of Payment (…contd)For erection & commissioning –(a) 10% on site mobilisation.(b) 68% on pro-rata basis on completion of milestones as per approved billing schedule.(c) 2% on compliance of industrial safety requirement, along with (b) above.(d) 15% on handling over of facilities to the Purchaser.(e) 5% on completion of material accounting.
  • 43. 7. Terms of Payment (…contd)For civil works –(a) 10% on site mobilisation.(b) 78% on pro-rata basis on completion of milestones as per approved billing schedule.(c) 2% on compliance of industrial safety requirement, along with (b) above.(d) 10% on handling over of facilities to the Purchaser.
  • 44. 7. Interest on Delayed PaymentInterest will be paid to the Contractor in the event ofdelay in release of balance payment.a)In case of supply order, delay beyond 95 days fromthe date of receipt of goods at site.b)In EPC contract, delay in release of paymentagainst MRICAR beyond 95 days from the date ofreceipt of goods at site.c)For final payment against handing over offacilities, delay beyond 45 days from the date ofreceipt of all supporting documents in acceptableform.
  • 45. 7. Interest of Delayed Payment(…Contd)Rate of Interest Payable :a) For Indian currency : Prime Lending Rate (PLR) of State Bank of India.b) For Foreign currency : London Inter Bank Offered Rate (LIBOR)
  • 46. 8. Taxes & DutiesTO BE DEALT SEPARATELY IN DIFFERENTMODULE
  • 47. 9. Securities1. Contract security for Performance Bond as well as for advance/stage payments shall be only in the form of Bank Guarantee2. Bank Guarantee shall be from scheduled commercial bank in India or from a branch of Indian bank abroad.3. Bank Guarantee shall be exactly as per the format given in the GCC.
  • 48. 9. Securities (…contd)4. Performance Security Bond (PSB) Bank Guarantee of 10% of total contract value (supply plus erection) to be submitted within 30 days from the date of award of contract.5. PSB BG validity till satisfactory completion of defect liability period and further claim period of 3 months. In case of EPC Contractor of foreign origin assigning site work to another entity, the entity for the site work shall submit another PSB Bank Guarantee of 10% of the value of the work assigned to him.
  • 49. 9. Securities (…contd)6. Performance Security Bond (PSB) Bank Guarantee is extendable for extension in defect liability period.7. PSB can be released on successful completion of defect liability period including extension, if any.
  • 50. 9. Securities (…contd)Bank Guarantee for advance/stage payments :1. Bank Guarantee of the full value of advance/stage payments valid till contractual delivery date with a further claim period of three months.2. Bank Guarantee can be cancelled/reduced in value once in 6 months to the extent of adjustment of the advance/stage payment against bills paid.3. Contractor has to extend the validity of both the Bank Guarantees for delay in supply/completion.4. In the event of delay being caused by reasons attributable to Purchaser, Bank Guarantee extension charges shall be borne by the Purchaser.
  • 51. 9. Securities (…contd)Latent Defect Bank Guarantee :1. 1% of the total value of supply items to be submitted at the end of defect liability period valid for 5 years therefrom.Indemnity Bond for Free Issue Material (FIM) :1. Indemnity Bond indemnifying Purchaser against loss or damage of FIM issued for fabrication at Contractor’s works outside Purchaser’s site.
  • 52. 1. Completion Time GuaranteeThe Contractor is deemed to have given a guaranteefor completion of Contract which shall be attainedon or before contractual delivery date.He is also deemed to have guaranteed that he shalladhered to contractual milestone dates.
  • 53. 2. Delay in Supply Delay in SupplyReasons for delay in supply can be classified intothe three heads :1. Delay attributable to the Contractor.2. Delay attributable to the Purchaser.3. Delay due to occurrence of one or more Force majeure events.
  • 54. Delay in Supply(…contd) Consequences of DelayWhere delay attributable to the ContractorThis provides option to the Purchaser :1. Accept the delayed supply with recovery of liquidated damages at specified rate applicable for the Contractor.2. To terminate the contract in full or parts and exercise the rights to the Purchaser available in GCC.
  • 55. 3. Liquidated DamagesIt is a predetermined compensation the Purchaser isentitled to recover from the Contractor in the eventof delayed supply.Rate of liquidated damages are 1%, 0.5% and0.25% for contracts upto 1 year, beyond 1 year andupto 2 years and beyond 2 years duration ofcontracts respectively.Only supply contract, liquidated damages to belevied on the value of the delayed portion only.
  • 56. Liquidated Damages (…contd)For EPC Contract, liquidated damages to be leviedfor the total contract value.In addition, for EPC Contract, liquidated damagesto be also levied for failure by the Contractor oncertain specified milestone dates of supply and/orerection activities.In the event of such levy of liquidated damages onmile stone rates, if the final date is achieved theliquidated damages recovered on milestone to berefunded.
  • 57. 4. Defect LiabilityThe Contractor shall give warranty for plant, equipment andfacilities supplied by them till completion of defect liabilityperiod.Defect liability period for only supply contract is 18 monthsfrom the receipt at site or 12 months from the acceptance,whichever is earlier.Defect liability for EPC packages, 18 months from the dateof completion of facilities (satisfactory erection and pre-commissioning) or 12 months from the date of operationalacceptance of the facilities, whichever occurs first.If the Contractor fails to make desired repairs/replacementduring the defect liability period, within 15 days of issue ofnotice, the Purchaser can get repaired/replaced done fromalternative sources at the cost of the Contractor.
  • 58. Extension of Defect Liability Period a) If facilities supplied under a contract could not be operated during defect liability period due to defects, the defect liability period of the facility shall be extended by period equivalent to such non-availability period.b) Defective parts of the facilities repaired in defect liability period shall have an independent 12 months warranty from the date of completion of such repair/replacement.
  • 59. 5. Latent Defect LiabilityFrom the end of defect liability period, theContractor will continue to be liable forlatent defects of the plant and equipmentsupplied by him for another period of 5years.
  • 60. 6. Transfer of OwnershipOwnership of goods to pass from Contractor to thePurchaser for :a)For indigenous goods supplied from within the same Stateas a site is located ownership of transfer when the goods arebrought to site.b)Ownership of indigenous stores in interstate transactionshall be transferred on sale in transit basis.c)Ownership of imported stores, for direct order shall betransferred on FOB basis.d)Ownership of imported goods (through Indian Contractor)shall be transferred on high sea sale basis.e)In EPC Contract, transfer of ownership to the Purchasernotwithstanding the Contractor shall continue to responsiblefor successful handing over of the facilities to thePurchaser.
  • 61. 7. Care of the FacilitiesFrom commencement of the work on the facilitiesat site till successful handing over to the Purchaser,the Contractor shall remain responsible for care andcustody of the facilities.In the event of any loss and/or damage of thefacilities or the equipment, the Contractor at its ownexpenses repair the affected items.The Contractor shall also be responsible for loss ordamage to the facilities caused by him or his sub-contractor in the course of work carried under hisdefect liability obligation.
  • 62. 7. Care of the Facilities(…Contd)Above obligation notwithstanding, the Contractorshall not be liable for any loss or damage to thefacilities at site for which he could not get anyinsurance from the market to cover his risk.There are only two risk which falls under thiscategory namely-War and Nuclear incident.The Purchaser should bear these loss even beforehanding over of the facilities.The Contractor is also not liable for losses, loss ofuse in design, data or specifications provided by thePurchaser.
  • 63. 8. IndemnityThe Contractor to provide the following Indemnityto the Purchaser.1)Intellectual Property Rights (IPR Identification)2)Indemnity against physical loss or damage to thefacilities before handing over to the Purchaser.3)Indemnity against latent defects for a period of 5years starting from completion of defect liabilityperiod.4)Indemnity against non-compliance of statue.5)Indemnity against damage of FIM.6)Indemnity against third party life and propertyloss claims arising out of nuclear events at site.7)Indemnity against taxes and duties.
  • 64. 9. Limitation of LiabilityThe Contractor shall not liable for anyindirect or consequential loss or damage, lossof use, loss of production, loss of profit orinterest costs. The liability of the Contractorto the Purchaser shall not exceed the totalcontract price.
  • 65. 10. InsuranceThe Contractor to take at his own cost, the followinginsurances for an EPC package contract.a)Transit insurance as per ICC Clause A with war andSRCC provisions.b)Storage-Cum-Erection risk insurance policy.Both the above insurance policies shall be taken at fullreplacement value of the plant and machinery.c) Insurance for contractor’s personnel.d) Third party liability insurance.e) Automobile liability insurance.Insurance claim Proceeds shall come to the purchaser fisstThe Purchaser shall disburse the amount to the Contractorfor expenses incurred in respect of repair/re-installation ofthe damage facilities.
  • 66. 11. Force MajeureForce majeure shall mean any event which is beyond the controlof the Contractor or the Purchaser, which substantially affects theperformance of the contract.Eg:a) War, hostilities or warlike operations (whether a state of war bedeclared or not), invasion, act of foreign enemy and civil war,b) Rebellion, revolution, insurrection, mutiny, usurpation of civilor military government, civil commotion,c) Embargo, import restriction, confiscation, nationalization,mobilization, commandeering or requisition by or under the orderof Central, State Government or Local Authority in India or anyother act or failure to act, of any local, state or nationalgovernment in India,d) Riot, state/region/country wide transporters strike,e) Earthquake, landslide, volcanic activity, fire, flood orinundation, tidal wave, typhoon or cyclone, hurricane, storm,lightning and pressure waves or other natural disaster,f) Nuclear event causing nuclear radiation, radioactivecontamination.
  • 67. 11. Consequences of Force Majeure No delay or non-performance by either partycaused by any event of force majeure shall :a)Constitute a default or breach of the contract canb)Give rise to any claiming for damages oradditional expenses caused thereby.c)The contract period shall get extended to coverdelay caused by force majeure without levy ofliquidated damages.d)Any increase in taxes and duties is also payable inthe case of such extensions due to force majeure.e)No price adjustment to be applied during suchextensions due to force majeure.
  • 68. 12. Change in FacilitiesBoth Purchaser and the Contractor have the right topropose a change in facilities during theperformance of the contract provided such changefalls in the general scope of facility and does notconstitute unrelated work.No change made necessary because of any defaultof the Contractor shall be deemed to be a changeand such change shall not result in any adjustmentof the contract price or time for completion.
  • 69. 12. Change in Facilities(…Contd)When a change is proposed either by the Purchaseror the Contractor, the Contractor shall prepare a‘Request for change proposal’ which shall includeamong the others the following :a)Description of the change.b)Effect on the time for completion.c)Cost of changed)Effect on functional guarantees.e)Effect on any other provisions of the contract.
  • 70. 12. Change in Facilities(…Contd)The Purchaser and the Contractor shall mutually agree uponall related points of the change proposal. On suchagreement Purchaser shall intimate to the Contractorwhether or not to proceed with the change.If the Purchaser and the Contractor can not reach agreementon the price for the change and/or equitable time forcompletion or any other matters related to such changeproposal, Purchaser may still instruct the Contractor toproceed with the change.The Contractor to proceed with the change as per suchinstruction by the Purchaser. However, all issues need to besettled within 90 days from the date of issue of instruction tothe Contractor to proceed with the change, failing whichmatter can be referred to arbitration.
  • 71. 13. Pricing the Change ProposalFor EPC contracts in which detailed engineering and BOQis given by the Purchaser any change in quantity will beregulated as follows.a)Items for which rates are available in the purchase order,total additional quantity upto +25% of the original purchaseorder value ordered within CDD will be paid at purchaseorder rate plus price adjustment.b)For additional quantity beyond +25% of the purchaseorder value, any quantity ordered beyond CDD and for othernew items, will be paid at FOR site price + 15%.c)Any deduction in purchase order quantity will be done atpurchase order rate.
  • 72. 14. Time for ExtensionTime for completion shall be extended if the Contractor isdelayed in the performance by reason of any of thefollowing :-a) Any change in the facilities.b) Any occurrence of force majeure.c) Any suspension order given by the Purchaser.d) Any delay in approval of drawing.e) Any default of the contract by the Purchaser.f) Delays attributable to the Purchaser.g) Any delay in issuing Erection Completion Certificate.
  • 73. 15. Time OverrunIn the event of delay in completion andhanding over of the facilities beyond CDDby the Contractor due to specific site relatedissues for which Purchaser is responsible, theContractor shall be entitled to compensatefor additional expenses for extended stay atsite to the extent required for such reasons inaddition to extension of time.
  • 74. 16. Suspension of WorkPurchaser may order the Contractor suspend thework by giving notice for the following reasons :a) On account of any default of the Contractor.b) For proper execution of the facilities or partthereof.c) For safety of the facilities or part thereof suchnotice should clearly specify :i)Which performance (work) to be suspended.ii)Effective date of the suspensioniii)Reasons thereof.
  • 75. 16. Suspension of Work(…Contd.)The Contractor shall be entitled to an extension ofthe time equal to the period of every suchsuspension plus 25% based on above reasons.If suspension period exceeds 30 days, theContractor shall also be entitled for compensation.Contractor may demobilize resources if suspensionperiod exceeds 30 days.However, the Contractor is not entitled forextension/compensation, if any default of theContractor.
  • 76. 17. Prolonged Suspension If suspension order given by the Purchaser, other than the reason of the Contractor’s default or breach of the contract and Contractor’s works get suspended for more than 90 days then the Contractor may give a notice to the Purchaser for resumption of works (within 28 days of receipt of notice). If the Purchaser fails to do so within such period, the Contractor may by a further notice to the purchase to delete such part or whole of the facilities, as termination of the contract. No claim for deletion portion of the work by the Contractor.
  • 77. 18. Resumption of WorkOnce permitted, the Contractor and thePurchaser shall jointly examine the facilities,plant and material affected by thesuspension.
  • 78. 19. Foreclosure of ContractAfter acceptance of the tender/during execution ofwork, the Purchaser shall decide to abandon orreduce the scope of work.The Purchaser or Engineer-In-Charge shall givenotice to the Contractor for foreclosure of contract.Upon receipt of the notice, the Contractor shall :a)Cease all further work.b)Terminate all sub-contract.c)Stop all further purchasing and/or sub-contracting.d)Remove all Contractor’s equipment from the site.
  • 79. 19. Foreclosure of Contract(…Contd)In such cases, the Purchaser shall have the option totake over Contractor’s material or any part thereof.In the event of foreclosure of the contract underGCC, the Purchaser shall pay to the Contractor.The full amount of contract rates, properlyattributable to supplies completed and/or the part ofthe facilities executed by the Contractor as of thedate of foreclosure.
  • 80. 20. Termination of Contract in full or PartThe Purchaser without prejudice to any other rightmay terminate the contract forthwith as a whole oronly such item of work in default, in the followingcircumstances.a)The Contractor shall offer or agree to give to anyperson in the Purchaser’s service any gift orconsideration of any kind as an inducement.b) The Contractor shall enter into contract with thePurchaser in connection with which commissionhas been paid or agreed to be paid.c) The Contractor shall obtain a contract with thePurchaser as a result of wrong tendering.
  • 81. 20. Termination of Contract in full or Part(…Contd)d) Adopts or has engaged ‘fraudulent practice’.e) Adopts or has engaged in ‘coercive practice’.f) Being an individual or if a firm, any partnerthereof, shall at any time be adjudged insolvent.g) Being a company, shall pass a resolution or thecourt shall make an order for the liquidation of itsaffair.h) Shall suffer an execution being levied on hisgoods.i) Attempt to assign, transfer or sub-contract theentire works or any portion thereof without theprior written approval of the Purchaser.
  • 82. 20. Termination of Contract in full or Part(…Contd)In the event of default by the Contractor, thePurchaser may without prejudice to any other right,give a notice to the Contractor in the followingcircumstances : If the Contractor –a) Has abandoned or repudiated the contract.b) Has without valid reason failed to commencework.c) Persistently fail to execute the contract.d) Refuse or is enable to provide sufficient materialservices etc.e) At any time makes default in proceeding with theworks with due diligence.
  • 83. 20. Termination of Contract in full or Part(…Contd)f) Commits default in complying with any of theterms and conditions of the contract.g) Fail to deliver the stores.h) Fail to complete the facilities and hand over it.
  • 84. 21. Termination of Contract on DeathIf the contractor is an individual or aproprietary concern and the individual or theproprietor dies or if the contractor is apartnership concern and one of the partnersdies then unless the purchaser is satisfied thatthe legal representative of the contractor arecapable, the purchaser shall be entitled tocancel the contract as to its incomplete partwithout the purchaser being in any wayliable to pay any compensation to the estate,of the deceased contractor and/or survivingpartners.
  • 85. 22. Settlement of DisputeSettlement by mutual consultationIf any dispute arise between the purchase and thecontractor in connection with the contract regardingits existence, validity or termination or execution atthe facilities, the parties shall seek to resolve anysuch dispute or difference by mutual consultation.In case parties fail to resolve such dispute ordifference by all such mutual consultations then theeither party may give a thirty(30) days notice to theother party conveying its intention to commenceArbitration.
  • 86. 23. Settlement of Dispute (…Contd)Settlement by ArbitrationAny dispute in respect of which notice of intentionto commence Arbitration has been given, shall befinally settled by arbitration.Consequent to issue of notice of intention tocommence Arbitration by either party, both thepurchase and the contractor shall appoint oneArbitrator each. These two Arbitrators shall agreebetween themselves and shall appoint thirdArbitrator. The issue in dispute shall then bereferred to these Arbitrators. The decision either byconsensus or by majority of these three Arbitratorsshall be final and binding on both the parties.
  • 87. 23. Settlement of Dispute (…Contd)Settlement by Arbitration(…Contd)For contract awarded to a foreign contractor or to aconsortium in which the Foreign contractor is thelead partner, Rules of Conciliation and Arbitrationof the International Chamber at Commerce shallapply to Arbitration proceedings.For contract awarded to public sector enterprise, allmatters in dispute to be settled through arbitrationshall be referred to the permanent Arbitrationmechanism (PAM) of the Dept. of PublicEnterprise, Govt. of India.