The document discusses different types of construction contracts. It defines a contract and explains key components like offer, acceptance, consideration. It then describes various types of construction contracts including unit price contracts, lump sum contracts, labour contracts, and project management contracts. For each type, it provides details on how payment is determined and highlights their advantages and disadvantages. Project management contracts allow clients to focus on their core work while the project manager oversees construction management. While clients pay extra fees, project management can help complete projects on time and within budget.

1. CONTRACTS AND
ITS TYPES

2. DEFINITION
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A contract is a legal agreement between two or
more people for an exchange of goods or
services. contracts are enforceable by contract
law. there are many different types of contracts
and they vary between industry and according to
the type of services performed.

3. WHAT IS
CONTRACT?
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As per INDIAN CONTRACT ACT 1872
As per contract act, an agreement
enforceable by law is a contract.
“A promise or set of promises
which the law will enforce”.
The agreement will create rights
and obligations that may be
enforced in the courts.
The normal method of
enforcement is an action for
damages for breach of contract.
CONTRACT

4. COMPONENTS OF
CONTRACT
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Discharge of the Contract
Agreement should not be void or voidable
Lawful consideration
Legal Capacity to contract
Offer/Proposal & Acceptance
Parties to an contract

5. PARTIES OF
CONTRACT
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PROMISOR
A person making the proposal
(offer) is known as a
promisor
We can also recognize him as
a proposer.
PROMISEE
A person accepting the
proposal (offer) is known as a
promisee.
He is also known as an
offeree.

6. 6
AGREEMENT CONTRACT
DEFINITION An arrangement (usually
informal) between two or more
parties that is not enforceable by
law.
A formal arrangement between two or
more party that, by its terms and
elements, is enforceable by law.
VALIDITY BASED ON Mutual acceptance by both (or
all) parties involved.
Mutual acceptance by both (or all)
parties involved.
DOES IT NEE TO BE IN
WRITING?
No No, except for some specific kinds of
contracts, such as those involving land
or which cannot be completed within
one year.
CONSIDERATION
REQUIRED
No Yes
LEGAL EFFECT An agreement that lacks any of
the required elements of a
contract has no legal effect.
A contract is legally binding and its
terms may be enforceable in a court of
law

7. TYPES OF CONTRACTS
Contracts are usually categorized according to the type of payment
but can be tailored to incorporate common elements from
several different contract types.
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8. UNIT PRICE CONTRACT
(ITEM-WISE)
This kind of contract is based on estimated quantities of
items included in the project and unit prices which have
been agreed to. The final price of the project is
dependent on the quantities of the items needed to carry
out the work.
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9. ⊡ In this type of contract, the contractor has to initially invest his own
money for starting the work, and so the owner need not worry about
giving the contractor a big advance.
⊡ In general this contract is considered the most scientific and most suitable
for construction projects where the different types of items, but not their
numbers, can be accurately identified in the contract documents.
⊡ The contractor is also safeguarded against any contingencies, or variations
in labor or material rates.
ADVANTAGES
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10. ⊡ The contractor has to invest his own money initially. though this is one of
the most preferred contracts in construction/ buildings, it is not unusual to
combine a unit price contract for parts of the project with a lump sum
contract or other types of contracts
DISADVANTAGES
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11. LUMP SUM CONTRACT
With this kind of contract the contractor agrees to do the construction
and completion of the building at a designated time for a fixed price or
lump sum. also named “fixed fee contract”, this type of contract is
often used in building contracts. fixed fee or lump sum contract is
suitable if the scope and schedule of the project are sufficiently
defined to allow the estimation of the project costs
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12. ⊡ A lump sum contract provides for a price that is not subject to any
adjustment on the basis of the contractor’s cost experience in performing
the contract. this contract type places upon the contractor maximum risk
and full responsibility for all costs and resulting profit or loss.
⊡ Since the price is fixed, any unforeseen contingencies or variations in
material or labour prices do not affect the owner.
⊡ It provides maximum incentive for the contractor to control costs and
perform effectively and imposes a minimum administrative burden upon
the contracting parties.
ADVANTAGES
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13. ⊡ An architect is not involved as this contract is an agreement between the
owner and the contractor for a final fixed price. So the architect does not
have a role to play, and so quality of work cannot be checked and
controlled by an expert.
⊡ Since specifications are not clear, the contractor can use alternative/
inferior brands of materials.
⊡ Also there is a lot of ambiguity in the specifications, measurements, mode
of payment, etc.
DISADVANTAGES
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14. LABOUR CONTRACT
In this type of contract, the owner buys and supplies all the material
required for the construction to the labor contractor and only uses his
labor. the system of employing contract labor is prevalent in most
industries including construction, involving skilled and semi skilled
jobs. a workman is deemed to be employed as contract labor when he
is hired in connection with the work by or through a contractor.
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15. ⊡ This kind of contract is sometimes preferred by the owner, because he
buys all the material by himself and thus saves a lot on the contractor’s
profit.
⊡ Moreover, the owner can buy the materials of his choice and can be sure
of the brand that will be used in the construction.
ADVANTAGES
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16. ⊡ In this Contract also, the Architect does not have a role to play, and so
quality of work cannot be checked and controlled by an expert.
⊡ There is a lot of headache and tension involved in running around and
arranging for the supply of materials at site, on time as the work
progresses.
⊡ It is easy to get fooled on the quality of sand, bricks etc because the
Owner is not very experienced in assessing the quality.
DISADVANTAGES
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17. PROJECT MANAGEMENT
CONTRACT
Project Management Contracts are a type of contract where
the architect agrees to manage the contract, as defined by the scope of
the agreement, for a specified duration of time for monetary
consideration. this type of contract can be short term or long term.
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18. ⊡ The clients can focus on their core operations while the architect (project
manager) looks after the management of projects, people and issues,
ensuring that deadlines are met, quality is maintained and costs are
controlled.
⊡ The project manager coordinates with all the agencies, including the
consultants, the contractor and the suppliers to ensure that the
construction of the project goes on smoothly.
ADVANTAGES
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19. ⊡ Some clients hesitate to go in for project management contract as they
have to pay extra for project management, in addition to the fees paid to
the architect. however, there are lots of clients nowadays, who opt for
project management as it saves them from a lot of headache and they can
concentrate on their work as the building comes up. moreover, in the long
run, since the project is completed on time, and costs are controlled, the
client actually saves.
DISADVANTAGES
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20. THANKS!
Any questions?
You can find me at: simranaggarwal456@gmail.com
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SIMRAN AGGARWAL
MURP-II (2020-22)
Pt. Lakhmi Chand State University of Performing and Visual Arts