• International Contracts
• Contracts and Their
• Chapter-I : Introduction
• Chapter-II: Legal Characteristics of CIC
• Chapter-III : The Need to Preserve CIR
NOTION OF COMPLEX INTERNATIONAL CONTRACTS
Result of development
Complex international contracts are a result of the
- economic and
- social development of the last hundred years.
- As a result they can not be undertaken
- by a single, even a large company;
- some projects even exceed the capacity of a whole national economy.
The tools for such cooperation are Complex International Contracts,
particularly complex international long-term contracts.
Why these Complex International Contracts essential?
These complex international long-term contracts are essential means
“to implement commercial transactions for scientific, technical and
Complex international long-term contracts today usually involve
parties of different countries; the parties themselves are often large
and multinational companies, which are active all over the world.
How Projects offered
Projects of complex long-term contracts are offered in international
tenders; international joint ventures and other forms of cooperation
In today’s world, which has become a “global
village”, complex long-term contracts are a “significant
factor in establishing conditions which assist in maintaining
world progress”. This international background makes it
even more important that complex long-term contracts are
carefully drafted to serve this cooperation and to
provide efficient and fair solutions.
Pacta Sunt Servanda (the parties are obliged to
adhere to the terms agreed) to be applied due to the
prevalent of various legal systems.
• Examples of such Contracts
Construction and Civil Works Contracts
Turnkey Agreements (delivery of whole factories)
Technology Transfer and Project Financing Contracts (Aircraft Leasing)
Primary Sector (Mining) Concession or Work Contracts
Joint Venture, Management, Cooperation, Franchising Agreements
Simple Output or Requirements contracts (deliver of goods or services)
• International Arbitration as usual dispute resolution mechanism for
Complex International Contracts
The overwhelming majority of complex international long-term contracts
contain arbitration clauses. This includes
the expertise of the arbitrators,
the neutrality of the procedure (with regard to nationality of the arbitrators,
applicable law, venue, language etc.), its privacy, simplification and
speed, the facilitated enforcement of the awards, the avoidance of a “rush
to the courthouse” and the enhanced predictability. In fact, today only in
rare cases judges get the opportunity to deal with complex long-term
In complex long-term contracts, parties plan the solution of future disputes,
and in most cases, they do that with arbitration clauses. Since both the
parties know that and since they usually want to preserve their relationship
and go on with the project, they rarely address courts in Complex
LEGAL CHARACTERISTICS OF COMPLEX INTERNATIONAL
• Most Legal Systems focus on domestic and discrete
CIC are the result of the technical, social and political
development of the last one hundred years. The vast
majority of contracts concluded in a national legal system
are domestic contracts. CIC, although important in terms of
volume, are relatively rare in number.
CICs are typically associated with special problems for which
traditional law does not provide appropriate answers. Our legislatures
have not fully analyzed:
- disturbance in the execution of the project,
- time delays,
- problems regarding contract termination
- involvement of multiple parties from different States, or
- questions regarding applicable law and
- dispute resolution mechanisms in an international context.
- In practice, legal actors are forced to find their own solutions by
drafting elaborate contracts and excluding inappropriate legal rules
(for instance by excluding the general right of cancellation in case of
Different Treatment Required:
International commercial transactions require treatment that is
different from national transactions because the parties must
foresee different situations.
For instance, an international sale over long distance and by
means of different carriers necessitates much greater risk-
prevention measures than a traditional local sale, which is
performed on the spot. National laws are often not tailored to
these kind of needs.
Problems regarding the determination of the applicable law
and enforcement of arbitral awards are limited to
international transactions and do not arise at all in purely
Solutions in the practice of international trade:
In practice, two developments result from the lack of legislative
or judicial guidance for parties drafting complex long-term
On the one hand, standard terms of contracts as provided by
business or professional organizations became more and more
On the other hand, parties draft very detailed contracts to
reduce the uncertainty resulting form the long duration and the
uncertainty of the contracts’ content.
For instance, the extensive contractual practice regarding clauses for
contract adaptation is an indication of the deficit of rules provided
by various national legal systems.
If a contract is very detailed, the importance of the applicable law is
reduced. The more detailed and more comprehensive contractual
clauses are, the less room there is for questions that must be decided
on the basis of the applicable law. The contract then becomes even
more internationalized. Needless to say that even with the most
detailed contract parties will not be able to foresee all eventualities
and possible problems which may occur.
Another reason for detailed contractual formulation is
that rules of the applicable national law can seem
inappropriate in a given situation.
For instance, after a satellite has been launched, or
software has been installed, or after a project has been
finished in the mining industry, defects appearing after
the contract has ended can hardly be allocated to
certain causes and failures of one of the parties, and
they can rarely be cured. Legal rules that require one
party to check the performance of the other or to
warrant a particular result must be replaced by more
appropriate contractual rules.
• The Characteristics of Complex International Contracts
Importance: Despite the differences in various contracts,
certain characteristics of complex long-term contracts can be
Although they may not appear in all contracts, an analysis of
these characteristics is important for a better understanding of
Complex International Contracts.
These characteristics allow us, if not to give a precise definition,
to distinguish Complex International Contracts from other
contracts. As there is no uniform category of Complex
International Contracts there is also clear borderline between
Complex International Contracts and other contracts. These
• Long Term Duration
• Probability of Disturbance, Uncertainty
• Sensitivity for Disturbance
• Number of Parties Involved
• Interdependence, Cooperation and Solidarity
• Long Term Duration
The long duration is an important characteristic of CIC.
Examples on Long term Contracts:
-Airport Construction (3-10 Years)
-Construction Industry (3 Years)
In addition to the often-long duration of the contract
itself, the relation between the parties may start long
before the execution of the contract and last long after
the end of the formal contract term.
• Complicated long-term contracts “require too much joint
planning prior to any formalized commencement to start
likewise termination often is not sharp, because, for example,
a party may have a renewal right to extend the contract term
or may have service or warranty obligations that last much
longer than the term of the contract.
• Technicality / Volume
Another characteristic of CIC is that their objects in many
cases are technical systems or whole new technologies.
Examples for the first group (Technicality) are construction or
Examples for the second group development contracts in
aviation technology and contracts in the communication and
computer industry. Software contracts can belong to both
groups, depending on the content of the contract.
The Volume of a project and its immense costs often require
the contracts to address questions about financing.
Example: Aircraft Financing or Aircraft Leasing
Once made investments are project specific and cannot be
transferred to other projects.
• Probability of Disturbance, uncertainty:
CIC contain high risk factors; it is virtually impossible to anticipate all
possible contingencies at the time the contract is executed. And
when parties from different part of the world are involved, further
complicating factors add to the complexities of long-term
Instead of clear fixation of quantities, qualities and prices the text of
the contract often must use formulas, such as “best efforts”, “good
faith cooperation” etc.
This is a result of a contract’ content, more than of its duration.
• The framework type character of the contract and the
impossibility of precisely foreseeing the future necessarily create
gaps in the contract, which again enhance its uncertainty.
Specifically, contractual gaps may occur in the following four
situations, which all typically occur in CIC:
-Parties postpone specific agreement on certain points due to the lack
of complete information at the time of contracting;
-Unforeseen or unforeseeable events occur due to changes in
economic, technical or political conditions;
-Inevitably vague expressions are used in the contract;
-Parties of joint venture disagree on the conduct of the joint enterprise.
• Sensitivity for Disturbance:
In traditional exchange contracts, disturbance and delays (like strikes,
lockouts, civil disturbances, and commercial impossibility) often do
not affect the contract as a whole.
In CIC such as aviation contracts, the situation is different. Delays and
disturbance in the time schedule of the project will put into question
the further cooperation of many parties and will lead o immense
additional costs for the contractors.
In many contracts in which various contractors work together, one
contractor will not be able to start its work before another contractor
has finished”. Thus, there is a close interaction between the parties
over long duration to accomplish performance. The ability of one
party to perform in substantial measure is based on the performance
Another reason for the sensitivity to disturbance is the necessary
cooperation of the parties. The intensive contacts between them
in the course of their collaboration requires a certain degree of
mutual trust and at the same time leads to additional sensitivity of
parties whose interests only partially comply with each other.
Example: In airport construction contracts, “time related disputes
are spawned by the conflict between the employer’s vital
interest in having its project completed according to a
predetermined agreed schedule, and the contractor’s
requirements to consume additional time when he must perform
the work under changed conditions, or he must perform different
work than was originally anticipate. The conflict between these
two very strong interests is the fuel which flames time related
The complexity of CIC lies in the complexity of the parties performances. In
most cases, the parties have agreed to provide a whole program of different
performances. The performances of the different parties are often dependent
on each other, which in turn leads to an intense relationship between them.
In some international contracts, the complexity of the contracts is enhanced
by the uncertainty concerning the contract’s factual basis.
In construction contracts, each project is unique and has unknown
circumstances, each project is situated in its own site, having its own
combination of design details, environment, project management, contractor
personnel and many other factors.
In technology contracts, extensive and detailed clauses will be necessary
regarding confidentiality and information duties after termination of the
• Number of Parties involved
In CIC, it is not only the degree of planning that is different,
but also the participation in planning. In relational
agreements we encounter joint participation in planning
the ultimate cooperation being the merger between
formerly independent entities in which all future planning
merged within one complex planning entity.
Example: Joint Venture agreements often include a network of
interconnected executing contracts referring to each other.
• Interdependence, cooperation and solidarity
In comparison to other contracts, the number of parties involved in CIC is
typically increased. The relationship of the parties is also more intense
compared to a discrete (separate) transaction. Without cooperation based
on mutual trust, a long-term project cannot succeed. The CIC are
characterized by an intensive (rigorous) cooperation of the parties and a
network of relationships between them, a typical example being joint venture
agreements. The exchange element steps back behind the element of a
• Example: For instance, a complex long-term construction contract is more a
cooperative venture than most other contracts. Each party depends upon the
performance of the other or those for whom the other is responsible. The
contractor cannot perform unless the owner supplies the design, official
permits, easements from public authorities or neighboring landowners and, on
occasion materials or equipment. The architect cannot approve submittal of
shop drawings until they have been submitted by the contractor.
• The Weakening of the Principle of
‘PACTA SUNT SERVANDA’
First, drafters of contracts try to build in contractual flexibility by
formulating cooperation duties, renegotiation clauses, special risk-
force majeure- and hardship clauses.
Second, in the absence of such clauses, arbitrators, courts and legal
scholars use various different concepts in order to escape a strict rule
of pacta sunt servanda.
CONTRACTS AND THEIR MANAGEMENT
(DRAFTING OF INTERNATIONAL CONTRACT)
Not Declared to be void
• GOOD COMMERCIAL CONTRACT EVOLVES 3 STAGES
Drafting of Clauses
Implementation and Management
• TWO ROUTES TO A CONTRACT
GCC & SCC
The Buyer/Principal makes known to all the prospective suppliers/contractors the
general terms and conditions which are acceptable to him. GCC flows from the
policy of buyer/principal on various matters covered in contract.
In fact, where the GCC/SCC route is followed, the contract itself is a simple one
page document to which are attached the following documents:
i) Scope and Technical Specifications
ii) General Conditions of Contract
iii) Special Conditions of Contract
iv) The Bid/Tender submitted by the Supplier/Contractor and
v) Buyer’s Principal’s Notification of award.
• Second Route:
Self Contained Contract Route
As the name itself suggests, each clause in such a contract is self
contained and stands on its own. The contract itself is one document
with no reference to any other document and contains all the clauses
in one place. Each clause in the document is self contained and
complete in all respects with remedies incorporated to the logical
Example: The clause on ‘Defaults and Liquidated Damages’ will deal
with both short term and long term defaults.
• Short Term Default:
In dealing with short term default, and as remedy for accepting
supplies beyond the scheduled deliver date, the clause will specify
the predetermined damages, say, @ of 1% per month upto a
maximum of 10%.
• Long Term Default: Any delay beyond 10 months (or 11 months even
if a month’s grace is added) would amount to a long term default,
as the 10% maximum liquidated damages runs up to 10 months
(arithmetically at the rate of one percent per month). The remedy
available to the buyer/principal against such long-term default, ie.,
where the default continues beyond 10 or 11 months, has to be
incorporated in the clause. This is normally a right to terminate the
STRUCURE OF INTERNATIONAL CONTRACT
• Interpretation and Definitions
• Scope and Technical Specifications
• Terms of Payment
• Price Variation
• Bank Guarantees
• Letters of Credit
• Taxes and Duties
• Scheduled Delivery Date
• Force Majeure
• Defaults, Liquidated Damages and Penalties
• Export Licence
• Inspection and Acceptance
• Passing of Title and Risk
• Patents and Copyrights
• Spares and Spares Policy
• Resolution of Disputes
• All contracts begin with Preamble
• Describes the two parties to contract
• Describes their credentials
• Describes their legal status /address
• Mentions briefly Main Objective and
Subject matter of the contract
INTERPRETATION AND DEFINITIONS
• It explains the significance and role of the headings,
• And how the contract, its various clauses and appendices
shall be harmonious construed.
SCOPE AND TECHNICAL SPECIFICATIONS
• This is the most important clause in a contract which sets out:
i) the object of the contract (in some detail, the items of
equipment and the quantities, spares, services,
documentation, training, technical assistance) and;
ii) the technical specifications and performance parameters which
usually run to several pages, are normally attached as
appendices to the contract, a reference being made to them
in the main clause in the contract.
• There are three aspects of price that have to be dealt with in the
clause on price in a contract. These are:
i) Price Basis;
ii) Base level to which the price is related; and
iii) Breakup of the price, particularly where the contract covers,
apart from the main equipment, other supplies and
services, such as initial supply of spares, documentation,
training and technical assistance.
TERMS OF PAYMENT
• Specifies the quantum of payment
• Mode of Payment
• Bank Guarantee
• Advance Payments
• Based on terms of the Contract
• Based on costs of inputs involved (direct & indirect)
• Economic Conditions
• Short Term Contracts
• Long Term Contracts
• Price Variation (downward in price levels) (loss to buyer)
• Price Escalation (upward in price levels) (loss to seller)
• Bank guarantees are guarantees given by supplier’s/contractor’s bank to the
buyer/principal, promising to pay on demand and without demur, the sum of
money mentioned in the bank guarantee, if it is invoked by the
buyer/principal before the date of expiry of the bank guarantee mentioned in
• Bank Guarantees could be:
-Towards earnest money deposit;
-As security against performance of the contract;
-As security against initial (advance) and stage payments made by buyer to the
-Towards liquidated damages in exceptional cases, where contracts are of large value;
-Towards guaranteeing specified operational parameters of the equipment
- Towards meeting warranty claims in respect of equipments or
- Towards performance of maintenance during a specified period (usually one year) in
respect of civil work contracts.
Note: Bank Guarantee is an independent contract between the Banker and the party
in whose favor the guarantee is issued.
LETTERS OF CREDIT
• Letters of credit are guarantees issued by a buyer’s bank in favor of the
supplier guaranteeing that payments will be made against documents inter
alia evidencing completion of suppliers/services/stages of progress of work
before the delivery dates specified in the letter of credit, provided the
documents are presented for payment before the last date for negotiation of
documents, which is mentioned in the letter of credit.
• Two Banks are involved in a letter of credit. The buyer has/opens an account
in a bank (issuing bank) in his country which guarantees payment. This bank
opens a credit with a bank in the supplier’s country in favor of the supplier. This
bank, known as the advising bank (normally, the supplier nominates the
advising bank) advises the supplier the last date for delivery of the goods, the
documents which the supplier has to deliver to the bank and the time within
which he must do so.
TAXES AND DUTIES
• There is an incidence of taxes and duties in almost all types of
• In Domestic Contracts, it is necessary not only to specify the nature of
taxes and duties attracted, but also to indicate the rate of such taxes
and levies prevailing on the effective date of the contract. The
clause in the contract dealing with price should also specify as to
who will pay for these taxes or duties. The clause should also clearly
indicate whether the price is inclusive of all taxes and duties, or
whether taxes and duties are to be borne by the buyer, in addition to
the base price mentioned.
• In International Contracts, however, the normal practice is to specify
that the taxes and duties in the supplier’s country will be borne by the
supplier, and the taxes and duties in the buyer’s country will be borne
by the buyer. Such a clause, will, therefore, take care of all types of
taxes and duties including income tax, export duties, custom duties,
• There can be rare case where the goods attract taxes while in transit
form the supplier’s country to the buyer’s country. In such a case, the
question of incidence of such taxes should be settled and mentioned
during negotiation of the contracts. If the incidence of such taxes is
decided to be borne by the buyer, the normal wording of the article
SCHEDULED DELIVERY DATE
• The scheduled delivery date clause specifies the point of time when
the delivery of various items of equipment, other items such as
documentation, and services are required to be provided by the
supplier to the buyer.
• Generally, these are related to the effective date of the agreement
and mentioned by way of number of months from the effective date.
• The scheduled delivery date can also be specific dates without
being linked to the effective date.
• Force Majeure is a situation in which either of the parties to a
contract is prevented, temporarily or permanently, from performing
its obligations due to circumstances beyond its control.
• The clause of force majeure normally starts with a description of the
events which are considered as events of force majeure. Acts of
God, acts of nature, acts of governments, wars, riots and civil
commotion, strikes and lockouts are generally covered as such
• More specifically, earthquakes, floods, epidemics and fires, etc are
mentioned as events constituting force majeure.
DEFAULTS, LIQUIDATED DAMAGES & PENALTIES
• Law recognizes that whenever there is a breach of a contract, the
injured party suffers inconvenience and damage, and is entitled to
recover a monetary compensation from the party is put in a position
in which it would have been, had there been a performance and
not a breach, but the defaulter party is not to be punished.
• As a general rule, compensation must be commensurate with the
injury or loss sustained arising naturally from the breach. If actual loss
is not proved, no damages will be awarded.
• In International Contracts, particularly the ones involving high
technology equipment, electronic equipment, and defense
equipment, export licences are required to be obtained by the
suppliers from the governments of countries, before they can supply
them in turn.
• In International contracts, a separate clause is incorporated about
export licences, making it obligatory for the supplier to obtain and
maintain export licences; where it is cancelled or withdrawn and the
supplier is unable to have it restored, within, say 30 days from the
date of cancellation/withdrawal, providing a remedy to the buyer of
a right to terminate the contract; and on such termination for the
supplier to return all the advance payments forthwith to the buyer,
with or without interest. If it is with interest, the rate of interest should
INSPECTION AND ACCEPTANCE
• This clause in a contract provides the rights and obligations of the
parties when inspection and interim acceptance by the buyer in the
supplier’s premises is included.
• Mainly, such an inspection will not absolve the supplier from any
defects which may be noticed at time of final acceptance.
• The costs of such tests and inspection at the supplier’s works will have
to be borne by the supplier, except that the travel costs or other
personal expenses of the buyer’s representative are to be borne by
• This clause normally spells out the obligations of the supplier
and buyer in respect of shipment depending on whether the
PASSING OF TITLE AND RISK
• In a contract, it is necessary to define clearly the point of time and
place at which the title and risk in the goods pass from the supplier to
• This can be covered by the price clause, where the price basis is
• This is an important clause through which the supplier is required to
guarantee that the equipment supplied shall be free from defects of
design, material, and / or workmanship and that if such defects are
noticed by the buyer and notified to the supplier, the later will,
without charge to the buyer, repair or rectify any defective item or
replace such an item, so long as they arise within a period specified
in the warranty clause.
• What is the remedy under Warranty –
Is it a Compensation or rejection of contract?
PATENTS AND COPYRIGHTS
• Notwithstanding the precautions taken and the maxim caveat emptor,
occasions may arise when buyers and users of equipment may be charged
with infringement of patents and copyrights.
• This is failure on the part of the supplier to get legal permission/license to
manufacture and sell items of equipment patented by individuals or
• Through this clause in the contract, the buyer seeks protection against such
charges being made (through filing of suits, claiming damages, etc) for no
fault of his.
• The supplier has to indemnify the buyer against losses and damages suffered
by the buyer, and also defend at his own cost suits that may be filed by the
patent bolder against the buyer.
• The additional remedy is to have the supplier obtain that right for the buyer
from the original patent holder.
• During the course of implementation of a contract, occasions may
arise when the employees of the buyer may be present in the
premises of the supplier in connection with the agreement and vice-
• They may suffer injuries or die in the course of such visits. If injuries or
death are caused by negligent acts or omissions of such employees,
this clause in the contact provides that the relevant employer shall
indemnify the other party in respect of any costs, claims or liabilities
arising from such death or injuries.
• This is a reciprocal arrangement between the two parties.
SPARES AND SPARES POLICY
• A contract for supply of equipment focuses on issues relating to the
equipment, including the supply of spares for initial operation may
vary from three to five years depending on the nature of equipment.
• It is necessary to ensure that the supplier is under an obligation to
continue to supply spares in future, when required by the buyer at
reasonable prices, treating the buyer as the most favored customer.
• This is termed as a ‘Fall Clause’ which means that the price at which
the supplier agrees to supply spares to any other customer in future
will not fall below the prices at which the supplier will supply spares to
• Organizations, particularly in the government sector, are required to follow
rigid tendering procedures before procurement of equipment and other
• Quite often, they also face budgetary constraints which may prevent them
from procuring all their requirements at one time. They may also want to
reassure themselves of the satisfactory performance of the items before
deciding to order more quantities of the same item. The purchase procedures
quite often prohibit the placing of repeat orders on the existing supplier
without following the procedure of inviting tenders. Under such
circumstances, it is customary to incorporate in the existing contract an
OPTION CLAUSE which would give the right to the buyer to exercise an option
to order more quantities under the same terms and conditions (which include
a price variation clause) including the price in the contract, provided it is
exercised within a specified period of the effective date in the contract.
• The OPTION CLAUSE would specify the maximum quantity that could be
ordered by the buyer while exercising the option.
RESOLUTIONS AND DISPUTES
• The normal remedy for resolution of disputes arising between any two
parties is for the aggrieved party to approach the Courts of law
which takes a long time for its settlement.
• Hence, they incorporate an Arbitration Clause allowing the parties to
resort to Arbitration instead of approaching the Courts.
• Arbitration is a mechanism for resolving disputes that might arise
during implementation of a contract, either in interpreting the
clauses in a contract or in assessing the effect of event which may
occur during the implementation of the contract.
• During the implementation of a contract there are normally three
events which may lead to premature termination of the contract:
• Prolonged force majeure,
• prolonged default and cancellation / withdrawal
• non-restoration of export licence by the Government of the supplier’s
country. (Remedy is termination)
• There may be cases where either of the parties may, for valid
reasons, like to assign the performance of the contract to a third
• In such cases, the party wanting to assign the performance of its
rights and obligations will seek written consent of the other party for
• It is for this reason that in the Preamble to a contract, while describing
the parties and their identification for the purpose of the contract,
the words ‘which expression shall unless repugnant to the context or
meaning thereof be deemed to include its successors and permitted
assigns’ are added.
• A contract is mutually agreed between two or more parties and
hence, two or more parties make a contract.
• There may be a need o carry out amendments to a contract during
• Such Amendments have also to be mutually discussed and agreed
and a formal document of amendment to the contract is to be
signed by the parties, if it is to be valid and enforceable.
• A clause to this effect is incorporated as part of the contract.
• During the negotiation and implementation of a contract, the parties
may exchange organizational information, technical specifications,
drawings, performance parameters and data, manufacturing
processes, trade secrets, etc. It is obviously not desirable for these to
become public knowledge.
• A clause requiring confidentiality is, therefore, incorporated in a
• As the confidentiality has to be maintained even after completion of
performance and expiry of the contract, this clause is added to the
list of clauses which survive the contract, in the ‘Survival Clause’.
• During the course of implementation of the contract, it becomes
necessary for the parties to issue communications to each other from
time to time.
Notice of occurrence and Cessation of force majeure events,
Notice of readiness of items for shipment,
Notice of default etc.
• Notwithstanding that almost all the clauses in a contract, whether
based on the GCC/SCC route or self contained contract route, are
comprehensive, it is necessary to lay down in a separate clause the
laws which generally govern the whole contract.
• The second aspect in respect of governing laws in international
contracts is about the link of this clause with the arbitration clause, in
which arbitration under the Rules of International Chamber of
Commerce, UNCITRAL Rules or Rules of the London Court of
International Arbitration are provided.
• The Clause should be so drafted as to make the arbitral award to
qualify being treated as a Foreign Award (A & C Act, 1996)
• Some of the terms and conditions in a contract continue to be valid even
after the expiry or completion of the main obligations in a contract.
• It is necessary to incorporate in a separate clause titled ‘Survival Clause’, a list
of all the clauses in the contract which would survive even after the contract
is terminated or completed.
• Examples are:
Warranties relating to equipment, workmanship and performance parameters
up to the periods provided, which may fall beyond the completion of the
• Other examples of surviving clauses are the obligations of the supplier to
continue to supply spares for the equipment, confidentiality, resolution of
disputes, and taxes and duties.
• Under GCC / SCC Route, once a bid is accepted and letter of
acceptance is issued, the contract comes into effect legally.
• Similarly, once the contract document is signed by both parties,
under the Self-contained Contract Route, a contract comes into
• The date of the letter of acceptance or the date of signing the
contract normally becomes the effective date for all purposes, and
various actions and activities on the part of both the parties start
SPECIMEN CLAUSES IN A CONTRACT
• Interpretation and Definitions
• Scope, Technical Specifications & Performance Parameters
• Terms of Payment
• Price Variation
• Taxes and Duties (Supply Contracts, & Transfer of Technology)
• Scheduled Delivery Date
• Force Majeure
• Defaults and Liquidated Damages
• Export Licence
• Inspection and Acceptance
• Passing of Title and Risk
• Patents and Copyrights
• Resolution of Disputes (Involving Domestic & Foreign Supplier)
• Unilateral Termination
• Governing Laws
i) Domestic Contracts
ii) International Commercial Contracts
• Effective Date
Form of Bank Guarantee – Earnest Money
Form of Bank Guarantee – Advance Payment
Form of Bank Guarantee – Performance
Form of Bank Guarantee - Warranty
• Tendering Methods
• Basic Rules of Procedure
• Earnest Money Deposit
• Form and Content of Tenders
• Evaluation of Tenders
• Acceptance of Tenders
• Tendering by Govt./Public Authority/Element of Public interest
• Judicial Review
GUIDELINES ISSUED BY THE CENTRAL VIGILANCE COMMISSIOIN
GOVERNMENT OF INDIA
1. Tendering Procedures
Transparency in Tendering System
Receipt & Opening of Tenders
Members of Tender Committee
Tendering Process-Negotiations with L-1
Shortcomings in Bid Documents
Irregularities in the Award of Contracts
Notice Inviting Tenders
Tenders- Clause about submission of samples
Purchase of Computer Systems by Government Departments
Above Guidelines Reitereated
Delays in Payments
2. Appointment of Consultants
Guidelines laid down by Bureau of Public Enterprises (1978)
Appointment of Consultants
Participation of Consultants in Tender
Consultants for Construction Works
3. Mobilization Advances
4. Back to Back Tie Up by Public Sector Undertakings
5. Works/Purchase/Consultancy Contracts awarded on Nomination
6. Transparency through Effective Use of Website
SALIENT FEATURES OF WORLD BANK
1. General Conditions Guiding the World Bank’s Requirements
2. Open Competition
3. Must observe highest standard of ethics during procurement
4. Procurement Plan
5. International Competitive Bidding
i) Prequalifications of Bidders
ii) Bidding Documents
iii) Validity of Bids
iv) Bid Security
v) Clarity of Bidding Documents
vii) Price Adjustment
viii) Transportation and Insurance
ix) Terms & Methods of Payment
x) Alternative Bids
xi) Performance Security
xii) Liquidated Damages and Bonus
xiii) Settlement of Disputes
xiv) Time for Preparation of Bids
xv) Extension of Validity of Bids
xvi) Award of Contract
xvii) Publication of the Award of Contract
xviii) Rejection of all Bids
xix) Domestic Preference