20 Conditions of Contract In Construction

What Is Contract?

The Contract is an undertaking or agreement by a person or firm to do any construction work or activity under certain terms and conditions. These terms are used in Conditions of Contract in Construction.

These work may be of different nature like construction, maintenance, and repairs, for the supply of materials, for the supply of labor, for the transport of materials, etc.

“A contract is one type of agreement which can be enforced by law”

In order to make this contract or agreement valid, there must be a definite offer and there must also be equally definite and unconditional acceptance of this offer.

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Conditions of Contract in Construction

Following are the some important terms and conditions of contract in construction,

1. Security Deposit

On acceptance of the tender, the contractor has to deposit 10% of the amount as security money with the department which is inclusive of the earnest money already deposited.

This amount is kept as a check so that the contractor fulfills all terms and conditions of the contract and carries out the work satisfactorily according to the specifications and maintains the progress of the work, and completes the work in time.

A typical clause cap be framed as follows,

The contractor shall (within ten days of the receipt by him of the notification of the acceptance of his tender) deposit with the owner while making cash Rs…(usually the amount is 1% of the cost of the work) and permits the owner while making any payment due, to deduct 10% of all money so payable until the full amount of security deposit specified in the tender is made up.

The security deposit referred to when paid in cash deduct 10% of all money So payable until the full amount of security deposit specified in the tender is made up. The security deposit referred to when paid in cash, may, at the cost of contractor be converted into interest-bearing securities provided contractor has expressly desired this in writing.

If the amount of security deposit to be paid in a lump sum within the period specified above is not paid, the tender already accepted shall be considered as canceled and legal steps taken against the contractor for the recovery of damages. The security deposit lodged by the contractor shall be refunded to him after the expiry of six months from the date on which the final bill paid.

However, in big projects, security is taken in the form of bank guarantees. Because, if the contractor is required to pay SD in cash, he is bound to include the interest on the amount deposited in his tendered rates or cost. The bank guarantee costs the contractor a small percentage.

Seldom exceeding two percent per annum of the amount guaranteed with small margin money. Accepting the security in terms of the bank guarantee is thus to the advantage of the employer. This is Important conditions of contract in construction.

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2. Compensation for Delay

There is a provision of compensation for delay in conditions of contract in construction. The time allowed for completion of the work in the essence of the contract on the pall of the contractor.

When the work allotted to the contractor remains un-commenced or there is a delay in completion of the work or if the progress of the work is not proportionate to the time escaped, then the contractor shall pay as compensation an amount equal to 1% or such a small amount as the superintending of delay engineer may decide for each day of delay subject t to the maximum of 10% of the tendered amount of the whole work.

The decision of the superintending engineer in writing as the quantum of compensation to be levid shall be final.

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3. Extension in Time Limit

These conditions of contract in construction is intended to indicate the circumstances under which an extension of the time limit may be granted to the site contractor by the owner.

A typical clause can be framed as below:

If the progress of the work is delayed by the owner or by the engineer or by some reason which is beyond the control of the contractor such as strikes, fire, etc. or any other cause which in the opinion of the engineer is justified for the extension, the time of completion shall be suitably extended as decided by the engineer.

It is the contractor’s responsibility to report such hindrance to the engineer-in-charge; he can then apply for an extension of time in writing to the engineer in charge within 7 days of the date of completion. The engineer-in-charge may grant such an extension of time on reasonable grounds.

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4. Completion Certificate

On completion of the work including removal of surplus materials or any other materials in connection with the work, the contractor shall be furnished with a completion certificate by the engineer-in-charge. The date of completion shall be noted in the measurement book according to the date as certified in the certificate.

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5. Payment on Certificate

The contractor shall be entitled to receive monthly payment on bills submitted by him to cost more than Rs. 5000 and duly approved and passed by the engineer in – charge, whose certificate of the sum shall be final and conclusive. But all such intermediate payment shall be regarded as an ance against the final payment and not as payment for work actually done.

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6. Work at Night and Holidays

There are conditions of contract in construction that No Work shall be done at night, on Sundays, and another holiday without the written permission of the engineer in charge.

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7. Inferior Materials and Workmanship

This clause is provided to reject the materials and workmanship which are not conforming with the specifications of the work.

This conditions of contract in construction may be written as:

All materials and workmanship which in the opinion of the engineer in charge are not conforming to the provisions made the specifications of the works shall be

All rejected materials shall be suitably marked on the site and shall be removed to a suitable distance at once her the contractor on demand from an engineer. All

Condemned workmanship shall be rectified repaired or replaced by the contractor for the satisfaction of the engineer in charge.

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8. Departmental Materials

When departmental materials are issued to a contractor from time to time for the purpose of the contract only at a fixed issue rate as provided in the tender. The value of the full quantity of materials supplied may be deducted from sums then due or thereafter to become due to the contractor under the contract or from the security deposit.

In this conditions of contract in construction specified that,

All construction materials given to contractor is a absolute property of the government and shall not on any account be removed from the site of the work and shall at all times be open to inspection by the engineer-in-charge or his authorized persons.        

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9. Extra Items and Its Payments

A contractor shall carry out the execution of the items which are not covered up under this contract, after obtaining the written order from the engineer-in-charge. Commencement of such work shall not in any way violate the terms and conditions of the original contract.

The engineer-in-charge shall decide and fix the rate of the extra items by comparing and studying the rates of suitable items mentioned in the contractor’s tender or by the actual process of rate analysis. No extension of the time limit shall be granted due to the execution of the extra items unless the same is recommended by- the engineer-in-charge.

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10. Measurement and Payment to Contractor

The measurements of all the Items under this contract shall be Liken by the Engineer-in-charge or his representative as per standard practice in accordance with the standard model of measurement of building works (IS 1200).

The contractor shall submit a bill on the printed form on or before the twentieth (20th) of each month of work executed in the previous month. The bill of work shall be prepared as per the rates specified in the tender.

If the contractor has submitted a bill for payment as above, the engineers-in-charge shall, not later than the first month, issue a certificate for payment to the contractor.

The amount payable shall be 90% of the sum obtained by applying tendered rates to actually measured quantities of the approved work completed by the contractor during the preceding month.

Should the owner fail to pay the sum state the engineer – in charge or in the award by are contractor shall be entitled to receive in addition Professional Practice & Valuation in any certificate for payment issued vibration, upon demand when due, the to the sum named in the certificate, interest thereon at the rate specified in the appendix to the conditions of contract in construction

Read More: Tendering Process in Construction and Types of Tenders

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11. Commencement of Work According to Drawing and Specifications

All works shall be carried out in accordance with the design, drawings, and specifications, and all materials in every respect shall are in strict accordance with the specifications. The contractor shall be entitled to have access for the purpose of inspection during office hours of all such drawings and specifications and all of such design, drawings as aforesaid.

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12. Additions and Alterations

The engineer-in-charge reserves then right to make any charge in, omission from, any additions or alterations for, the original designs. Drawings, specifications instructions are necessary for the opinion of the engineer-in-charge during the progress of the work and which may be given to him in writing and signed by the engineer-in-charge.

Such charges, omissions, substitutions shall be deemed to have formed as work included in the original tender and the contractor shall be bound to carry out the work. The time of completion shall be extended proportionately by the engineer-in- charge due to above reasons.

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13. Subletting

In order to guard against the behavior of the sub-contractors appointed by the main contractor, this clause is included in the conditions of contract in construction.

The clause should provide for two important points,

• Written permission to appoint sub-contractors to be obtained from the owner.
• The main contractor to be considered responsible for the works as a whole.

The clause of subletting may read as follows.

The contract should not sublet or assign work to others without the written approval of the owner. In case the contractor assigns or sublet his contract, or attempt to do so, the owner may, by notice in writing rescind the contract. In the event of Contract shall thereupon forfeit and be absolutely at the disposal of the owner.

In such a case, the owner has full right to take the remedy, take possession of the premises and all the materials, tools, and appliances thereon and finish the work by whatever method he may deem expedient. The contractor shall not eligible for any payment until the work is completed.

If the unpaid balance of the contract price shall expense the expense of completing the work, such excess shall be paid to the contractors: In case, when expenses or cost of finishing work exceed the unpaid amount balance, the contractor shall pay the difference to the owner. The engineer’s certificate as to the expense r finishing the work shall be final.

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14. Breach of Contract

In case a contractor fails to carry out work with contractual obligations, the owner must have the right to claim damages for breach of contract. However such damages will not always be an adequate remedy and provision must be made in order to get the work completed.

In case of abandonment of the work owing to bankruptcy or liquidation, serious illness or death of the contractor, or any other cause, the owner shall have the power to adopt any of the following courses as he may deem best suited to his interests

  i) To rescind the contract.

 ii) To take over and complete the work as an agent of the contractor.

The owner shall have the right to employ labor and supply materials to carry out the work, or any part thereof, debiting the contractor with the cost of the labor and the price of the materials, and crediting him the value of the work done, at the same rates as if it had been carried out by the contractor under the terms of the contract.

The owner shall also have the right to take possession of and use or permit to use or all tools, plant, materials, stores provided by the contractor for the execution of the-a work, paying or allowing for the same in accounts at the contract rates or at the current market rates.

The contractor shall not remove tools, plants, materials, etc. from the site without the written permission of the owner. The engineer in charge shall determine the cost of all the work done by the owner acting as an agent for the contractor and in that case, the certificate assigned engineer-in-charge shall be confirmed and conclusive against the contractor.

When the breach of contract is on the part of the owner, the contractor all has the right to abandon the work and bring an action for damages.

Read More: 11 Types of Formwork (SHUTTERING) Used in Construction

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15. Labour Laws

It is agreed by the contractor that he shall have to respect the provision of the labour laws Which are in force from time to time and the contractor shall be responsible for all claims, compensations, etc, occurring under the provision of such labour laws.

the works on behalf of the Architect and the contractor is supposed to give him full co-operation and assistance to perform his duty well.

The clerk of works shall be a qualified competent person to the satisfaction of the Architect or Engineer. He shall be appointed and paid regularly by the owner as per the recommendation of the architect. The contractor shall afford every facility and assistance to the clerk of works for inspecting the works and materials for checking and measuring time and materials. However, subject to this clause, the contractor shall t the instructions only from the engineer or Architect.

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19. Compensation in Case of Bad Work

If any work is found to have been executed by the contractor with unsound, imperfect, or unskillful workmanship or with inferior materials, or it Is not in accordance with the contract, the contractor shall make good the defects in work at his own expenses and remove the materials or articles complained in writing by the Engineer-in-charge.

If the contractor fails to do so, within a period as specified by the engineer in charge the contractor shall be liable to pay compensation at the rate of one percent per day up to a maximum of 10% of the amount of the estimate. If the contractor fails to rectify the defects or remove and replace the defective materials the same may be done at risk and cost of the contractor.

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20. Maintenance Period

The contractor shall be responsible for any damage or any defects noticed within the prescribed maintenance period of 3 months (6 months in case of road work). The work shall as soon as practicable after the expiration of the maintenance period be handed over to the engineer-in-charge in good and perfect condition.

if any damages, defects, imperfections become apparent in it from the armed date of commencement until the end of the maintenance period, the contractor shall make good same at his own expenses, or in default, the engineer in charge shall be entitled to carry out such work by other workmen and deduct the expense from any sums that be due to the contractor or from his security deposit.

The security deposit of the contractor shall not be refunded before the expiry of the maintenance period or till the final bill has been prepared and passed whichever is later.

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21. Supervision by Higher Officers

All works under the contract shall be executed under the direction and subject to the approval in all respects of the engineer in charge or the S.E. of the circle for the time being who shall be entitle to direct at what points and in what mariner the works are to be commenced and carryout. This is a major clause in the conditions of contract in construction.

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22. Suspension of Work

If at any time the Engineer-in-charge shall, for any reason whatsoever, require that whole or any part of the work to be suspended for any period, he shall give notice in writing ordering such suspension work to the contactor who shall thereupon suspend or stop the work totally or partially as the case may be.

The contractor shall be entitled to reasonable compensation for the resultant unavoidable expenses to him on account of the suspension of the work. He shall also be entitled to a reasonable extension of time to complete work.

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