48723394 contract-management

PROGRAMME
ON
“CONTRACT MANAGEMENT”

CONTENTS
Page No.
1. Legal History of Contracts
05
2. Towards Contract Offer
32
3. Engineering Contracts and Contract Management
36
4. Taxes and Duties
73
5. Negotiations
80
6. Bank Guarantees
86
7. Time Schedule and Liquidated Damages
91
8. Insurance Aspects
97
9. Letter of Credit
105
10. Standard Price variation
109
11. Arbitration
115
12. Cost over run – Time over run
121

13. Legal Terms Versus Engineering Terms
128
14. Landmark Judgments – Citation
141

1. LEGAL HISTORY OF CONTRACTS
100EVOLUTION OF LAW OF CONTRACTS
1.0 India is an ancient country with a civilisation and culture back ground of its own
which is distinct from European and even other Asian States. But its modern
development as a constitution is mainly due to its contact with Europe. The
events which led India to come into contact with Europe is due to the capture of
Constantinople and the discovery of the New World. The Cape of Good Hope
opened a new chapter in the history of Europe. The enterprising merchants of
Europe opened up the trade with the East as well as of the West. In 1499
VASCO DA GAMA, a Portuguese, landed at Calicut on the Malabar coast, which
can be said to be a prelude to the establishment of the Portuguese Empire in the
East. The Portuguese began to trade with India. Then the Dutch, the English and
the French followed the Portuguese in establishing trade with India. The power of
the Mughal Empire was at its Zenith when trade centres were first established in
India by the merchants of Europe. Purely commercial interests prevailed in their
trade in India. But, there arose keen competition between the merchants of the
European States in India due to large volume and many richness available. The
competition became very perilous and it came to be backed by armed forces.
Hence chartered companies came into existence to meet the situation. In India
also, the power of the Mughal Empire declined in the eighteenth century and in its
place nobles and chiefs came to establish separate kingdom. Major part of India
under one great Mughal Empire came to be divided into several small contesting
principalities. This created a golden opportunity for the merchants of Europe to
establish themselves firmly in India.
1.1 Slowly the Britishers took possession of land needed for the trade storage space
for goods
inward and outward. Later slowly enlarged it for then own universal trade
operations, by the same time, the trade by Dutch, French and Portuguese declined.
The Britishers took over large trade measures. Towards this enlarged trade
operations, they acquired lands and later created British Empire in India.
2.0 Queen Elizabeth-I granted to some London merchants a charter of incorporation
on the
last day of December, 1600. This charter of 1600 created a trading company.
2.1 The company carried its business on democratic lines. The company started
acquiring
Lands, property and all these are to be properly governed and suitably
administrated. The charter further granted legislative power to the company to
make laws, orders and regulations for the good government of the company and
its servants and to punish offences against them by fine or imprisonment
according to law status and customs of the realm.

3.0 The Charter of 1661. Under the Charter of 1661, the company was
authorised to
appoint Governors and Councils in its settlements. A general judicial
authority was given to the Governor and Council of each factory. It granted
the judicial power to the Governor and Council of a factory which meant the
Executive Government of the place. There was however, no line of
demarcation between the executive and judiciary. It paved the way for the
administration of justice according to English Law.
3.1 Thereafter, the principal role in the Indian scene was played by three Presidency,
viz., Mumbai, Chennai and Calcutta.
3.2 Then the English company entered into a treaty with the Mughal Emperor. The
treaty was the turning point in the legal history of India. Bu the said treaty, the
English Company secured the following privileges:
1. The disputes amongst company’s servants will be regulated by their own
tribunals.
2. The English people will enjoy their own religion and laws in the administration of
the company.
3. The local native authorities will settle such disputed cases in which English and
Hindus or Muslims were parties.
4. The Mughal Governor or Kazi of the relevant place will protect the English
people from all sorts of oppression and injury.
3.3 In 1716, Courts of Judicature consisting of the Chief Justice, five English and four
Indian Judges respectively in various communities were established. They were
required to administer justice according to caste, customs, orders of the company
and the Laws of England. In 1726, Letters Patent were granted by George-I
which created for the first time Crown Courts in the three Presidencies of
Mumbai, Chennai and Calcutta on a uniform and permanent basis. It also
established Municipal corporations in the three Presidencies. The Municipals
consisted of a Mayor and nine Aldermen. Seven of the Aldermen and the Mayor
to be English. The Mayor and Aldermen constituted a Court which was known as
Mayor’s Court in the Presidency Towns.
4.0 PLAN 1772
4.1 The of Circuit prepared the first judicial plan on August 15, 1772. The same was
the first step to regulate the machinery of administration of justice. The plan was
a land mark in the judicial history of India and the same became famous as
Warren Hasting’s Plan of 1772.

4.2 The judicial plan of 1772 was the first of its kind for the administration of justice
within the framework of the country. Warren Hastings amply exhibited his desire
to promote impartial and less expensive justice.
4.3 The new plan was thus designed to provide for the first time after long years, a
semblance of justice, to the people and save them from exploitation in the name
of justice.
4.4 Certain changes in the Judicial Plan of 1772 was needed and it was through
Regulating Act of 1773 these changes were enacted. Then, Supreme Court of
India was first established at Calcutta. This regulating act eliminated the ills and
evils of the judicial plan of 1772.
4.5 Subsequent to this, certain reforms and changes were called for due to certain
specific cases like trial of Radha, Churan, execution of Raja Nand Kumar, Patna
Case and Cossijurah’s Case. Due to these things and certain representations an
Act of Settlement was reached in 1781 by the then British Parliament. By this
act, the judiciary and administrative measures had been clearly defined and
formulated to act independently.
5.0 It was Lord Cornwallis, who made a remarkable and highly constructive
reforms which formed the basis for the development of legal history and theory
besides, large contributions of LORD WARREN HASTINGS. It was really
LORD CORNWALLIS who had given a deep thought to the Mohammedan Law
prevailing at that time and made lot of reforms by creation of separate judicial and
revenue functions, reorganisation of Civil Courts, formation of Municipal Courts
and Registrar’s Courts. It was, further, he who realised the importance of need
for, to a well organised and regulated Provincial Courts and need for Professional
Lawyers. He introduced further modifications in 1790. It could, easily therefore,
be said LORD CORNWALLIS land the foundation for the legal and judiciary
systems in India.
5.1 The successive British General who held high esteemed office during the
erstwhile British period modified and developed, by studying the weaknesses in
the system created by LORD WARREN HASTINGS and LORD CORNWALLIS
and later the formation of Central Government, Central Legislative, Local
Governments, Local Legislative, relations between Central and Provinces, Indian
financed, defence, frontier relations, administrative and political relations,
judicial and legal system in the services, formation of Indian Civil Services and
establishment of High Courts were followed one after another, keeping in view
the needs of the people and prevailing conditions at that time.
5.2 The successive Law Commissions established during various periods further
improved the system and First Law Commission headed by Lex Loci, prepared
draft Penal Code, draft, Code, draft, Code of Civil Procedure and draft Law of

Limitation, Law of tort, Law of crime. Later, Indian Civil, Indian Police Service,
Indian Forest Service, Indian Engineering Service, Indian Educational Service,
Indian Medical Service, Indian Agricultural and Veterinary Service, Public Works
Department, Railway Board, Post and Telegraphs, Customs Services were created
to serve the needs of the society.
6.0 The Law of Contracts was also enacted during the period 1872. It is called
INDIAN CONTRACT ACT 1872, exclusively to deal and regulate the
commercial business transactions between parties to the contract.
101INDIAN CONTRACT ACT 1872
1.0 Every person living in any State in the Country is governed by Law of that state.
The enactment of the various laws is the outcome of the necessity of regulating
their dealings, habits, convention, culture, customs, rights, duties etc. of the
people and to establish the society towards the needs and demands growing day
by day. The object of law relating to contract is to regulate the dealings between
individuals, between individual and company, between companies and so on
between two different parties. Before the proper codification of the law on this
subject, dealing between the parties as stated above, were governed on the basis
of customs, conventions, precedents and the usage of the religion. Towards the
contracting parties along with the growth of society, advancement of civilisation,
science and technology, the codification of the law relating to dealing with these
matters became an absolute necessity. Parties become aware of their needs,
obligation rights etc. in the deals between them. In order to achieve this
objective, the State thought it necessary and imperative towards the law
government these dealings between the persons concerned in certain uniform way
and accordingly enacted the law which is called “ LAW RELATING TO
CONTRACTS” and in India it is mainly incorporated in THE INDIAN
CONTRACT ACT 1872. Thus the Indian Contract was born in 1872. In short it
is defined and described as under.
1.1 According to the ordinary meaning attached to the word contract, all agreements
made by persons are contracts. But it is not so according to Law related to
contracts. According to the definition of ‘Contract’ maintained in the law of
contracts, only those agreements are contracts which are enforceable in law,
having made with the free consent of the parties, by person, competent to contract
with each other for a lawful consideration and lawful object and which are not
expressly declared to be void by stature. This is subject to any special law
according to which a contract should be in writing attested by witnesses and
registered under the law of reputations in force from time to time.
A knowledge is essential for the executive in the Contracts /
Purchase / Sales
Department on all these important legal acts namely:

The Indian Contract Act 1872
The Sale of Goods Act 1930
The Arbitration Act and
Conciliation Act 1996
The Limitation Act 1963
2.0 A contract has been defined as an agreement enforceable in law. In order to
constitute as agreement, there must be a proposal and an acceptance to the
proposal. For such an agreement to become legally binding and result in a valid
contract, it is essential that -
there must be free consent to the parties concerned
parties must be competent to contract
there must be a lawful consideration
the object must be lawful
the agreement must not be expressly declared to be void
the agreement must comply with the provision of any law requiring it to
be in writing or attested or registered.
A valid binding contract originated from an offer given by a person who signifies
to any other his willingness to do or to abstain from doing anything with a view
to obtaining the assent of the other to such act or abstain, which is called a
proposal. When a person to whom the proposal is made signifies his assent in
toto the proposal is said to be accepted. A proposal when accepted becomes a
promise. The person making the proposal after its acceptance of the offer by the
other, is called the promisor and the person accepting the proposal is called the
promisee.
Every promise has a consideration
All these are built in the Indian Contract Act – 1872 which has 10 clear chapters
with 238 different sections.
2.1 The Indian Contract Act, 1872
It contains 238 sections under 10 Chapters out of which Sections 76 – 123 of
Chapter VII is taken out and Sale of Good 1930 enacted.
The most important sections of the Contract Act 1872 which are essential, are
noted below:
Section Chapter Items
10 II What agreements are contracts
11 II Who are competent to contract
37 IV Obligations of parties to contract
40 Person by whom promise is to be performed.
50 Performance in manner of at time prescribed of sanctioned
by promise.

51 Premised not bound to perform unless reciprocal promise
ready and willing to perform.
52 Order of performance of reciprocal promises.
53 Liability of party preventing event on which contract is to
take effect.
54 Effect of default as to the promise which should be
performed in contract consisting of reciprocal promises.
55 IV Effect of failure to perform at fixed time in contract in which
time is essential.
67 Effect of neglect of promises to afford premised reasonable
facilities for performance.
73 VI Compensation for loss or damage caused by reach of
contract.
74 Compensation for breach of contract where penalty stipulated
fer.
126 VIII Contract of guarantee surely principal debtor and contractor.
2.2 Sale of Goods Act 1930
2.2.1 Goods means every kind of movable property other than actionable claim and
money and
Includes stock, shares, growing crop, grass and things attached to and forming
part of the land. Future goods means goods to be manufactured or produced.
2.2.2 Born out of the Indian Contract Act 1872, is the Sale of Good Act. It was enacted
in 1930 and is applicable in all the states of India except Jammu and Kashmir.
Since, in most of the Commercial transactions in the contract between the agreed
parties, involved transfer goods, movement of goods and transfer of ownership /
title of goods, it has become necessary to enact this Sale of Goods Act to define it
clearly.
2.2.3 There are ( 66 ) sixty six sections under ( 7 ) seven chapters.
The most important sections of the Sale of Goods Act 1930, which are essential,
are noted below:
Sections Chapter Items
5 II Contract of Sale how made
6 II Existing or future goods
11 II Stipulation as to time
12 II Condition and warranty
18 III Goods must be ascertained
31 IV Duties of seller and buyer
32 IV Payment and delivery are concurrent conditions
42 IV Acceptance
56 VI Damages for non acceptance

57 VI Damages for non delivery
59 VI Remedy for breach on warranty
2.2.4 Doctrine of CAVEAT EMPTOR
Caveat Emptor means “ Purchaser beware “, when a person enters into a contract
for the purchase of goods, this maxim comes into operation and the buyer will be
obliged to fulfil the contract even if he has made any mistake in assessing the
quality of the goods which he is buying.
2.3 The Indian Arbitration Act, 1996
Section Chapter Items
10 III Number of arbitrators
11 III Appointment of arbitrators
12 III Grounds of challenge
16 IV Competence of arbitral tribunal to rule on its jurisdiction
17 IV Interim measure ordered by arbitral tribunal.
18 IV Equal treatment of parties.
20 V Place of arbitrators.
26 V Expert appointed by arbitral tribunal.
31 VI Form and contracts of arbitral award.
3.0 LAW OF CONTRACTS
3.1 Objects of Contract
The purpose of Law of Contract is to ensure the realisation of reasonable
expectation of the parties who enter into contract.
3.2 Essential of a Contract
Two Parties
Offer and Acceptance
Promise
Consideration
Capacity
Free consent of the parties
Must be for a legal object.
Not opposed to public law
Possibility of performance
Not prohibited by law.
3.3 Classification of Contracts
Void Contract
Voidable Contract

Executory Contract
Executed Contract
Unilateral Contract
Bilateral Contract
Implied Contract
Guarantee Contract
Contingent Contract.
3.4. Formation of a Contract.
Agreement over an offer and an acceptance
3.4.1. Offer
Must be definite
Intended to give rise to legal consequence
Must be from a competent person
Qualified to make an offer
Must be communicated.
3. 4.2 Acceptance
Must be communicated in a reasonable manner & time specified
Must be made before the offer is revoked or rejected
Must be absolute, unconditional and shall correspond with the mutually agreed
terms.
Must be made only by a person or party to whom the offer has been made.
3.5. Lapse of Offer
After the stipulated time
Due to enactment of law
Due to the death of the offer or.
Due to counter offer.
Due by rejection by the offeree.
3.6 Revocation of the Offer
May be revoked by the offer or before its acceptance even though originally
agreed to hold it open for a definite period.
3.7 Terms
3,7.1. Promisor: The person making a proposal is called the promisor.
3.7.2 Promisee: The person accepting the proposal the promisee.
3.7.3. Promise: When the person to whom the proposal is made signifies his assent

thereto, the proposal to said to be accepted. A proposal when accepted becomes
promise.
3.7.4. Consideration: Consideration is what a promisor demands as a price for his
promise .
3.7.3 Discharge of Contract.
By accord and satisfaction
By novation
By an agreement
By breach
By impossibility to perform
By waiver.
4 .0. DEFINITION
4.1 GENERAL TERMS
ACCEPTANCE ACCEPTANCE SHALL MEAN THE
MANIFESTATIONS BY THE OFFEREE OF
HIS ASSENT TO THE TERMS MUTUALLY
AGREED TERMS OF THE OFFER BY THE
OFFERER.
Agreement Agreement shall mean mutual understanding
between the parties which creates obligations
between each other.
Base data Base date shall a notional date generally fixed
as 1 month prior to the date set of opening of
tenders Part I to reckon the Published indicates
for raw materials/ labour etc. for computing the
Price Variances.
Bid: Bid shall mean a valid offer made against any
tender enquiry, indicating terms, conditions
and prices.
Bidder: Bidder shall mean a person/
party/firm/company/consortium who submits
an offer / bid against a tender enquiry.
Bill of Quantities: Bill of Quantity shall mean the completed bill
of quantities for various item descriptions
forming part of the bid.
Billing Schedules: Billing Schedule shall mean the items,
description and Quantities arrived at after
detailed deigns and engineering are prepared.
It generally occurs in lumps sum price contracts,
where rates are fixed up for such items, based on
the break up prices indicated in the offer.
Codes: Codes and Standards shall mean such codes

and standards as prescribed in
ISS/DIN/BSS as applicable to the
equipments, components, plants machinery,
consumables. ASM Test Codes – AIEE
Codes – Indian Electricity Act, Indian
Explosives Act, Indian Petroleum Act,
Indian Mines Act.
Commencement data Commencement date shall mean the date
specified in the Letter of intent/ Award /
Letter of acceptance / contract agreement.
Commissioning Commissioning shall mean integrated
activity of operation of all equipments,
links in the system and carrying out the
performance tests.
Completion Final acceptance certificate / Completion
certificate.
Certificate /Final Acceptance certificate Shall mean the certificate issued by the
Engineer / Employer / Owner to the
Contractor after satisfactory completion /
execution of the works and compliance of
all the applicable terms and conditions
covered by the Contract agreement/ award
LOI and the accepted modifications thereon
which will enable the Contractor to get his
final payment.
Conditions: Condition shall mean the conditions agreed
between the parties and stipulated in the
Contract agreement.
Consultant Consultant shall mean the consultant
/consulting firm, independent professional
engaged by the employer / purchaser.
Contract period: Contract period shall mean the period /
time schedule agreed in the contract during
which period the contracted work shall be
performed / executed.
Contract price: Contract price shall mean the price
accepted in the contract between parties
and adjustment if any during contract
period.
Contract: The contract shall mean an agreement
between the employer and contractor for
execution of certain works as per agreed
terms, conditions specifications, prices and
enforceable as per law.
Contractor: Contractor shall mean successful bidder
whose bid/offer has been accepted by the

employer/ purchaser.
Day: Day shall mean the period between
midnight to next midnight.
Defect liability period: Defect liability period shall mean the
agreed period specified in the contract
following the taking over / commissioning
during which period the contractor shall be
responsible for making good the defects at
his cost.
Defect: Defect shall mean the lack of something
necessary for completion /performance.
Demurrage : Demurrage shall mean the detention of a
Vessel / ship by the freighter beyond the
allowable time for sailing, loading and
unloading operations.
Dimensions: Dimensions shall mean length, area volume
etc. all expressed in metric system.
Drawing: Drawing shall mean such drawings
provided along with bid documents /those
submitted by the bidder along with the
offer / submitted during the progress of
work by the Contract / employer /
Consultant and later approved.
Employer: Employer shall mean the person / firm /
company named who shall engage / employ
the Contract to carry out / perform the
works.
Final acceptance certificate / Completion
Certificate
Final acceptance certificate / Completion
certificate shall mean the certificate issued
by the Engineer/Employer/Owner to the
Contractor after satisfactory completion
/execution of the works and compliance of
all the applicable terms and conditions
covered by the Contract agreement /
award / LOI and the accepted modifications
thereon which will enable the Contractor to
get his final payment.
Force Majeure: Force majeure shall mean an irresistible
force or compelling circumstances beyond
one’s control.
Foreign currency Foreign currency shall mean the currency
other than the Indian Rupee.
Gross misconduct Gross misconduct shall mean any act or
omission of the contractor in violation of
the most elementary rules of diligence
which a conscious contractor in the same

position and the same circumstances would
have followed.
Inspecting Officer / Engineer Inspecting Officer / Engineer shall mean
any employee of the Employer / Purchaser
or Consultant or organization or agency
specified / intimated for the purpose of
inspection of goods kept ready.
Instruction Instruction shall mean any drawing,
instruction written, directions explanations
issued by the Employer/ Purchaser /
Consultant.
Letter of award Letter of award shall mean the official
communication issued by the Employer /
Purchaser notifying legally to the bidder
that his bid has been accepted on mutually
agreed terms, conditions and prices.
Letter of Credit Letter of Credit shall mean a documentary
proof of the availability of credit which can
be operated by presenting documents called
for
Manufacturer Manufacturer shall mean a person firm /
company who manufactures and / or
produces Plant, Equipment, Component
Spare Parts etc.,
Minutes of meeting Minutes of Meetings – MoM shall mean
officially recorded statement of points /
issues discussed between the parties and
signed by authorized representatives.
Month Month shall mean English Calendar month.
Notice Notice published by the Purchaser with the
intention to invite offer/ bid for his
requirements.
Plant Plant shall mean equipment, machinery
apparatus, instruments and all other things
forming integral part of the work to be
provided in the contract for due
performance of the work / system
Price Price shall mean the price agreed in the
contract between the parties towards the
scope of work.
Programme Programme shall mean a plan of action
agreed towards performance of the scope of
work in the contract.
Project Project shall mean the project specified in
the tender documents and specification.

Provisional take over Provisional take over shall mean
acceptance of prima facie and in principle
subject to completion of / fulfillment of
certain conditions. This is not a complete
acceptance of work entitling the contractor
to get full payment or to assume that all the
obligations and terms and conditions of the
contract have been fulfilled to the
satisfaction of the Owner / Purchaser.
Repel Repel shall mean refuse to accept or agree
to or subject to.
Revocation Revocation shall mean rescindment of
withdrawal.
Risk Risk shall mean an act, / action, / hazard
that causes injury or damage or loss to
persons and or property.
Schedule Schedule shall mean timed plan of action of
event for a Project or work.
Site Site shall mean the land acquired and set
for the location of the project / work.
Specification Specification shall mean the Technical –
Commercial specification including
modification set in the tender / contract
documents.
Sub-contractor Sub-contractor means a Contractor selected
with the approval of Purchaser to supply
certain items included in the scope of work.
Sub- Supplier Sub- Supplier means the supplier selected
with the approval of the purchaser to
supply certain items included in the scope
of work.
Taking over certificate Taking over certificate shall mean the
certificate issued by the Employer /
Purchaser to the Contractor. It means
physical possession of the erected plant
with or without minor defects and
deficiencies in work subject to testing and
fulfillment of guaranteed design
parameters.
Tender Tender shall mean the bidders’ offer with
his terms, conditions, specification and
prices to perform the scope of work.
Test Test shall mean such test / tests stipulated
or considered necessary by the Inspecting
Officers.
Time of Completion Time of completion shall mean the time /

period stated / agreed for completing the
scope of work specified in the contract.
Turn key Turn key shall mean a method of
construction / erection / installation
whereby the Contractor assumes total
responsibility from design through
completion of the work / project.
Work Work shall mean plant, non-plant,
buildings, Structures, foundations and all
plant Equipment, Components to be
provided and other construction erection /
services that the contract requires the
contractor to provide.
4.2 LEGAL TERMS
1. Agreement Mutual understanding
2. Contract Is an agreement enforceable by law.
Agreement which creates obligation is a contract.
3. Offer When one person signifies to another his willingness to do
or
abstain from doing anything with a view to obtaining the
assent
of the other to such act or abstinence, he is said to
make an offer .
4. Acceptance Acceptance is the manifestation by the offeree of his assent
to the
terms of the offer.
5. Void Contract A contract not enforceable by law is a void contract.
6. Voidable Contract It is an agreement that is binding and enforceable but
because of
lack of one or more of the essentials of a valid contract, it
may be
repudiated by the aggrieved party at his option.
6 a Executory Contract An executory contract is one in terms of which both the
parties
have not yet performed their obligations.
6b. Executed Contract An executed contract is one that has been completed or
performed.

6c. Unilateral Contract Unilateral contract is a contract in which one party to the
contract
has performed his obligation at the time of contract and
the obligation is outstanding only against the other.
6 d. Implied Contract It is one which can be inferred from the conduct of the
parties-the
contract may not express the terms in so many words,
orally or in
writing.
6e. Contingent Contract A contingent contract is a contract to do or not to do
something
if some event collateral to such contract does or not
happen.
Its performance depends upon something happening or
Not happening some event. The event is uncertain future
event.
7. Contract of Indemnity It is a direct agreement between two parties whereby one
promises to save another harmless from the result of the
conduct of the promisor himself or any other third person.
8 Contract of Guarantee A contract of guarantee is to perform the promise or
discharge the liability of a third person in case of default.
9. Continuing Guarantee A guarantee which extends to a series of transactions is
called a continuing guarantee.
10. Proposal When one person signifies to another his willingness to do
or to abstain from doing anything with a view to obtaining
the assent of the other to such an act or abstinence, he is
said make a proposal.
11. Promisor The person making a proposal is called a Promisor.
12. Promise The person accepting the proposal is called the promisee.
13. Promise When the person to whom the proposal is made signifies
his assent, thereto the proposal is said to be accepted. A
proposal when accepted becomes a promise .
14. Consideration Consideration is what a promiser demands as the price of
his promise.
15. Private of Contract Private of contract is said to exit between two persons when

there is a valid contract, enforceable between them.
16. Obligation It is a legal tie which imposes upon a person the necessary
of doing or abstaining from doing a definite act or acts.
17. Novation Contract substituted by a third party with the consent of
the parties to the contract.
18. Revocation Rescind or withdrawal. An offer may be revoked by the
offer or before it is accepted even though he had originally
agreed to hold it open for a definite period.
4.3 SPECIFIC LEGAL TERMS
ADVERTISEMENT tHE PUBLICATION OF INFORMATION. A
LEGAL ADVERTISEMENT, MADE
PURSUANT TO LAW, CONSTITUTES DUE
NOTICE OF A PROCEEDING.
Amendment In the law of procedure, any change made in a
pleading or in any paper filed for purposes of
procedure. An amendment corrects errors of
commission or omission, modifies the system
without fundamentally changing the nature that
is an amendment operates within the
theoretical parameters of the existing
constitution.
Assignment Assignment shall mean transfer of claim, right
of property as an instrument as deed
authorizing it.
Beneficiary Beneficiary shall mean a person / party / firm /
company to receive the benefit
Breach Breach shall mean failure to adhere or perform
the agreed term/promise.
Breach trust: The failure of a trustee to perform his duties
either willfully or negligently, applied
especially to misuse for his own purposes of
the trust ‘res’ or property. Any act of trustee
which is forbidden by the trust deed or will or
by the court; or is beyond the trustee’s powers
express or implied. It is a tort for which an
injunction will lie, and if willful, is generally a
crime.
Capacity : Legal power to enter into binding obligations
or to enjoy the privileges of a legal status.
Testamentary capacity is the capacity, to make
a legally effective will. Contractual capacity is
the capacity to enter into a legally binding

contract. Marital capacity is the capacity to
enter into a valid marriage.
Caveat In probate practice an entry of opposition of
probate which requires notice to be send to the
“caveator” of all the proceedings, of probate.
An intimation made to the proper officer of a
court of justice to prevent the taking of any
step without intimation to the party interested
to appear and object to it. A process to stop the
institution of a person, and more frequently to
stay the probate of a will. The issue of letters
of administration, a license of marriage etc.
the person filling or entering a caveat is called
the caveator.
Caveat emptor Caveat emptor shall mean Let the buyer
beware, in respect of quality of quantity of
goods purchased. The rule at common law,
unknown in the civil law, that the buyer in a
sale of personality, must protect himself by
demanding express warranties, and, if he does
not do so cannot reject the goods sold for
defects even if they were not apparent at the
time of the sale. Purchaser beware in respect
of quality and quantity of goods purchase.
Claim The assertion of a right to have money paid. It
is used in special proceedings like those before
administrative courts, or in bankruptcy.
Claimant One who makes a claim
Commercial Law The rules of law dealing with commercial
transactions, including the law of contracts of
business organizations, of principal and agent,
of security etc.,
Compensation Compensation shall mean anything as an
equivalent as to make assessment for loss or
damage.
1. The consideration for services rendered
by contract agreed or implied.
2. Remuneration for injury suffered,
especially when it has resulted in
measurable loss or in expenditure.
Money paid for damage caused by any
wrong or breach of contract, to the person
defrauded or injured.
Consensus ad idem Consensus ad item shall mean all terms

conditions, drawings, tender specification,
offer etc., have been clearly understood and
identity of mind created between parties.
Consequential Consequential damages means the damages,
claimed in a tort or breach of contract which do
not normally follow from the tort or breach.
Consideration Consideration shall mean what a promisor
demands from the promisee as the price for the
promise.
Covenant Covenant shall mean a binding and solemn
agreement to do or not to do or keep away
from doing a specified thing.
These covenants are supported by the same
consideration as that which supports the
promise.
Damage Damage shall mean money claimed by a
person to compensate for injury or wrong
caused by the other party.
Default Default shall mean failure to do something
agreed upon as expected.
Discharge Discharge shall mean release of the burden or
relieve oneself from the obligation.
Disclaimer Renunciation of any right, title or internet in
any property or condition, especially by a
defendant in a suit, or by a person against
whom a right is claimed.
Dispute Dispute shall mean an unresolved claim among
two or more parties.
Duress The use of force or threats to compel a person
to make a contract or conveyance, or to
commit an unlawful act.
Guarantee Guarantee shall mean a promise to a person to
be answerable for the payment of debt, default,
miscarriage or the performance of a duty by
another in case he fails to perform.
A mercantile contract, the equivalent of the
common law contract of surety-ship, by which
a person undertakes to answer for the debt of
another. In a guarantee of payment, the
obligation of the guarantor and the debtor
becomes enforceable at the same time. In a
guarantee of collection or of solvency, the
obligation of the guarantor does not arise, until
an attempt has been made to enforce the
obligation against the debtor. A guarantee is

revoked by death. The defences and rights of a
guarantor are the same as those of a surety, and
a guarantee of payment is indistinguishable
from a contract of surety ship. For this reason
the two contracts are regarded as practically
identical and in some jurisdiction are made so
by statute.
Heirs Heirs shall mean persons who are legally
entitled to inherit through the natural course of
law.
Infringement Infringement shall mean break or impair or
violate or fail to observe to the agreed term.
Instrument A formal written document having legal
effect, either as creating liability or as
affording evidence of it.
Interpret In the case of statues, to discover the meaning
of the statutes either in part or as a whole. It is
sometimes concerned with the meaning of
individual words and sometimes with the
general purpose sought by a large body of
legislation.
Jurisdiction The powers of a court to render a valid
judgment. Jurisdiction over the person (i.e., in
personam) is the power of a court to render a
valid judgment against a specific person.
Jurisdiction over the subject matter is the
power to hear and determine over a thing (ie..,
“in rem” the rights of persons in regard to a
concrete object or to a statutes.)
Lapse To come to an end or cease, generally said of
rights or privileges which have not been
exercised within the proper time, or which fail
because of the happening of some contingency.
Latches Latches shall mean failure to do the required /
agreed thing / job / act at the agreed proper due
time. It is a term used chiefly in equity to
indicate unreasonable delay to claim a right or
assert a principle. Laches is defence to an
action on equity even if the right is undoubted.
In law, it is, strictly speaking, impossible to
speak of laches, if the right exists and its
exercise is not barred by the statute of
limitations or some similar defence. Before
statutes of limitations included equitable
actions, as they now generally do, under code

procedure, laches was used in equity as the
approximate equivalent of limitations.
Latent defect A defect in merchandise which would not be
apparent on ordinary inspection, but which
comes into evidence later, when the article is
used. The ordinary implied warranties in sales
guaranteed against such latent defects.
Liquidated damages Liquidated damages shall mean a
compensation to be made consequent to a
damage caused. It can be pre-estimated.
Liquidated damages, not as a penalty, is agreed
upon between parties in the contract towards
time delay. Liquidated damages can also be
prefixed towards shortfall in performance
parameters agreed in a Contract.
Mandate A general term for an order of any kind issued
by a court; a direction or precept.
Market price The price which any commodity ore specific
goods would obtain if sold at a given time
without restriction, at public sale.
Memorandum A note or record of a fact or an agreement. It
must be sufficient to enable the fact and the
terms nor follow any established form.
Minutes Notes or records of a transaction, or of a
meeting of some organization or committee, or
of corporate proceedings, kept in a minute
book.
A record of what takes place, which can used
as evidence.
Negotiable A written instrument signed by the marker or
drawer for the unconditional payment of fixed
sum of money and money only at a fixed or
determinable future time or on demand, to a
payee or to his order or to bearer.
Notice Information or knowledge by whatever means
communicated. Actual notice is such information
that can be shown to have reached the person to be
noticed.
Novation Novation shall mean that one party to the
contract is substituted by a third party with the
consent of the parties to the contract.
Obligation Obligation shall mean the condition or duty by
which one person/ party is legally bound to
perform the services for the benefit of the other
person / party.

It is a legal duty, however, created, the
violation of which may become the basis of an
action at law.
Offer The proposal to enter into a contract made by
one person called the offerer to another called
the offeree. All the terms of the proposed
contract must be contained in the offer, so that
any indication of assent will be sufficient to
create the contract. An offer does not arise
until it is communicated i.e., comes to the
knowledge of the offeree. It ceases to exist
when it is revoked or rejected, or when it is
accepted, since it then becomes a contract. A
counter offer by the offeree is rejection of the
offer.
An offer will expire by lapse of a set time if
such a time is stated in the offer, or by the
lapse of a reasonable time is determined by
usage or by the special circumstances of the
case. Until the offer has expired it may be
revoked by the offeror as soon as knowledge of
its withdrawal is communicated to the offeree.
In the same way it may be revoked as soon as
knowledge of the offeree’s refusal reaches the
offeror. If the other has expired, it can neither
be revoked, rejected nor accepted.
Owner A person entitled to the privileges and rights of
ownership and subject to its obligations.
Patent right Patent right shall mean exclusive right
granted / obtained to produce and sell a product
so invented. / an invented product.
Power of attorney a formal document by which an agent is
appointed, generally with wide generally
power, although it may be for a limited group
of transactions, in which case it is called a
“special” power of attorney. It is subject to all
the rules of agency and to regulations that are
peculiar to itself.
Prejudice A state of mind in which a person entertains a
judgement about an event, the character of a
person or the validity of a proposition, without
examining the facts or hearing evidence.
Promise A proposal when accepted becomes a promise
and it means an oral or written agreement to do
or not to do some thing.
Promisee Promisee shall mean the person / firm /

company accepting the proposal is called
promisee.
Promisor The person / firm / company making a
proposal is called a promisor.
Proof The process of establishing, by legal evidence
and argument the truth of the facts or
allegations necessary to sustain the cause of
action or defence. The burden of roof is
generally on the party seeking relief or having
the affirmative of an issue. The burden then
shifts to the defendant to establish the contrary
position. If the roof adduced by the plaintiff
does not outweigh that of the defendant he has
not sustained his burden. The evidence
introduced upon the trial.
Proposal Proposal shall mean that when a person / firm /
company signifies the willingness to do or abstain
from doing anything with a view to obtaining the
assent of the other to such an act or abstinence the
person / firm / company is said to make a proposal.
Quantum meruit Quantum meruit shall mean reasonable amount
to be paid for services rendered or work done
when the price therefore is not fixed by the
contract and also means right to be paid a
remuneration for work done.
As much as he has earned. The basis of an
action in which, when there is no express
contract alleged but only a contract implied in
fact or in law, a plaintiff recovers for the value
of services rendered. Such as action will lie
when the contract is rescinded, whether but the
act of the plaintiff or the defendant, but cannot
be used if the contract itself is relied on to any
extent. Some cases have relaxed this rule so
far as the measure of damage is concerned.
Rate of exchange The amount reckoned in one unit of currency
which will be exchanged for a unit of a
different currency. This is ordinarily done by
quotation on the market, but is often regulated
by statute, or administrative order.
Remedy Remedy shall mean act by which violation of
right is prevented or compensated for legal
redress.
Repeal The annulling of an existing stature,
constitutional provision or regulation, by the
body which originally passed it.

Restitution Restitution shall mean giving back to the
rightful owner something that has been lost or
taken away.
Revocation The calling back of a thing granted or
destroying or making void of some deed that
existed.
Revoke Revoke shall mean to withdraw an offer,. To
terminate an agency, to cancel a license.
Show cause A show cause order is a direction of the court
to a party in a law suit to show good reason
why certain action should not taken by the
court.
Sub-let Sublet shall mean to let out the work to
another.
Subrogation The substitution of another in the place of the
obligee of an obligation or the creditor of a
debt. It is , as a rule, created by law of equity
from facts which result in the discharge of
obligation by person not primarily liable. It is,
in effect, an equitable assignment of all the
rights that the obligee had against the
discharged obliger, to the person who has
discharge the debt.
Successor Successor shall mean one who succeeds an
officer / title.
Title The technical legal word commonly used for
ownership. It implies particularly the power of
disposal and the right and duty to protect the
property. The fights called title can be reduced
to a mere name without substantial content.
The caption describing a stature or legal
proceeding.
Tribunal A general word equivalent to court, but of
more extensive use in public and international
law.
Undertaking A promise, especially one formally given in the
course of a legal proceeding, which may be
enforced by attachment or otherwise. An
undertaking to appear is a promise by a
solicitor to appear for his client in an action so
as to make personal service on the client
unnecessary. In company law, the word
undertaking denotes all the property of the
company, past, present and future and it’s a
mortgageable, interest, being commonly
charged by debentures of the company.

Valid Having legal effect; binding according to law;
vested with legal authority.
Violate To disobey as a law. To interfere with the
rights of another especially when done
forcibly. To ravish.
Waive Knowingly to surrender or abandon a claim or
a defence which might have been legally made
in the course of procedure. In private
transactions it may take the form of a release or
an election of courses of action where several
are open. The effect of a waiver is that the
claim, defence, or right waived is wholly lost
and cannot be revived without the consent of
the other party. In many instances, failure to
claim a right or defence, is construed as a
waiver.
Warranty Warranty shall mean Sellers’ assurance to the
Purchaser that the goods or property is or shall
be as represented and if not it will be repaired
and reconditioned or replaced by the Seller at
his cost or expenses.
The general rule of law applicable to all sales
of goods is that the buyer at his own risk,
caveat emptor, unless the vendor gives an
express warranty, or unless the law imply a
warranty from the nature of the thing sold and
circumstances of the sale; or unless the vendor
have been guilty of a fraudulent representation
or concealment in regard to the thing sold –
Wharton.
Wear and tear Words employed to describe the amount of
surface destruction and other minor injury that
ordinary use or an article is likely to cause.
Without prejudice An expression indicating that an existing
agreement or other transaction is not too be
considered a waiver or surrender of any other
claim not then asserted.
Witness (testis) A person who on oath or solemn affirmation
gives evidence in any cause or matte. A
witness may attend voluntarily or be required
to appear by a command from a Law Court.
5.0 TERMS RELATING TO IMPORTS.

1. Air way Bills /
Air Consignment Notice - is a receipt and not a document of title of goods.
2. Parcel Port Receipt - Not a document of little.
3. Marine Bill of Landing (B /L) - is a document of title, a receipt from Shipping Co.
for the goods and also legal evidence of a contract
of carriage .
4. Full set of B/ L. - Bill of Lading normally issued in sets of two more,
one may be a negotiable copy.
5. Clean Bill of Lading - If the packaging or goods appear damaged, the
shipping
co. will specify this on the B/L to ensure he is not
liable
for any claim for damage already done. Absence
of such
clause make the B/L ‘clean’ as opposed to
clauses.
6. On Board of B/L - This means the goods are in the hold of the vessel.
7. Received for shipment B/L - No indication of loading on the ship and the
importer
does not know when the goods would reach
destination.
8. On Deck - Goods are loaded onto the deck and exposed to
waves
and weather.
9. Blank Endorsed - This is to transfer title to the holder thus releasing
the
Seller’s claim to the Cargo shipped.
10. House Airway Bill / - Unacceptable as neither evidence title nor
contract of
house bill of lading carriage. Can be accepted only if the carrier i.e.,
Air
India certified on the AWB that the goods have
been
Shipped.
11. Charter Party B / L - Goods carried by a chartered streamer due to legal

complexities this form of B / L is not acceptable.
12. State B / L - This is one tendered to Paying Banker too late for
it
to reach consignee before goods arrive at their
destination.
13. Consular Invoice - Exporter submits to the Embassy of Importer’s
country
for them to stamp. Often to enable customs
authorities
in Importer’s country to clear the goods.
14. Usance Bill - A bill expressed to be payable months / days /
after sight
/ date.
15. Certificate of Origin - Issued by Chamber of Commerce in Seller’s
country
certifying origin of goods. This is required as per
Indian
Exchange Control Regulations.
16. Packing List - Details of which package contains.
17. Manufacturer’s / Suppliers - States that the goods are as per contract of sale.
Quality inspection certificate.
18. Analysis Certificate - Ingredients / proportions revealed by independent
analysis of chemicals etc.
19. Aval - Joint and several guarantee on the draft of a
person or
firm usually for the drawee where the guarantor
places
his signature on this draft together with a notation
indicating in whose favour his guarantee is given.
20. Bid Bond - The bid bond is a bank guarantee in lieu of tender
money. This is given so that seller executes the
contract
if the same is awarded to him. The buyer thus
protects
himself from the seller backing out of the offer
after an
agreement reached.

21. Bill of Exchange - Document issued in a legal form precisely defined
of
which the two following versions are most
common.
- draft, wherein drawer instructs drawee to pay a
certain
amount to a named person.
- promissory note wherein the issuer promises to
pay a
certain amount.
22. Certificate of Manufacture - Confirmation of a producer that the goods have
actually
been produced by him in his factory.
23. Charter Party - Contract according to which the owner leases the
vessel
to a charterer for a certain period or a certain
voyage.
24. F O B - Free on Board
C & I - F O B + Insurance
C I F - C & I + Freight
C I F C - C I F + Commission
C I F C I - C I F C + Interest
25. Demurrage - Extra charge to be paid if vessel is not loaded or
unloaded within the time allowed.
26. Dock Receipt - Receipt issued by a warehouse supervisor or port
officer
certifying that goods have been received by the
shipping
company.
27. Franco - Free from duties, transportation charges and other
levies.
Used also as delivery condition e.g. Franco
(Named place
of delivery) which means that the seller must bear
all
transportation charges and duties upto the named

place.
28. Incoterms - Publication of the International Chamber of
Commerce
regarding delivery terms currently in use.
29. Inspection Certificate - Confirmation that the goods have been inspected
prior
to shipment issued by neutral organisation.
30. Performance Bond - The performance bond is designed to provide
financial
assurance that the seller meets his obligations in
the
manner and within the time contractually agreed
upon.
31. Letter of Credit - A Letter of Credit ( L / C ) is a letter issued by
the
Bankers at the request of the importer in favour of
the
Foreign supplier informing him that it undertakes
to
Accept the bills drawn or effect payment in
respect of
The exports made to the Importer under precisely
Defined conditions.
32. Cad - Cash against documents.
6.0 Shipping Terms International
Abbreviations
1 Ex-Works EXW
2 Free Carrier (at a named point) FRC
3 Free on Rail or Free on Truck FOR
4 F.O.B. Air Port FOA
5 Free alongside Ship FAS
6 Free on Board FOB
7 Cost & Freight C&F
8 Cost, Insurance & Freight CIF
9 Freight / Carriage paid to DCP
10 Freight / Carriage and Insurance paid to CIP
11 Ex-Ship EXS
(deliver goods on Board at
Destination)
12 Ex-Quay EXQ

(deliver goods on to quay at
destination)
13 Delivered at Frontier DAF
14 Delivered Duty paid DDP
EX – WORKS ( EXW )
( Basic Price + Packing Charges )
The delivery of goods shall be arranged by the Supplier at his premises and the purchaser
shall make all arrangements at his own cost and risk to take delivery of the goods and
transportation of the same to his destination.
FREE CARRIER ( F R C )
The supplier shall only provide export licence, pay any export taxes and provide
evidence of delivery of goods to the carrier. The purchaser shall nominate the carrier,
arrange for contract for the carriage, pay the freight and insurance premium.
FREE ON RAIL ( OR ) FREE ON TRUCK ( FOR )
The supplier shall deliver the goods to Railway / truck and provide the purchaser with an
invoice and transport documents. The purchaser shall notify the supplier of the
destination of goods and pay the freight charges.
F O B AIR PORT ( FOA )
The supplier shall deliver the goods to Airport of departure and contract for carriage or
notify the purchaser if the purchaser wants the supplier to do so. The purchaser shall pay
the freight charges and insurance premium.
FREE ALONGSIDE SHIP ( FAS )
The supplier shall deliver the goods alongside the ship and provide the purchaser with an
‘ alongside ‘ receipt. The purchaser shall nominate the carrier, contract for carriage and
pay freight charges, obtain export licence and pay any export taxes and also insurance
premium.
FREE ON BOARD ( FOB )
The supplier shall deliver goods on Board and provide a clean ‘ On board ‘ receipt,
provide export licence, pay export taxes and loading charges if not included in the freight
charges. The purchaser shall nominate the carrier; contract for carriage and pay the
freight charges and also insurance premium.
COST AND FREIGHT ( C & F )
The supplier shall contract for carriage, pay freight charges to named destination, deliver

goods on board and provide the purchase with an invoice and clean ‘ On board ‘ bill of
lading; obtain export licence and pay export taxes. The purchaser shall accept delivery of
goods on shipment after documents are tendered to him, pay unloading costs if not
included in the freight charges, pay insurance premium.
COST, INSURANCE & FREIGHT ( CIF )
The supplier shall, in addition to the cost and freight charges as stated above, also arrange
for the insurance of goods, pay the premium and provide the purchaser with a policy or
certificate. The purchaser shall accept delivery of goods on shipment after documents are
tendered to him pay unloading costs if not included in the freight charges.
FEIGHT / CARRIAGE PAID TO ( DCP )
The supplier shall contract for carriage, pay freight charges to named destination; deliver
goods to first carrier; obtain export licence and pay any export taxes; provide the
purchaser with the invoice and transport documents. The purchaser shall collect the
documents, accept delivery of goods when they are delivered to first carrier; arrange and
pay insurance premium.
FREIGHT / CARRIAGE & INSURANCE PAID TO ( CIP )
The supplier, in addition to ‘ Freight / Carriage paid to…’ as stated above, shall arrange
for contract for insurance of goods and pay the premium, providing the purchaser with a
policy or certificate and the purchaser shall accept delivery of goods after the documents
are tendered to him.
EX – SHIP ( EXS )
The supplier shall deliver goods on board at destination; provide the purchaser with
documents to enable delivery to be taken from the ship. The purchaser shall pay the
discharge costs, import duties, taxes and fees, if any; obtain import licence.
EX – QUAY ( EXO )
The supplier shall deliver goods on to quay at destination; provide the purchaser with
documents to enable him to take delivery, obtain import licence and pay import duties,
taxes, fees, unloading costs and insurance. The purchaser shall take delivery of goods
from the quay at destination.
DELIVERY AT FRONTIER ( DAF )
The supplier shall deliver goods cleared for export at a place named on the frontier;
provide the purchaser with documents to take delivery of the goods. The purchaser shall
pay for on-carriage; obtain import licence and pay import duties, taxes and fees if any.

DELIVERED DUTY PAID ( DDP )
The supplier shall obtain import licence and pay import duties, taxes and fees if any,
arrange and pay insurance premium, provide documents to enable the Purchaser to take
delivery of the goods at the named place of destination.

2. TOWARDS CONTRACT OFFER
102TOWARDS A CONTRACT PROPOSALS
1.0 FOR ANY CONTRACT PROPOSALS, IT IS NECESSARY YOU KNOW
THE
FOLLOWING CLEARLY
1. YOUR COUNTRY
2. YOUR COMPANY
3. YOUR CLIENT
4. YOUR COST
5. YOUR CONSIDERATIONS
6. YOUR CONDITIONS
7. YOUR COMPETITOR
8. YOUR COMPETITIVENESS
2.0 THEN YOU WILL WIN THE CONTRACT AND THEREAFTER WORK
ON
THE CONTRACT BY RESPECTING AND ADHERING DULY
1. CARE FOR IT
2. CONDITIONS ABIDE IT
3. CONCENTRATE ON THE JOB
4. CONTROL ALL THE ACTIVITIES
5. CO-OPERATE WITH ALL AGENCIES
6. CO-ORDINATE WITH ALL DEPARTMENTS
7. COMMUNICATE ON ALL MATTERS
8. COMPLETE IT SATISFACTORILY
3.0 THEN YOU HAVE PERFORMED AND DISCHARGED THE
CONTRACT
SUCCESSFULLY AND THEREBY YOUR
PRESTIGE, PRIDE, ENRICHED
B. TOWARDS CONTRACT OFFER
1.0 PREPARATION OF OFFER
103Collect the Tender documents in full and screen it very carefully word by
word.
104Very little time given for preparation and submission of the offer.
105Generally these documents are loaded fully in favour of the Purchaser /

Owner.
106Mostly unfair, unacceptable clauses / stipulations would have been built
in.
107Clear all the doubts initially with in your company itself.
108Get it cleared such words as etc. connected work, incidental to work, as
may be needed, other items as to meet the contract as these terms, if
accepted, will lead to lot of other work and cost.
109If necessary get the documents perused by some one who is more
experienced or even a Contracts Specialist.
110Check clearly the general conditions and special conditions look for
hidden meaning and sort them out.
111Do not submit an offer when tender documents says, as per drawings – as
generally drawings do not represent the complete scope of work.
112On all these loosely worded terms, you will suffer severally in the hands
of the owner.
113Do not agree all clauses for the sake of getting the order.
114Seek clarification where such doubts could not be cleared within.
115A visit to site where project is planned and interaction with the authorities
concerned may help.
116Do take care of the local problems at the site.
117Check on your strength, weakness, opportunities and threat.
118Check the risk and liability involved.
119Quote only in the area wherein you have all facilities – know – how.
120Prepare the offer and list out the deviation in the appropriate location.
121Do not quote a firm price offer - always quote with price variation as per
standard formula, make provision towards time overrun - monthly basis.
122Do not agree any additional work during negotiations - without
corresponding time extension needed and rates / cost needed.
123Elements like taxes and duties – Exchange Rate – Quote at prevailing rates
with clause to protect against any variations.
2.0 DURING NEGOTIATIONS OR EXCHANGE OF LETTERS
1. Get all the deviations sorted out carefully as it has a cost and time,.
2. Avoid raising fresh issues.
3. Equally do not agree for fresh issues - but if needed discuss and agree
with additional cost and time.
3.0 PRICE NEGOTIATIONS
1. Do not agree for any reduction / rebate in prices.
2. If due to special circumstance, such a rebate is to be agreed upon, please
have total check on your pricing and estimated cost, then offer rebate.
4.0 NEGOTIATING EXECUTIVE

For any kind of negotiations, select an Executive who can do well balanced,
knowledgeable, unperturbed and polite gentleman and enough human psychology
to influence the party.
5.0 CONTRACT
1. Secure the order as of agreed terms, conditions and prices.
2. Respect it and adhere to it and do not deviate it.
3. Earnestly execute it, and discharge it with accord and satisfaction.
4. Get pride and prestige to your company.
6.0 PLANNING AND MONITORING
HEAD OFFICE
The planning shall include
to understand the scope of work the magnitude and sequence
Engineering, procurement and construction.
Scheduling and time duration
Materials supplies sequence
Resources, man power, funding
Advice on contraints
Grouping - major activities.
7.0 SITE OFFICE
Construction Manager -
Live wire of the site team.
Competent and Trustworthy person.
Planner and Decision maker, problem solver
Controls the job and workmen - staff team
Initiator & Indicator - Motivator
Authority - Delegated
The Construction Manager / at the project site, will be chief key man vested with
full authority and delegation of powers, to discharge the full responsibility to
execute the job within the agreed schedule, controlling all the inputs, costs,
maintaining quality, satisfying the owner and give the company the end results as
per budget.
He is a Planner, Materials Manager, Personnel Manager, Finance Manager.
He is also a liaison between both the contracting parties, and taken care of image
building, Customer service and ultimately brings out pride and prestige to the
company.

8.0 DURING THE CONSTRUCTION PERIOD
1. Adhere and follow the scope - Technical specification in the contract.
2. Execute the work as per approved drawings.
3. Prepare a work schedule also indicating the inputs needed from the owner
- discuss and get them approved.
4. If the input any, delayed, keep a record in writing and ask for extra time
and compensation if so needed.
5. Any change asked for, immediately get it approved for the change in
scope, price and time needed.
6. Do not accept any oral request.
7. During the site review meetings, please express the problems and
solutions if any, and should got to be recorded. Even if no solution
possible, difficult and points raised should be recorded.
8. Do not agree on any issue, which is not clear - not in the scope.
9. Any modifications / revision suggested, examine its implication of cost
and time before agreeing to it – and if agreed, get these items confirmed in
writing so that bills when raised are paid.
10. In case of any unforeseen event, keep the Owner informed in writing.
11. Keep the file and documents safely and in order.
12. Always assume there could be a possibility of any claim later to be settled.
13. It is desirable a sequence file is kept separately on all important letters a
copy filed herein.
14. Keep a record on time schedule – delays caused by each one.
15. Till the final bill is settled and paid, always keep in mind, any issue may
figure and may involve cost.
16. Settle all material account and get the document signed.
17. After due discharge of contract, get all the documents duly signed by
authorised Executive so that the obligations are completed, no more
liability or risk involved.

3. ENGINEERING CONTRACTS AND CONTRACTS
MANAGEMENT
1.0 Engineering design, manufacture, supply and services contracts are generally
reciprocal in nature, concluded between two parties. The basis on which such
contracts are drawn and concluded are:
-- International Competitive Bidding
I C B
-- Domestic Competitive Bidding
D C B
-- Bids invited among limited proven sources; or
Limited Tender Enquiry basis
L T E
-- Bids invited from the only known source; or
Single Tender Enquiry basis
S T E
-- On Nominations
-- Outsourcing
In all these, there are set procedures laid down and are being followed since the
two contracting parties are not otherwise known or tied up with each other, except
through the contract for the particular stipulated scope, service etc. with certain
agreed terms and conditions. It must be ensured that the contract is carefully
drawn as it creates a special legal relationship between them. Any error, slip,
omission may later lead to disputes, litigations and cause Court legal action.
1.1 Huge investments are envisaged towards the creation of assets like factories,
production units, housing complex, power sector, coal mining sectors, chemical
industries, oil industries, transport sector, machinery, equipments etc. by Central,
State and Private sectors in the plan period. All these proposals, capital invested
both in Indian Rupees and in Foreign currency shall have to yield results and
Return on Investments ( ROI ) at the scheduled time and within the estimated and
approved and sanctioned cost. Any over run of cost and time as well, shall have
an averse effect on the total economy of that region and ultimately the nation as a
whole. Therefore, it is very essential, that every care is exercised in the tendering
procedure, specification both technical and commercial, in the selection of the
Vendor / Supplier / Erector / Contractor, the formation of contract, execution of
contract and discharge of contract, so that the planned and programmed objective
is attained within the sanctioned cost and time and without their overrun.
1.2 In other words, the promise made by the promisor and accepted by promisee is
duly performed by both the parties, promisor and promise duly discharging their
obligation set in the contract.
1.3 The scope of work as expected and envisaged at the time of entering with the

contract, is performed.
1.4 In the process of management, man, money, materials, machines and managers
are to be
managed.
2.0 The term “ Management “ is normally meant to achieve the objective duly
controlling, expediting and monitoring all the activities concerned. Management
is defined by various learned people in different contexts. It is defined as a multi-
purpose organ that managers the business, manages the managers, manages the
workers and the work. It is also defined as getting them up done through people.
Some other has defined it as a distinct process consisting of planning, organising,
actuating, controlling to perform the determined objectives and set goal by the use
of people and all other resources. The Manager or the Management should be
effective and efficient to meet the objective set forth within the time frame, cost
frame and resources. There are different kinds of management theories and
broadly they are classified as under:
1. Personnel Management
2. Financial Management
3. Production Management and
4. Materials Management
2.1 The Personnel Management is meant to look into the human resources, training,
motivation, proper placement and other aspects required for development of man
– power and proper replacement.
2.2 The Financial Management is meant to find funds to control the financial
resources of the company by way of due budget regulations, proper phasing up of
expenditure, generating internal resources and effectively controlling resources so
that the due return on the investment is achieved.
2.3 The Production Management is meant to keep the machineries installed for
maximum utilisation reducing the down time, to operation & maintenance and to
meet the production targets set forth.
2.4 The Materials Management is meant to procure the materials at right time and at
right cost, receive, store and preserve them and effectively use them avoiding
wastage besides due inventory control with a view to minimise the holding cost.
2.5 While all the above have been fairly defined and there are a number of text books
and lot of information theoretically and on experience basis available, the
CONTRACT MANAGEMENT at the present moment is not gone into through
text books. It has become today great importance and it had assumed greater
significance to, due to the changes in the policy of the country. Business
community both within the country and outside are showing keen interest to

invest in all the industrial sector. Therefore Management of contract is very
important and essential.
3.0 CONTRACTS MANAGEMENT
The contracts Management embraces all the above management functions. The Contract
Management has to manage the scope of work specified in the contract , manage the
Contractor with his manpower resources, manage the time property drawing sequence
and priority as set out in the contract, properly manage the construction machinery, tools
& plants for due and proper deployment to complete the construction/erection as per
schedule and also manage the contract within the amount agreed to in the contract, From
the above, it could be seen that management of contact has a very vital role which has to
manage materials, manpower, machinery and the money besides time. This contract
management, therefore, calls for deep and detailed knowledge on the principles of
management of personnel, finance, materials, and production technology. While all the
other four management’s require knowledge about particular aspects, the Contracts
Management necessarily requires knowledge about all the different types of management
theory. Therefore, from the above preamble, it could be appreciated easily that contract
management is a very difficult and vital task as it has to control five to six factors, but at
the same time, without any flexibility in regard to any one of them.
4. 0 COMMERCIAL SPECIFICATIONS.
The commercial specifications are drawn with a view to control the time, delivery, cost,
guarantee and certain protective safety and legal clauses against any possible mal-
performance of the contract. It is to ensure the reciprocal promises are performed well.
The commercial terms broadly include the following.
124Scope of work
125Commissioning /Delivery dates
126Time- Essence of the Contract.
127Price and Price Variation.
128Bank Guarantee for Performance
129Bank Guarantee for Advance Payment.
130Payment Terms
131Insurance
132Transport
133Excise Duty/ Sales Tax/ Octroi
134Customs Duty
135Exchange Rate
136Liquidated Damages
137Warranty – Guarantee for warranty
138Force-Majeure
139Suspension of work.
140Defence of Suits

141Power to vary or omit
142Facilities to be provided
143Termination of Contract
144Arbitration and compensation event
145Limits of Contract
146Discharge of Contact
147Legal jurisdiction.
4. 1 Each one of the above terms have a definite effect on the performance of the
contract and
in particular on time, scope and price and other liabilities.
4.2 Generally, the following form part of the tender documents.
1. Notice Inviting Tender.
2. Tender - Technical Specifications
3. Tender – Commercial Specifications
4. General / Special Conditions
5. Tender Drawings.
5.0 PRE-AWARD CONTRACT FUNCTIONS.
5. 1. Pr award contract functions are broadly classified as under:
• Preparing list of contracts related to Project and developing contract packages.
• Preparation and finalisation of tender documents and ensuring conformity with
project.
• Preparing detailed schedule for contractual activities ensuring conformity with
project.
• Evaluation and short listing of bidders.
• Preparation of Commercial evaluation of qualified offers.
• Issue of Letter of Award to the successful bidder.
• Co-ordination for the preparation of engineering schedule, site activity schedule,
resource mobilisation plans with the contractor and respective inter- departments.
Contract Agreement concluding.
• Keeping all the original bides, evaluation reports and other documents in safe
custody.
6. 0 FORMATION OF CONTRACT.
Contract is naturally formulated from an offer against an enquiry and acceptance thereof.
Therefore, it is obvious that there should be minimum of two parties – one who makes a

proposal or offer and the other who accepts it. Therefore, it is imperative that there
should be a concurrence of at least two minds. The parties must have identity of minds
and in legal terms it I is called “Consensus ad idem”. When a proposal made by one is
accepted by the other such a proposal then becomes a promise. The acceptance must be
absolute and unconditional and shall correspond to the terms of the offer and / or
mutually agreed terms.
The contract emerges from the acceptance of an offer.
The offer must be DEFINITE-
Intending to give rise to legal consequences and must be from a competent person
qualified to make the offer.
The Acceptance must be ABSOLUTE and UNCONDITIONAL-
Corresponding to the terms of the offer and must be made by a person competent and
must be the one to whom the offer is made and must be communicated.
CHART - 1

The Chart- 1 explains the position of the Owner with his bid specification and the Bidder
with his bid proposals. Naturally bid proposals may not be in line completely with the bid
specifications and may contain deviations. These deviations are analysed and examined
and an understanding reached and an identity of mind arrived at between the Owner and
the Bidder. In other words, these two parties narrowed down the differences/ deviations
and understood each other.
A privity of contract is created thus, between the parties by which terms and conditions
agreed can be enforced between them .
6.1 On the basis of a contract agreement reached and concluded between the parties
concerned to the contract, these parties create their rights and set their obligations,
risk and liabilities of each to the other. The contract so concluded draws out a
written clear cut relationship between the parties to the contract and set to a time
frame. These obligations are written in the contract under various clauses and each
one of the contracting parties has to perform these clauses with due respect and
faith and shall not breach them under normal circumstances. If this is arrived at and
achieved by the parties to the contract, then naturally the contract shall be executed
in time and within the agreed contract price without any dispute and it can be
termed as discharge of contract through accord, perform and satisfaction. The Chart
–2 explains the obligations under the contract in a broad sense between the owner
and the contractor.
CHART -2.
6.2

6.3 6.2 The contract must be signed by the holder of power of attorney issued by the
respective
company. It should be on non-judicial stamp paper of prescribed value as per stamp
act.
7.0 POST AWARD CONTRACT FUNCTIONS.
7.1 Post award contract functions involve inspection expediting and co-ordination
monitoring the progress of work through constant follow-up with the contractors
in order to ensure timely deliveries of equipment, erection, testing and
commissioning there of as per the requirements of project. This also includes
payment, dealing with disputes and taking necessary action in the event of
inadequate performance in the course of the execution of the contract, The
following are the typical post award activities.
• Finalisation of PERT network for the particular contract.
• Finalisation of contract co- ordination procedure.
• Co-ordination with quality assurance for vendor approval and approval of sub-
contractors.
• Co- ordination with quality assurance for finalisation of quality plans.
• Programme for release of inputs and work front.
• Monitoring and analysis of contractor’s progress report.
• Visit to manufacture’s premises to ascertain physical progress of the manufacture of
the equipment.
• Monitoring of despatch and receipt of goods at project site.
• Payments and monitoring of cash flow and budgeted financial consumption.
• Finslisation of scope changes, schedule changes and procedure changes.
• Co- ordination for Customs clearance for goods to be imported.
• Co-ordination for obtaining insurance policy,
• Co-ordination for erection methodology, performance test and commissioning
procedure.
• Co-ordination in taking over the equipment after performance test.
• C0-ordination in closure of the contract.
If the above aspects are considered in preparing tender documents/ finalising the
packages, concluding contracts and careful monitoring and managing the pre-contract
and post-contract functions, will definitely ensure completion within the cost and time
provision.
8. 0 CONTRACT MANAGEMENT
148
8.1 A contract is to be operated between the parties to the contract as per scope, price,
time schedule, payment terms and other clauses and conditions agreed upon. There
cannot be any change unless authorised. Chart- 3 & 3A explains the limitations
between the parties.

The contract creates a technical, financial and warranty liabilities.
8.2 The Indian law of contracts under heading performance Section 50 stipulates.
Performance in manner or at time prescribed or sanctioned by promise. The
performance of any promise may be made in any manner, or at any time which
the promisee prescribes or sanctions.
8.3.1 The Indian law of contract under performance of reciprocal promises Section 51.
Stipulates “ Promisor not bound to perform unless reciprocal 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.
Even though generally contracts are bilateral in nature between the owner and the
contractor, the agencies involved in many contracts during the implementation of
the contract are:
• Owner
• Consultant
• Equipment manufacturer, and
• Contractor.
In most of the cases, the Purchaser and Consultant are one of the contracting party
and the equipment manufacturer and the contractor are the other contracting party.
The relationship between these two groups are again governed by a contract
between themselves though they are under one part of the contract. The objective
of all are to complete the scope of work entered into the contract within the time
schedule and price agreed upon and perform the contract. But in real execution of
the contract each one of the four plays in a different way mainly to meet his
interest first and foremost.
The attitude of the parties to the contract in the due performance of the contract
are explained in Chart-4.
OWNER always
• desires to complete the work earlier
• desires to control all activities
• desires all information to be furnished in time but generally causes
• Delays in releasing the fronts/inputs in due time.
• Delays in clearance and approvals;
• Delays in release of due payments.
CONSULTANT always

• desires his views are final but generally causes
• delays in basic engineering particulars.
• delays in approvals, release of drawings, technical data
• delays in inspections and despatch advice.
EQUIPMENT MANUFACTURER always
• desires that the equipment shall be accepted
• desires total freedom in quality and manufacturing methods.
And least advice/opinion from others.
• desires immediate inspections, despatch clearance
• desires early payment but generally causes
• delays in manufactures and inspection call.
• Delays in supply of erection methodology; and
• Delays in supply of operation &maintenance procedures.
CONTRACTOR always
• desires quick release of drawings, data and approval
• desires free area at site.
• Desires acceptance of work when completed.
• Desires quick payment and more profits but generally causes.
• Delays in submission of PERT chart schedules, QAP progress reports etc;
• Delays in mobilisation, progress and achieving the targets.
All these attitudes of these parties cause great problems in the proper performance and
discharge of the contract.
8.4 ELEMENTS AND FORCES OPPOSING THE CONTRACT.
While the parties may have their own desires, expectations, delays etc. Which could be
resolved among themselves there are number of elements and forces and uncertainties
that are really opposing the proper performance of the contract. These elements & forces
could be within as well as external. Within, is generally the change in scope of work or
additional and alternations .Such change shall cause impact on cost and time and many
times may involve prolonged discussions and negotiations. Naturally, these affect the
time schedule and the agreed prices. While these could be sorted out between the parties
only, the opposing forces from the external agencies really cause concern on cost and
time and even cause a frustration to the parties. These forces are generally acts of
Governments, acts of God and other agencies like carrier owners, power cut, strike,
terrorism, local problems etc. These are beyond the control of the contracting parties and
they cannot solve these problems. Consequences due to these problems have to be
examined in a fair way to both and time extension and additional price to be agreed upon.
Chart- 5 shows the position.

CHART 4
ATTITUDE OF THE PARTIES TO THE CONTRACT

With the different views and objectives of each party as above and these views opposing
each of the other, the contract is to be managed and again within the scope of work, time
schedule and price. Any over run in time or cost and on both are not desirable and to be
discouraged.
9.0 HOW TO MANAGE THE CONTRACT.
Basically all parties involved in the contract shall understand the role to be played
by each and must be determined to play it correctly in due time without fail. Each
party must understand and appreciate the problems faced by the other party and shall
have open mind to resolve the problems with a view to complete the scope of work
agreed in the contract instead of looking at the problem in an isolated way with self
interest. Contract performance interest must be overriding factor than the self interest.
9.1 To manage the contract, the Purchaser’s interest in completing the project on time
and within the contract price agreed upon is ensured by time schedule guaranteed
by way of liquidated damages and the entire performance of the contract in total is
guaranteed by a contract performance guarantee to certain financial limit. A time
limit, reasonable one shall be determined and set for all activities to be done by the
parties to the contract. Periodical review is to be held and by the parties to the
contract. Periodical review is to be held and if necessary spot decision to be taken
with all concerned. There shall be a price variation clause with a standard formula
which will protect against the cost escalations. It must be ensured that the contract
shall be kept alive, active and agitated so that no frustration sets in. If due to external
forces like Force Majeure conditions, time extension to be granted to complete the
work and if for any reason overstayal is caused, then it has to be regulated as per
Hudson’s Formula mentioned below:-
9.2 Hudson Formula for compensation due to time extension.
9.2.1 The Hudson Formula’ explained:
For the assessment of the contractor’s losses, due to delay, under this head, the formula as
stated by Hudson as under:
(H.O / Profit Percentage) Contract sum
- - - - - - - - - - - - - - - - - X - - - - - - - - - - - - - - - - - X Period of delay in weeks.
149Contract period in
Weeks.
For example, overheads and profit combined contribute R s. 20 in the contractor’s
tendered rate of Rs.100, the contract sum is Rs.10,00,000/- and the time limit allowed is
40 weeks, the prorata amount per week, the contractor expects towards overheads and
profit from this contract would be:
20 10,00,000

- - - - - - - - X - - - - - - - - - - = Rs. 5000/-
100 40
This amount represents the loss per week of delay at the site of the work. For overstayal
for any work Rs. 5000/- shall be the compensation payable.
CHART 5

9.3 Scope Change – Additional Work
9.3.1 Within the limits agreed in the contract under variation clause, there will not be
any change in the price.
9.3.2 If the quantity in the additional work exceed these limits, then the rate as agreed
for such item under bill of materials shall be adopted.
9.3.3 If there is no rate for the item in the bill of materials, it should be fair to adopt the
rate for the same item agreed in any other contract of the same project.
9.4 Corresponding time needed to complete the additional work should also be worked
out, agreed upon and time extension granted.
10.0 INTERPRETATION OF CONTRACT AND CONNTRACT TERMS.
10.1 A contract shall be drafted and written in simple language which could be
understood even be understood even by layman. Plain and understandable words
shall be used in the construction of the contract. Such words shall be given their
ordinary and natural meaning. Clauses carrying same text and sprit shall not be
repeated at different sections/parts of the contract. Such repetition shall cause
great problem in interpretation and shall lead to dispute. Like wise. Words of
same meaning or nearer meaning shall not be used together in the same section or
clause. Construction of contract choosing the correct, apt and simple words
assumes a very great importance these days as more and more contracts are drawn
up and concluded due to very rapid development in various sectors.
10.2. Interpretation of a contract document or terms normally shall not arise if the
construction of the contract is drawn on the basis of simple chosen words
understandable by all including a layman. In such a case every one will conceive
and understand the sprit and meaning in the same way leaving little for a
different meaning for the same. Interpretation of the contract means literally the
intention of the contract. It can be said to be a method by which true sense or the
meaning of the word used in the contract, is understood, Interpretation, therefore,
emerges more or less picking the definition and meaning given to the words used
in the contract, as given in the standard dictionary. It may thus lead to find out
what is the intention conveyed in the contract through these words or expression.
In the process of interpretation, words used have to be given their ordinary,
natural and popular meaning only. In many cases, courts have observed that if the
words are simple and clear, there shall be very little for the court to do. A strict
construction of a contract can cut both the ways and it is in the interest of parties
to the contract to have liberal construction. An illustration of the bond or contract
executed by Antonio in favour of Shylock as a Security for the money borrowed
in Shakespeare’s “ THE MERCHANT OF VENICE” would give rise to the
judgement of strict interpretation. The bond said, if the money borrowed in not
repaid on the stipulated date, shylock can claim a pound of flesh from Antonio,

Shylock insisted the pound of flesh when Antonio failed to repay the borrowed
money on the stipulated date. After even pleading by Portio, Shylock stuck to the
strict construction of the clause and finally the judgement was that Shylock can
take a pound of flesh without shedding a drop of blood and not to cut less or more
of flesh.
10.3 Courts though are vested with unlimited powers to interpret the terms of the
contract, it is to be noted that Courts cannot rewrite the contract. Generally the
Courts try to ascertain the intention of the parties to the contract while agreeing
such terms and consider all the words in the written down contract itself in their
ordinary and natural meaning and sense only. To understand the intention, Courts
will consider all the relevant part, section of the document in detail and as a
whole. Courts also take into account the circumstances leading to the use of such
words in the contract.
10.4 Courts have held in many cases and interpreted the contract as under:
• The intention of the parties to the contract shall prevail over the words written in the
contract.
• The words as written in the contract shall be interpreted with its normal and popular
meaning as understood by layman.
• Same words appearing at different clauses shall be given and interpreted with the
same meaning.
• Handwritten words or clauses shall prevail over the printed or typed clauses.
• Typed clause shall prevail over printed clause.
• Special conditions shall prevail over the general conditions.
10.5 In case of two views or interpretations possible over a clause one in favour of the
party who drafted the contract and the other against him, the interpretation
against him shall be preferred.
10.6 Similarly, in the case of two or more interpretations possible over a clause, the
one which helps to operate the contract and proceed further shall be preferred.
10.7 Technical and Scientific words in the document, such meaning technically and
scientifically applicable shall be the primary meaning.
10.8 The contract must be considered as a whole in order to ascertain the true meaning
and intention of the parties to the contract.
10.9 In the light of the above aspects of interpretation of contract, it becomes necessary
and essential to draft the contract clauses carefully leaving little or no room for
any scope for interpretation.
11.0 BREACH OF CONTRACT AND REMEDIES THEREON
11.1 A contract is drawn and concluded on the basis of agreements reached on all

terms, conditions, prices, unit rates etc. with an identity of mind ‘ Consensus ad
idem ‘ and with free will, consent without force and compulsion. Therefore
parties to the contract are expected to perform the contract with its strict sense
diligently and faithfully respecting to the mutually agreed terms and conditions.
It therefore shall not be the intention of the parties to the contract, to breach it at
any point of time under normal circumstances. However under certain situations,
conditions created, there could be a possibility of any one of the parties to the
contract to breach it partly or totally. In such an event, there is always recourse in
the contract and in law as well, to compensate the damages caused.
11.2 A breach of contract is failure to perform an obligation arising out of the contract.
If the entire obligations are not performed or failed to perform it is called total
breach. When the contract is broken only in part, it is called a partial breach. If a
party announces before his performance is due, his definite unwillingness or
inability to perform or fulfill the contract the party thereby admits, he is guilty of
breach. This kind of breach is called anticipatory breach. A party may
deliberately incapacitate himself or render impossible to perform his obligation or
interfere in the performance of the other party. These also constitute a breach of
contract. Every breach of a contractual obligations confers upon the injured party
a right of action. An actionable breach of contract occurs when a promisor
without sufficient excuse or justification fails to perform in accordance with the
terms of the contract.
11.3 Under the complicated provisions of engineering contracts, the possible breach of
the contract by the owner and the contractor are numerous and are as defined
asunder:
11.3.1 Breach by the Owner
Delay in approving, drawing, designs, systems, sub-vendors, sub-contracts, PERT
network,
Delay in handling over the site at the agreed time,
Delay in making payments of the bills,
Delay in inspection,
Delay in furnishing inputs / work fronts,
Delay in approving the changes in scope, revisions,
Delay caused by other agencies employed at site.
11.3.2 Breach by the Contractor
Delay in submission of drawing, designs, system, list of sub-vendors, sub-
contractors, PERT chart network,
Delay in the execution of work as per agreed schedule, engaging unauthorised
sub-contracts.

Failure to adhere to statutory provisions, regulations, safety measures,
Failure to ensure as required, to employ qualified people, failure to adhere to
standards and codes.
11.4 By breach the contract is broken
Breach of Contract occurs
Where a party to the contract repudiates it,
Where a party to the contract fails to perform one or more of the obligations
imposed on by the contract,
Where a party to the contract disables himself from performing his part in the
contract.
11.5 The right to treat contract as wholly discharged by breach may arise in anyone of
the following ways.
11.5.1 the other party to the contract may fail to perform his obligations, that is what he
has promised under the contract,
11.5.2 the other party to the contract may renounce his liabilities under it, he may make
an express repudiation that is, to state explicitly that he will not perform his
promise,
11.5.3 the other party to the contract may make an implicit repudiation he may do some
act which disables him from performing his obligation or by his own act he may
make it impossible to fulfill, his own obligations under the contract.
11.6 Breach of the contract always entitles the innocent party to maintain an action for
damages.
11.7 Remedies to the Breach of Contract
The injured party consequent to breach of the contract by the other party is
entitled for compensation due to loss or damaged. The Indian Contract Act
contains three provisions towards consequences of breach of contract as under.
11.8 Section 53: Liability of party preventing event of which contract is to take
effect - When a contract contains reciprocal promises, and one party to the
contract prevents the other from performing his promise, the contract becomes
voidable at the option of the party so prevented, and he is entitled to
compensation from the other party for any loss which he may sustain in
consequence of the non-performance of the contract.
Section 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
arose in the usual course of things from such breach, or which the parties knew,
when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage
sustained by reason of the breach.
Section 74 : Compensation for breach of contract where penalty
stipulated for - When a contract 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 actually damage or loss is proved to have been
caused thereby, to receive from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the case may be, the
penalty stipulated for.
Section 75 : Party rightfully rescinding contract entitled to compensation
- A person who rightfully rescinds a contract is entitled to compensation for any
damage which he has sustained through the non-fulfillment of the contract.
11.9 Conditions to be established
11.9.1 It must be first proved that there exists a contract or an obligation resembling
those created contract.
11.9.2 That the defaulting party was under an obligation to perform that part which is
alleged to have been breached.
11.9.3 That the breach of the contract must be established.
11.9.4 That such a breach of contract has caused loss or damage and arose in the usual
course.
11.9.5 That the parties to the contract knew when they made the contract such a loss or
damage is likely to occur from the breach of it.
11.9.6 That the loss or damage sustained by reason of breach is neither remote nor
indirect.
11.9.7 That the injured party did take precautions to mitigate the losses to the maximum
extent possible.
11.9.8 When all the above are fulfilled, the injured party is entitled to receive
compensation for any loss or damage from the party who has broken the contract.
12.0 COMPENSATION EVENT CONTRACT- PRICE –TIME LEGAL
POSITON

12.1 COMPENSATION EVENT
In any contract between two parties, the compensation event shall generally be
hereinunder.
150The owner/purchaser does not give access to site of work or does not hand
over the site as per agreed schedule.
151The owner / purchaser causes delay in furnishing facilities agreed, in
approving designs, drawings, technical specifications, inspection data etc, sub
contractors, su-suppliers, instructions required for execution work.
152The owner / purchaser instructs the contractor to carry out additional work,
substituted work additional tests which results indicates no defect.
153The owner / purchaser delays in making advance payments and other
subsequent stage payments.
154The owner / purchaser modifies the schedule of other contractors which
consequently affects the performance, like delayed inputs work fronts.
155The site conditions are substantially more adverse than could reasonably
assumed out of the data information furnished in the tender specifications and
even from information available publically and form a visual inspection at
site.
156Other contractor’ public authorities, utilities of the owner /purchaser does not
work within the agreed data.
157Any other constraints stated in the contract.
12.2 CONTRACT – PRICE TIME EXTENSION
1. If the compensation event if any, happens, it shall cause additional cost
and prevent the scope of work being completed within the agreed time.
2. The compensation admissible and time extension to the extent needed
to complete the entire work shall be assessed and settled.
12.3 LEGAL POSITION
Indian Contract Act – 1872
Section 53

Liability of party preventing event on which contract is to take effect.
When a contract contains reciprocal promises and one party to the contract
prevents the other from performing his promise, the contract becomes
voidable at the option of the party so prevented and he is entitled to
compensation from the other party for any loss which he may sustain in
consequence of the non performance of the contract.
Section 54
Effect of default as to that promise which should be first performed
contract consisting of reciprocal promise.
When a contract consists of reciprocal promises, such that one of them
cannot be performed or that its performance cannot be claimed till the
other has been performed, and the promisor of the promise last mentioned
fails to perform it, such promisor cannot claim the performance of the
reciprocal promise, and must make compensation to the other party to the
contract for any loss which such other party may sustain by the non
performance of the contract.
12.4 Compensation
The compensation has to be worked out based on the event, default
occurred or caused.
13. PROBLEMS IN CONTRACT PERFORMANCE
Hindrance – Event Records
13.0 DELAYS, FAILURES BY PURCHASER – REMEDY
13.1 Generally dealys – failures caused by purchaser are in
158Approving the drawings
159Approving the billing schedules
160Approving the Quality Assurance Plan / PERT
161Providing input data
162Providing work front
163Making payments
164Resolving interface problems
165Resolving site problems
166Timely inspection

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48723394 contract-management