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way or the other related to the completion of a construction project. Such documents can consists
of construction drawings, plans, specifications, budget details and the other supporting
documents. Such documents are framed by experts who are usually either construction workers
or civil engineers.
Construction documents are really important. The following points describe their importance:
The importance of construction documents lies in the fact that they convert ideas into
print which helps to safeguard information.
Secondly, these documents help to accumulate all the information which can be helpful at
the completion of the project to estimate the total cost of construction.
The other reason is that they help the owner to put the project in papers and get the local
authorities for certain permissions.
But the main point is that they give the contractor a clear idea and specific instructions on
how the owner expects the construction project to shape up.
Construction documents can be piled up together to make up a book. There are two or three
components or sections in which this book is divided. The book is divided into the following
sections:
The first component consists of the building plans and the architectural drawings which
are submitted by the architects or other professionals.
The next part consists of the details of the materials and the equipments used in the
project. Also the cost covered throughout the project at every little junction should be
noted down with the date.
Listed below are standard contract documents that will need to be completed by subcontractors. (Some documents are in PDF
format. If you do not have Adobe Reader, you can download it here.)
These documents are not required to be submitted with a proposal. However, you are encouraged to review the Sample
Subcontract Document applicable to your organization prior to submitting a technical proposal.
Cost Summary Form for Small Producer and Unconventional Proposals Word Excel
Cost Summary Form for Ultra-Deepwater Proposals Excel
Proposal Signature Page Word PDF
These documents are not submitted with a technical proposal but may be required to be submitted after selection, but before award.
The term ‘tort’ was introduced into the terminology of English Law by the French speaking
lawyers and Judges of the Courts of Normandy and Angevin Kings of England. As a technical
term of English law, tort has acquired a special meaning as a species of civil injury or wrong. Till
about the middle of the seventeenth Century tort was an obscure term, at a time when procedure
was considered more important than the right of an individual. This emphasis on procedural
aspect for determining the success for a case continued for some 500 years, till 1852, when the
Common Law Procedure Act was passed and primacy of substance over the procedure gradually
gained firmer ground. Today the maxim as it stands is ‘ubi jus ubi remedium’, i.e. where there is
right there is remedy.
Tort is the French equivalent of the English word ‘wrong’ and of the Roman law term ‘delict’.
The word tort is derived from the Latin word ‘tortum’ which means twisted or crooked or wrong
and is in contrast to the word rectum which means straight. It is expected out of everyone to
behave in a straightforward manner and when one deviates from this straight path into crooked
ways he is said to have committed a tort. Hence tort is a conduct which is twisted or crooked and
not straight. Though many prominent writers have tried to define Tort, it is difficult to do so for
varied reasons. The key reason among this being, that the law of Torts is based on decided cases.
Judges while deciding a case, feel their primary duty is to adjudge the case on hand rather than to
lay down wider rules and hence they seldom lay down any definition of a legal term.
Furthermore the law of tort is still growing. If a thing is growing no satisfactory definition can be
given.
Tortuous Liability
It is pertinent to understand what is meant by tortious liability or rather the nature of tort law in
order to understand its utility. To throw more light, the word tort evolved, from at one time very
nearly passing into literary use as a synonym for wrong but after the middle of the seventeenth
century, a practise began in the courts of the common law, of distinguishing between actions in
‘contract’ for breaches of contract and actions for other wrongs, and of using the word ‘tort’ as a
compendious title for the latter class of actions. Since then it was usual to speak of ‘actions in
contract’ and ‘action in tort’[1]. So a tort came, in law to refer to that particular class of wrongs
for which an action in tort was recognized by the courts of common law as a remedy and to lose
the generic sense of wrong which it may have helped in popular use.
Another interesting result of this association of the word with a form of action was that it came to
refer also to the liability of a person who did not commit any tort or wrong, e.g. a master who is
sued for the damages by the person injured by a tort committed by his servant[2]. This was
because an ‘action in tort’ was the remedy against the master and in course of time and in
response to new needs and conditions, the master was held liable to pay damages even though he
had not committed any tort. So the law of torts is that body of law which deals with the liability
of persons against whom an ‘action in tort’ would lie.
Tort as we know today has evolved over the centuries and has grown tremendously in countries
such as the England, United States of America, and other progressive countries and to a certain
extent in India. The main study in this article however would revolve around two aspects of this
branch of law, firstly, whether the law of tort in India is unnecessary and secondly, whether the
law of torts has been simply overlooked. Before moving on to the core subject it would be
essential to fully understand the meaning of the term tort in the Indian context.
During British rule, courts in India were enjoined by Acts of Parliament in the UK and by Indian
enactments to act according to justice, equity and good conscience if there was no specific rule
of enacted law applicable to the dispute in a suit. In regard to suits for damages for torts, courts
followed the English common law insofar as it was consonant with justice, equity and good
conscience. They departed from it when any of its rules appeared unreasonable and unsuitable to
Indian conditions. An English statute dealing with tort law is not by its own force applicable to
India but may be followed here unless it is not accepted for the reason just mentioned.
The observation made by Hon’ble Sahai.J dispels any illusions as to the necessity of the law of
torts. His observations also envisage the growth of tort litigation in India. To fully asses the role
played by tort law in a modern society, it would be instructive to turn to the history England
during the last three centuries. This is for two reasons firstly, tort litigation in England has grown
significantly, making it an interesting study and secondly, the law of torts in India has been
largely borrowed from the English law of torts.
The outstanding fact of England’s legal history relevant to the present context is the growth of
her own tort law from small beginnings to the size and status of a separate branch of law. This
was the work of her lawyers and judges who developed the action for damages as a remedy for
violations of rights and duties and fashioned it as an instrument for making people adhere to
standards of reasonable behaviour and to respect the rights and interests of one another.
As a result, the English people benefited by the cultivation of habits of thought and conduct
which helps social peace and co-operative effort, inculcated a live sense of individual rights
which they do not hesitate to ascertain in courts of law. The necessary corollary of this is the
formulation of a large body of rules defining in detail the rights of the individual in relation to
others and the conditions in which he can assert them in a court of law. So we have a body of law
whose rules have grown and are constantly growing in response to new concepts of rights and
duty and new needs and conditions.
If it is true to say that the English people attained during this period, a degree of social unity and
integration enabling them to achieve phenomenal success in various aspects of their life, activity
and welfare, it is difficult to resist the inference that among the many forces and influences that
made this possible, was the development of their system of law and justice so as to afford
security to the citizen in his life, person, property and rights and interests which he values. An
integral and important part of this system is tort law. [6]
Evidence of its importance is afforded by the large and growing volume of litigation and case
law in actions for torts of various kinds and in particular those of defamation, negligence and
nuisance. In deciding these actions English judges and juries have tried to make their decisions
sub-serve the purposes already stated. They have taken care to allow claims only when they are
just and make their awards of damages serve, on the one hand as a deterrent of wrong doing and
on the other, afford satisfaction to parties suffering from injury or loss. The views here stated
find support in the almost whole sale adoption of tort law of England along with her other laws
by progressive nations like those of the U.S.A, Canada and Australia.
Though we have done likewise in borrowing the English law of tort, we have to make a far
greater use of it than we do now for making it serve the purposes for which the people of other
countries aforesaid have used it. The use made of it in these countries in evidenced not only by
the case law in their courts but also by the continual interest evinced by their lawyers, judges and
professors in the development of this branch of law by means of their contributions to the
growing volume of literature on it.
It is undeniable that we cannot afford to neglect any agency which can help to regulate individual
conduct in conformity with the needs of social peace and contentment which are the basic factors
on which our plans of national advancement can rest. It is hardly necessary to add that while
adopting English rules and theories, we have to make alterations and adaptations of them which
are demanded by conditions in India as observed by various Indian Judges[7] and also take note
of the great changes in this branch of law that are taking place elsewhere.
Therefore it is unnecessary to state that, there is absolutely no scope of doing away with this
branch of law. Some may argue that the law of torts merely plays merely a role of a residuary
law. However bearing in mind the facts above mentioned it is clear that there is no truth in this
argument.
There have been a number of enactments such as the Public Liability Insurance Act, 1991,
Environment Protection Act, 1986, Consumer Protection Act, 1986, Human Rights Protection
Act, 1998, Pre-Natal Diagnostics Techniques Regulations and Prevention of Misuse Act, 1994,
embodying the new principles of tortious liability in India. The Motor Vehicles Act, 1988 and
judicial interpretation continue to contribute to development of accident jurisprudence. The
unfortunate Bhopal Gas Leak disaster has triggered a new path of tort jurisprudence, leading to
environment tort, toxic torts, governmental torts, MNCs liability, congenital torts, stricter
absolute liability, etc. Still the Indian Law Reports furnish in this respect a striking contrast to the
number of tort cases before the Courts.
While most branches of law, eg, crimes, contracts, property, trusts, etc, have been codified, it is
interesting to observe that there is yet no code for torts in India. Most of the development in tort
law is the contribution of the Indian Judges and lawyers. Though recommendations for an
enactment on tort law were made as early as in 1886 by Sir F Pollock, who prepared a bill known
as the ‘Indian Civil Wrongs Bill’ at the instance of the Government of India, it was never taken
up for legislation.
Undoubtedly a code is useful, but it is well to recognise that this branch of law is still in the
process of growth and while it would be difficult to prepare a code, it would not also help a
proper development of the law to do so. Lack of a code for the law of torts acts as a deterring
factor for it to branch out as a favoured form of litigation. The growth of tort law in India does
not even compare to other progressive countries which have put it to much better use as
discussed previously.
Acknowledging the fact that a code on torts would be premature for the reasons aforementioned,
it would perhaps be wiser to start with enactments on particular topics on which the case-law in
India is unsatisfactory and has to be rectified. One of the first recommendations for legislation
made by the Law Commission appointed by the Government of India is on the subject of liability
of the government for torts of its servants.
Recently the National Commission for Review of Working of Constitution (NCRWC) also
recommended a law to give liability of state for torts of its employees in the report of the
commission headed by MN Venkatachaliah CJ (2002).
One the other hand the reason why an Indian code on this branch of law is premature is that there
is very little tort litigation in our courts and there have not been sufficient opportunities for
applying principles evolved elsewhere or evolving principles appropriate to Indian conditions. At
present it is a singular circumstance that very few cases of torts go before the Indian courts.
However this proves to be a Catch 22 situation as until there is a code for the law of torts not
many people will prefer to go to the courts for cases involving torts, as they would not be sure of
its outcome.
Conclusion
The law of torts in India is definitely not unnecessary but merely requires enactments to make it
more ascertainable. Failure of aggrieved persons to assert their legal rights is perhaps to be
ascribed not merely to insufficient appreciation of such rights but to other causes as well, e.g.,
difficulties in proving claims and obtaining trustworthy testimony, high court fees, delay of
courts. The elimination of difficulties which obstruct aggrieved parties in seeking or obtaining
remedies which the law provides for them is a matter which is worthy of consideration. If these
lacunae are removed, India could also witness a growth in tort litigation.
WHAT IS PREQUALIFICATION?
FEBRUARY 24, 2011 | BY KNEWS | FILED UNDER FEATURES / COLUMNISTS, PEEPING TOM
In order for our readers to understand the issue of procurement, today we publish an explanation about pre-qualification of bidders.
The public must not be confused between prequalification and a tender for a contract.
The two are not the same and the difference between the two is explained here.
Prequalification is not a form of tendering. Prequalification when used, precedes the tendering for the actual contract.
Prequalification is used to identify contractors who would be allowed to tender for certain contracts.
Therefore an advertisement for prequalification does not amount to an advertisement of a tender for a contract because all the
former does is allow those interested to express their desire to be eligible to tender.
Once a company is pre-qualified for a particular contract it is then eligible to tender for that contract.
A firm applying for prequalification has no expectation to be awarded any contract on the basis of the application for prequalification.
Its only expectation is that once it has been approved for prequalification, then it is free to bid for the contract.
Prequalification therefore precedes the tender and an advertisement for prequalification should not be confused with an
advertisement inviting tenders for the award of the substantive contract.
Prequalification is not used for all contracts. In fact, it is only used in certain cases where it is felt necessary to do so.
The vast majority of contracts are publicly advertised without the need for prequalification which is often reserved for large contracts
and those with requiring highly technical expertise.
One of the advantages of prequalification is to reduce the need to evaluate unqualified contractors. It is way of narrowing the field to
only those who have the requisite ability to comply with the terms of the contract and the financial capability to undertake the work.
Thus for certain contracts, particularly large contracts or those involving highly technical work, a procurement entity will before
advertising for bidders for the contract, first ask for invitations for pre-qualified bidders.
Prequalification allows for unqualified bidders to be weeded out and thus helps to speed up evaluation of bids since only a limited
number of pre-qualified bids have to be examined.
This means that only those firms pre-qualified would be eligible to bid on the contract.
The prequalification is merely for companies to demonstrate that they have the ability to undertake the work or supply of whatever it
has to be sourced.
Section 6 of our National Procurement Act is in fact very precise on this point. It provides at Section 6 for the procuring entity to
engage in prequalification proceedings in order to identify, prior to the submission of tenders , suppliers and contractors that are
qualified to participate in such proceedings.
The Act goes on to indicate that a procuring entity shall solicit invitations to pre-qualify by causing an invitation to pre-qualify to be
advertised.
Section 6 (6) goes on to state, “The procuring entity shall promptly notify each supplier or contractor submitting an application to pre-
qualify whether or not it has been pre-qualified and shall make available to any member of the general public, upon request, the
names of all suppliers or contractors that have been pre-qualified.
“Only suppliers or contractors that have been pre-qualified are entitled to participate further in the procurement proceedings.”
The Procurement Act goes on to state that except for single sourcing, procurement through community participation, restricted
tendering single or a request for quotations, for which there are prescribed rules- all procurement should be by open tendering.
In the case of request for quotations, there are usually limits to the amounts under which this method can be used.
The procurement process is important for public transparency and should allow for a system that is fair and allows for the
procurement agency to reap the benefits that go with such openness.
Hundreds of hours of evaluator time, forests of Notices to Tenderers (NTTs), and substantial goodwill can be saved if you take the time to
check the RFT carefully. If at all possible, try responding to it yourself. That is by far the most powerful means to iron out any problems and
minimise or eliminate the NTTs that you may have to issue later.
Consider setting up a template response format, that asks the questions you want, and gets respondents to answer them directly afterwards.
This gives some significant benefits:
It ensures you can easily find the answers to the questions, without sifting through so much waffle
It makes your requirements crystal-clear to bidders
Evaluation is fairer and more transparent
It will hugely reduce the time and frustration for both you and the respondents in understanding what each other wants/ is communicating
However, if you take this (excellent!) approach, it’s worth investing in getting an independent professional to pull together the template tools,
so that they are practical to use and don’t make things harder for respondents. This is a skill that the team at Plan A has developed in the
past few years, and while it can be transferred, it’s not that easy to get it right first time.
Once you have issued your wonder RFT, it’s time to sit back and wait for the responses. If you’ve done your job right, then you won’t have a
lot of queries or clarifications to deal with!
Evaluating the Responses
Evaluation is normally a two-step process.
In the Price Quality method, the first step involves each member of the
Tender Evaluation Team (TET) making their own mind up on the scores
that they attribute to the Non Price Attributes of each bidder's response .
Having an anchored scale, as mentioned above – is invaluable here, as it
reduces the amount of arm-wrestling that goes on in the second stage
when their scores are significantly different.
Although it’s seldom done this way, it’s worth considering whether you
allocate each member of the TET just one or two attribute sections to
mark for all the bidders. This means that, although you have fewer
opinions on the right scores for each section, you do get a consistent
grading and there are less arguments needed to moderate the scores. Obviously, it will also save time on the evaluation. This method is
most suitable when the project is well defined, with no major complexities and few significant risks.
The second step in a weighted attributes evaluation involves pulling the TET together to agree the final scores for the Attributes sections, and
apply the Supplier Quality Premium. There are huge time savings in this approach if you use a template approach.
One major Council who we developed template RFT tools for, reported that these enabled them to reduce the TET moderation time
from an average of SIX hours, to TWO hours. Consider the internal savings of this – when three or four TET members evaluate
hundreds of tenders each year.
For a lowest price conforming bid, the first step simply involves opening the price envelopes to identify the lowest price bid.
For this evaluation method, the second step is also simple – it only involves ensuring that the TET agrees whether the attributes
requirements for the lowest priced bid conform to the RFT requirements.
Bidding Procedures
On this page:
The envelopes are opened in public at the date and time advised in the Bidding Document. The
Bids are evaluated, and following approval by the ADB, the Contract is awarded to the Bidder
whose Bid has been determined to be the lowest evaluated substantially responsive Bid.
Top
Initially, only the Technical Proposals are opened at the date and time advised in the Bidding
Document. The Price Proposals remain sealed and are held in custody by the Purchaser. The
Technical Proposals are evaluated by the Purchaser. No amendments or changes to the Technical
Proposals are permitted.
The objective of the exercise is to allow the Purchaser to evaluate the Technical Proposals
without reference to price. Bids of Bidders who do not conform to the specified requirements
may be rejected as deficient Bids, with ADB's approval.
Following ADB approval of the technical evaluation, and at a date and time advised by the
Purchaser, the Price Proposals are opened in public. The Price Proposals are evaluated, and
following ADB's approval of the price evaluation, the Contract is awarded to the Bidder whose
Bid has been determined to be the lowest evaluated substantially responsive Bid.
Top
In the Two-Stage:Two-Envelope bidding procedure, at the first stage, Bidders submit two sealed
envelopes simultaneously, one containing the Technical Proposal and the other the Price
Proposal, enclosed together in an outer single envelope.
Only the Technical Proposals are opened at the date and time advised in the Bidding Document,
and the Price Proposals remain sealed and are held in custody by the Purchaser. The Technical
Proposals are evaluated and if the Purchaser requires amendments or changes to the Technical
Proposals, such amendments and changes are discussed with the Bidders. The Bidders are
allowed to revise or adjust their Technical Proposals to meet the requirements of the Purchaser.
The objective of the exercise is to ensure that all Technical Proposals conform to the same
acceptable technical standard and meet the technical solution required by the Purchaser. Bids of
Bidders who are unable or unwilling to bring their Technical Proposals to conform to the
acceptable technical standard will be rejected as deficient Bids with ADB's approval.
Following ADB approval of the evaluation of Technical Proposals, Bidders are invited, at the
second stage, to submit Modified Bid Proposals consisting of Revised Technical Proposals and
Supplementary Price Proposals based on the technical standard agreed.
The original Price Proposals and the Modified Bid Proposals are opened at a date and time
advised by the Purchaser. In setting the date the Purchaser will allow sufficient time for the
Bidders to incorporate the changes in the Revised Technical Proposals that are needed to meet
the agreed technical standard and to prepare the Supplementary Price Proposals that reflect these
changes.
The Price Proposals, Supplementary Price Proposals, and Revised Technical Proposals are
evaluated, and following ADB's approval, the Contract is awarded to the Bidder whose Bid is
determined to be the lowest evaluated substantially responsive Bid.
Top
In the Two-Stage bidding procedure, Bidders first submit their Technical Proposals, in
accordance with the specifications, but without prices.
The Technical Proposals are opened at the date and time advised in the Bidding Document. The
Technical Proposals are evaluated and discussed with the Bidders.
Any deficiencies, extraneous provisions and unsatisfactory technical features are pointed out to
the Bidders whose comments are carefully evaluated. The Bidders are allowed to revise or adjust
their Technical Proposals to meet the requirements of the Purchaser.
The objective of the exercise is to ensure that all Technical Proposals conform to the same
acceptable technical standard and meet the technical solution required by the Purchaser. Bids of
Bidders who are unable or unwilling to bring their bids to conform to the acceptable technical
standard may be rejected as deficient bids.
After the evaluation of Technical Proposals has been approved by ADB, the second stage is to
invite Bidders to submit Price Proposals and Revised Technical Proposals in compliance with the
acceptable technical standard. The Revised Technical Proposals and Price Proposals are opened
in public at a date and time advised by the Purchaser.
In setting the date the Purchaser should allow sufficient time for Bidders to incorporate the
changes involved in the Technical Proposals and prepare Price Proposals.
The Price Proposals and Revised Technical Proposals are evaluated, and following ADB's
approval, the Contract is awarded to the Bidder whose Bid has been determined to be the lowest
evaluated substantially responsive Bid.
Many potential legal issues can arise over the course of a contract. These issues can generally
be divided into several types; issues regarding the validity of the contract itself; defenses to
formation; integration issues; and performance problems and breach of contract. Legal counsel
is advisable to be sure that the contracting party understands what creation and performance of
the contract entails.
Formation Issues
Formation of a valid legal contract requires offer by one party and acceptance by
another of that offer. A valid contract also requires consideration, which is
exchange of something of legal value that has been bargained for by both
parties. Under the Statute of Frauds, certain contracts, such as real estate
contracts, must be in writing and signed by both parties. Absence of any of these
elements leaves the contract open to claims that it was not validly formed.
Defenses to Formation
Parties may also raise certain legal defenses to formation: that one of the parties
lacked capacity to contract (due to insanity, minority, etc.); that the subject matter
of the contract itself is illegal (bribery, for example); that the parties contracted
under duress; that the contract was unconscionable (so unfair to one party that or
that the contract was based on a mistake of fact serious enough to impact the
actual substance of the contract.
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Performance Issues
Even if a contract is legally valid, one party may claim that they should not be
forced to perform their duties under the contract, due to an event so
unanticipated that neither party, in contracting, could foresee that event
impacting the contract. Parties may seek to discharge their duties under the
contract by claiming impracticability (that the party to perform has encountered
unanticipated and extreme difficulty or expense); impossibility (that the party's
duties under the contract could not be performed by anyone, due to unforeseen
circumstances that arose after the time of contract); or frustration of the contract's
purpose (meaning that the purpose of the contract has been rendered of no
value due to some circumstance that is not the fault of the party seeking
discharge of the contract).
Integration Issues
Under the parol evidence rule, when two parties agree that their contract will be a
completely integrated writing (one embodying the entire substance of the
agreement), then no prior agreements or promises on the matter will be part of
that contract. Consequently, there are often contractual issues on whether a
writing was intended as a final, integrated expression of the contract, and if so,
whether completely or partially integrated. If the writing is found to be not
integrated, multiple legal issues arise as to which promises or extrinsic writings
should become part of the contract.
Issues of Breach
Should a party be unable to claim any of the above defenses to performance and
fail to perform his duties under the contract, he may be held in breach of his
contractual duties. Various legal issues arise upon breach, including the decision
on whether the breach is material (meaning whether the aggrieved party received
the substantial benefit of performance) or minor, and what, if any, should be the
appropriate remedy.
Sales of Goods
Legal issues arising based on contracts for sales of goods are governed by the
Uniform Commercial Code ("UCC"). While the contractual issues for sales of
goods are often similiar to those listed above, construction of contracts and the
remedies offered for breach have their own variations under the UCC.
i) It results from breach of a duty undertaken i) It occurs from the breach of such duties
by the parties themselves. which are not undertaken by the parties but
which are imposed by law.
ii) In contract, each party owes duty to the ii) Duties imposed by law of torts are not
other. towards any specific individual but towards
the world at large.
The Indian Contract Act, 1872 is the law relating to Contracts in India. It came into force on
September 1, 1872 and is extended to the whole of India except to the state of Jammu and
Kashmir.
The Act has 238 sections altogether. Sections 1 to 75 came into force on September 1, 1872.
Contents
[hide]
Contract
The term 'Contract' has been defined in Section 2(h) of the Indian Contract Act, 1872. It defines the
Contract as an agreement enforceable by law.
An agreement cannot become a contract unless it can be enforceable by law. To be enforceable
by law, a contract must contain all the essential elements of a valid contract as defined in Section
10.
According to Section 10, "All agreements are contracts, if they are made by the free consent of
the parties, competent to contract, for a lawful consideration, with a lawful object and are not
expressly declared by the Act to be void.
Essential Elements of a Contract as defined in Section 10 of the Indian Contract Act 1872
All the above ingredients must be satisfied in every valid contract. It can be noted that all
contracts are agreements, but not all agreements are contracts.
Offer
Section 2(a) of the Indian Contract Act, 1872 defines the term "Proposal" as when one person
signifies to another his willingness to do or to abstain from doing something with a view to
obtaining the assent of the other to such an act or abstinence, he is said to make a proposal. The
person making the 'proposal' or 'offer' is called the 'promisor' or 'offeror', the person to whom
the offer is made is called the 'offeree'.
Acceptance
Acceptance means the expression of assent to whom the proposal is made in a Contract.
Acceptance may be expressed either by conduct or by implied circumstances. However, silence
cannot be prescribed as a mode of acceptance.
Consideration
Section 10 of the Indian Contract Act states Consideration as one of the essential elements to
constitute a contract.
Consideration means 'something in return'. According to section 2(d) of the Indian Contract
Act, "When at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or abstain from doing something,
such act or abstinence is called a consideration for the promisee."
Capacity to Contract
Section 11 of the Indian Contract Act provides the requirements for competancy of the parties to
the contract.
It says, "Every person is competent to contract, who is of the age of majority, according to law,
which he is subject to also who is of sound mind and who is not disqualified from contracting by
any law to which he is the subject"
Disqualifications
Quasi-Contracts
Under special circumstances, obligations resembling those created by a contract are imposed by
law although there is no contract between the parties. Such contracts are called Quasi-
Contracts.
Discharge of Contract
1. Discharge by Performance.
2. Discharge by Mutual Consent or Agreement
1. Novation - When a new contract is substituted for an existing contract
2. Alteration
3. Rescission
4. Remission - Accepting the lesser sum of amount than what was contracted for
3. Discharge by subsequent illegality or impossibility
1. Destruction of Subject-matter
2. Failure of ultimate purpose
3. Death or personal incapacity of Promisor
4. Change of Law
4. Discharge by lapse of time
5. Discharge by operation of law
6. Discharge by breach of contract
1. Anticipatory breach
2. Actual breach
See Also
Chapter VI of Contract Act with Sections 73 to 75 deals with the consequences of breach of a
contract.
When a contract is breached, the injured party is entitled to one or more of the following
remedies.
Damages
Some common types of contracts are used in the engineering and construction industry
With this kind of contract the engineer and/or contractor agrees to do the a described and
specified project for a fixed price. Also named "Fixed Fee Contract". Often used in engineering
contracts.
A Fixed Fee or Lump Sum Contract is suitable if the scope and schedule of the project are
sufficiently defined to allow the consulting engineer to estimate project costs.
This kind of contract is based on estimated quantities of items included in the project and their
unit prices. The final price of the project is dependent on the quantities needed to carry out the
work.
In general this contract is only suitable for construction and supplier projects where the different
types of items, but not their numbers, can be accurately identified in the contract documents.
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.
A contract agreement wherein the purchaser agrees to pay the cost of all labor and materials
plus an amount for contractor overhead and profit (usually as a percentage of the labor and
material cost). The contracts may be specified as
This types of contracts are favored where the scope of the work is indeterminate or highly
uncertain and the kinds of labor, material and equipment needed are also uncertain. Under this
arrangement complete records of all time and materials spent by the contractor on the work
must be maintained.
Compensation is based on a fixed sum independent the final project cost. The customer agrees
to reimburse the contractor's actual costs, regardless of amount, and in addition pay a
negotiated fee independent of the amount of the actual costs.
Cost + Fixed Fee with Guaranteed Maximum Price Contract
Compensation is based on a fixed sum of money. The total project cost will not exceed an
agreed upper limit.
Compensation is based on a fixed sum of money. A bonus is given if the project finish below
budget, ahead of schedule etc.
Cost + Fixed Fee with Guaranteed Maximum Price and Bonus Contract
Compensation is based on a fixed sum of money. The total project cost will not exceed an
agreed upper limit and a bonus is given if the project is finished below budget, ahead of
schedule etc.
Cost + Fixed Fee with Agreement for Sharing Any Cost Savings Contract
Compensation is based on a fixed sum of money. Any cost savings are shared with the buyer
and the contractor.
Incentive Contracts
Fixed Price Incentive Contracts are preferred when contract costs and performance
requirements are reasonably certain.
Cost Reimbursement Contract provides the initially negotiated fee to be adjusted later by a
formula based on the relationship of total allowable costs to total target costs. This type of
contract specifies a target cost, a target fee, minimum and maximum fees, and a fee adjustment
formula. After project performance, the fee payable to the contractor is determined in
accordance with the formula.
Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come
from a statute or from a contract that is voluntarily entered into, where the parties agree to hold
all existing or future disputes to arbitration, without necessarily knowing, specifically, what
disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is
similar to mediation in that a decision can not be imposed on the parties. However, the principal
distinction is that whereas a mediator will try to help the parties find a middle ground on which
to compromise, the (non-binding) arbitrator remains totally removed from the settlement process
and will only give a determination of liability and, if appropriate, an indication of the quantum of
damages payable. By one definition arbitration is binding and so non-binding arbitration is
technically not arbitration.
judicial proceedings, although in some jurisdictions, court proceedings are sometimes referred
as arbitrations[3]
alternative dispute resolution (or ADR)[4]
expert determination
mediation
Contents
[hide]
This article contains a pro and con list. Please help improve it by integrating both sides into a more
neutral presentation. (November 2012)
Parties often seek to resolve their disputes through arbitration because of a number of perceived
potential advantages over judicial proceedings:
when the subject matter of the dispute is highly technical, arbitrators with an appropriate
degree of expertise can be appointed (as one cannot "choose the judge" in litigation)[5]
arbitration is often faster than litigation in court [5]
arbitration can be cheaper and more flexible for businesses[citation needed]
arbitral proceedings and an arbitral award are generally non-public, and can be made
confidential[6]
in arbitral proceedings the language of arbitration may be chosen, whereas in judicial
proceedings the official language of the country of the competent court will be automatically
applied
because of the provisions of the New York Convention 1958, arbitration awards are generally easier
to enforce in other nations than court judgments
in most legal systems there are very limited avenues for appeal of an arbitral award, which is
sometimes an advantage because it limits the duration of the dispute and any associated
liability
[edit] Arbitrability
By their nature, the subject matter of some disputes is not capable of arbitration. In general, two
groups of legal procedures cannot be subjected to arbitration:
Procedures which necessarily lead to a determination which the parties to the dispute may not
enter into an agreement upon:[7] Some court procedures lead to judgments which bind all
members of the general public, or public authorities in their capacity as such, or third parties, or
which are being conducted in the public interest. For example, until the 1980s, antitrust matters
were not arbitrable in the United States.[8] Matters relating to crimes, status and family law are
generally not considered to be arbitrable, as the power of the parties to enter into an
agreement upon these matters is at least restricted. However, most other disputes that involve
private rights between two parties can be resolved using arbitration. In some disputes, parts of
claims may be arbitrable and other parts not. For example, in a dispute over patent infringement, a
determination of whether a patent has been infringed could be adjudicated upon by an
arbitration tribunal, but the validity of a patent could not: As patents are subject to a system of
public registration, an arbitral panel would have no power to order the relevant body to rectify
any patent registration based upon its determination.
Some legal orders exclude or restrict the possibility of arbitration for reasons of the protection
of weaker members of the public, e.g. consumers. Examples: German law excludes disputes over
the rental of living space from any form of arbitration,[9] while arbitration agreements with
consumers are only considered valid if they are signed by either party,[10] and if the signed
document does not bear any other content than the arbitration agreement.[11]
agreements which provide that, if a dispute should arise, it will be resolved by arbitration. These
will generally be normal contracts, but they contain an arbitration clause
agreements which are signed after a dispute has arisen, agreeing that the dispute should be
resolved by arbitration (sometimes called a "submission agreement")
The former is the far more prevalent type of arbitration agreement. Sometimes, legal significance
attaches to the type of arbitration agreement. For example, in certain Commonwealth countries, it is
possible to provide that each party should bear their own costs in a conventional arbitration
clause, but not in a submission agreement.
In keeping with the informality of the arbitration process, the law is generally keen to uphold the
validity of arbitration clauses even when they lack the normal formal language associated with
legal contracts. Clauses which have been upheld include:
The courts have also upheld clauses which specify resolution of disputes other than in
accordance with a specific legal system. These include provision indicating:
that the arbitrators "must not necessarily judge according to the strict law but as a general rule
ought chiefly to consider the principles of practical business"[15]
"internationally accepted principles of law governing contractual relations"[16]
Agreements to refer disputes to arbitration generally have a special status in the eyes of the law.
For example, in disputes on a contract, a common defence is to plead the contract is void and thus
any claim based upon it fails. It follows that if a party successfully claims that a contract is void,
then each clause contained within the contract, including the arbitration clause, would be void.
However, in most countries, the courts have accepted that:
1. a contract can only be declared void by a court or other tribunal; and
2. if the contract (valid or otherwise) contains an arbitration clause, then the proper forum to
determine whether the contract is void or not, is the arbitration tribunal.[17]
Arguably, either position is potentially unfair; if a person is made to sign a contract under duress,
and the contract contains an arbitration clause highly favourable to the other party, the dispute
may still referred to that arbitration tribunal.[citation needed] Conversely a court may be persuaded that
the arbitration agreement itself is void having been signed under duress. However, most courts
will be reluctant to interfere with the general rule which does allow for commercial expediency;
any other solution (where one first had to go to court to decide whether one had to go to
arbitration) would be self-defeating.
States regulate arbitration through a variety of laws. The main body of law applicable to
arbitration is normally contained either in the national Private International Law Act (as is the
case in Switzerland) or in a separate law on arbitration (as is the case in England). In addition to
this, a number of national procedural laws may also contain provisions relating to arbitration.
By far the most important international instrument on arbitration law[citation needed] is the 1958 New York
Convention on Recognition and Enforcement of Foreign Arbitral Awards . Some other relevant international
instruments are:
The term arbitral tribunal is used to denote the arbitrator or arbitrators sitting to determine the
dispute. The composition of the arbitral tribunal can vary enormously, with either a sole
arbitrator sitting, two or more arbitrators, with or without a chairman or umpire, and various
other combinations.
In most jurisdictions, an arbitrator enjoys immunity from liability for anything done or omitted
whilst acting as arbitrator unless the arbitrator acts in bad faith.
Arbitration institutions tend to have their own rules and procedures, and may be more formal.
They also tend to be more expensive, and, for procedural reasons, slower.[18]
The duties of a tribunal will be determined by a combination of the provisions of the arbitration
agreement and by the procedural laws which apply in the seat of the arbitration. The extent to
which the laws of the seat of the arbitration permit "party autonomy" (the ability of the parties to
set out their own procedures and regulations) determines the interplay between the two.
However, in almost all countries the tribunal owes several non-derogable duties. These will
normally be:
to act fairly and impartially between the parties, and to allow each party a reasonable
opportunity to put their case and to deal with the case of their opponent (sometimes shortened
to: complying with the rules of "natural justice"); and
to adopt procedures suitable to the circumstances of the particular case, so as to provide a fair
means for resolution of the dispute.[19]
Although arbitration awards are characteristically an award of damages against a party, in many
jurisdictions tribunals have a range of remedies that can form a part of the award. These may
include:
One of the reasons that arbitration is so popular in international trade as a means of dispute
resolution, is that it is often easier to enforce an arbitration award in a foreign country than it is to
enforce a judgment of the court.
Under the New York Convention 1958, an award issued a contracting state can generally be freely
enforced in any other contracting state, only subject to certain, limited defenses.
Only foreign arbitration awards can be subject to recognition and enforcement pursuant to the
New York Convention. An arbitral decision is foreign where the award was made in a state other
than the state of recognition or where foreign procedural law was used.[20]
Virtually every significant commercial country in the world is a party to the Convention, but relatively few
countries have a comprehensive network for cross-border enforcement of judgments of the court.
The other characteristic of cross-border enforcement of arbitration awards that makes them
appealing to commercial parties is that they are not limited to awards of damages. Whereas in
most countries only monetary judgments are enforceable in the cross-border context, no such
restrictions are imposed on arbitration awards and so it is theoretically possible (although
unusual in practice) to obtain an injunction or an order for specific performance in an arbitration
proceeding which could then be enforced in another New York Convention contracting state.
The New York Convention is not actually the only treaty dealing with cross-border enforcement
of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral
Awards 1927 [1] remains in force, but the success of the New York Convention means that the
Geneva Convention is rarely utilized in practice.
Article V of the New York Convention provides an exhaustive list of grounds on which
enforcement can be challenged. These are generally narrowly construed by the courts in
arbitration centres to uphold the pro-enforcement bias of the Convention.
Certain international conventions exist in relation to the enforcement of awards against states.
The Washington Convention 1965 relates to settlement of investment disputes between states
and citizens of other countries. The Convention created the International Centre for Settlement of
Investment Disputes (or ICSID). Compared to other arbitration institutions, relatively few awards
have been rendered under ICSID.[21]
The Algiers Declaration of 1981 established the Iran-US Claims Tribunal to adjudicate claims of
American corporations and individuals in relation to expropriated property during the Islamic
revolution in Iran in 1979. The tribunal has not been a notable success, and has even been held
by an English court to be void under its own governing law.[22]
[edit] Challenge
Generally speaking, by their nature, arbitration proceedings tend not to be subject to appeal, in
the ordinary sense of the word.
However, in most countries, the court maintains a supervisory role to set aside awards in extreme
cases, such as fraud or in the case of some serious legal irregularity on the part of the tribunal.
Only domestic arbitral awards[citation needed] (i.e. those where the seat of arbitration is located in the
same state as the court seised) are subject to set aside procedure.
In American arbitration law there exists a small but significant body of case law which deals with the
power of the courts to intervene where the decision of an arbitrator is in fundamental disaccord
with the applicable principles of law or the contract.[23] However, this body of case law has been
called into question by recent decisions of the Supreme Court.[24]
Unfortunately there is little agreement amongst the different American judgments and textbooks
as to whether such a separate doctrine exists at all, or the circumstances in which it would apply.
There does not appear to be any recorded judicial decision in which it has been applied.
However, conceptually, to the extent it exists, the doctrine would be an important derogation
from the general principle that awards are not subject to review by the courts.
[edit] Costs
In many legal systems - both common law and civil law - it is normal practice for the courts to award
legal costs against a losing party, with the winner becoming entitled to recover an approximation of
what it spent in pursuing its claim (or in defense of a claim). The United States is a notable
exception to this rule, as except for certain extreme cases, a prevailing party in a US legal
proceeding does not become entitled to recoup its legal fees from the losing party.[25]
Like the courts, arbitral tribunals generally have the same power to award costs in relation to the
determination of the dispute. In international arbitration as well as domestic arbitrations governed by
the laws of countries in which courts may award costs against a losing party, the arbitral tribunal
will also determine the portion of the arbitrators' fees that the losing party is required to bear.
[edit] Nomenclature
As methods of dispute resolution, arbitration procedure can be varied to suit the needs of the
parties. Certain specific "types" of arbitration procedure have developed, particularly in North
America.
Judicial Arbitration is, usually, not arbitration at all, but merely a court process which refers to
itself as arbitration, such as small claims arbitration before the County Courts in the United
Kingdom.[3]
High-Low Arbitration, or Bracketed Arbitration, is an arbitration wherein the parties to the
dispute agree in advance the limits within which the arbitral tribunal must render its award. It is
only generally useful where liability is not in dispute, and the only issue between the party is the
amount of compensation. If the award is lower than the agreed minimum, then the defendant
only need pay the lower limit; if the award is higher than the agreed maximum, the claimant will
receive the upper limit. If the award falls within the agreed range, then the parties are bound by
the actual award amount. Practice varies as to whether the figures may or may not be revealed
to the tribunal, or whether the tribunal is even advised of the parties' agreement.
Binding Arbitration is a form of arbitration where the decision by the arbitrator is legally binding
and enforceable, similar to a court order.
This form of arbitration is also known as Baseball Arbitration. It takes its name from a
practice which arose in relation to salary arbitration in Major League Baseball.
Night Baseball Arbitration is a variation of baseball arbitration where the figures are not
revealed to the arbitration tribunal. The arbitrator will determinate the quantum of the
claim in the usual way, and the parties agree to accept and be bound by the figure
which is closest to the tribunal's award.
Such forms of "Last Offer Arbitration" can also be combined with mediation to create
MEDALOA hybrid processes (Mediation followed by Last Offer Arbitration).[27]
International arbitration
UNCITRAL Model Law on International Commercial
Mandatory arbitration Arbitration
Arbitration Roundtable of Toronto
Ukrainian Arbitration Association
[edit] Notes
[edit] References
Boskey, James B. (1993) The American Arbitration Association Insurance ADR Manual West Pub. Co.
Blackaby, Nigel; Lindsey, David; Spinillo, Alessandro (2003) International Arbitration in Latin
America Kluwer
Born, Gary (2009) International Commercial Arbitration Kluwer
Buhring-Uhle, Christian and Kirchhof, Gabriele Lars (2006) Arbitration and Mediation in
International Business 2nd Ed.
Craig, W. Laurence; Park, William W.; Paulsson, January (2001) International Chamber of Commerce
Arbitration Oxford University Press
David, R. (1985) Arbitration in International Trade
Dugan, Christopher; Wallace, Jr., Don; Rubins, Noah (2005) Investor-State Arbitration Oxford
University Press
Lew, Julian; Mistelis, Loukas; Kroell, Stefan (2003) Comparative International Commercial
Arbitration
The Permanent Court of Arbitration (2000) International Alternative Dispute Resolution: Past,
Present and Future
PWC (2008) International Arbitration: Corporate Attitudes and Practices
Redfern, A. and Hunter, M. (2004) Law and Practice of International Commercial Arbitration 4th
Ed.
Schreuer, Christoph H. (2001) The ICSID Convention: A Commentary Cambridge University Press
– (International Centre for Settlement of Investment Disputes)
Tibor Varady, John J. Barcelo, and Arthur Taylor Von Mehren (2006) International Commercial
Arbitration 3rd Ed.
Yves Dezalay and Bryant G. Garth. (1998) Dealing in Virtue: International Commercial Arbitration
and the Construction of a Transnational Legal Order
General Negative list Items for Works Contracts under State VAT Act & Rules
(a) Purchases effected by way of works contract where the contract results into an immovable Property .
(b) Purchases of Building material which are not resold but are used in the activity of Construction. (Free issues)
(d) Any purchases of Consumables or of goods treated as Capital Assets by the Contractor/dealer where he is principally
engaged in doing job work or labour work and is not engaged in the business of manufacturing of goods for sale by him.
(Please refer to the specific provisions of works contracts under the relevant state VAT Acts for such Negative lists)
5. Tax deducted at source (TDS) provisions of works contracts under the State VAT Act & Rules
In most of the State VAT Acts, the provisions of Tax deducted at source (TDS) are incorporated. The logic behind the TDS
(WC) provisions is that the Contractors are not organized in many cases and they do not pay taxes on time , therefore in
this provision the contractee / customer deducts the prescribed % of TDS from the Contract Price and pays the same
before the prescribed dates, directly, to the respective State Government through the specified challan. The TDS is to be
deducted by the specified customers only as notified by the State Governments. Generally, the dealers registered under
the State VAT Acts, State and Central Governments, Corporations, Government Undertakings, Co-operative Societies only
have to deduct the said TDS (WC) and not by all the Customers. The monetary limit of the turnover is prescribed between
Contractor and Contractee for such deduction in the hands of the Customer in most of the VAT Acts.
It is responsibility of the Contractee / Customer to deduct the prescribed % of TDS (As provided in the relevant VAT Act &
Rules) and pay the same to the State Government before the prescribed date, otherwise interest / penalty is leviable on
such Contractees / Customers.
However, as per the State VAT Act provisions, the Seller (Contractor) is liable to pay VAT, if No TDS is made by the
Contractee/Customer. The State Governments have prescribed different VAT Forms under the provision of TDS (WC). In
certain States, the Contractee has to obtain TANs (Tax deductible Account Number) and file Annual Returns of TDS under
the TDS provisions .
In Maharashtra, under MVAT Act, 4% TDS is applicable (instead of 2%) in the case where the Contractor has not obtained
the VAT TIN certificate (URD Contractor).
6. Provisions of Works Contract for Main and Sub-Contractor under the State VAT Laws.
The following two types of VAT levies are provided for the transactions of works contracts between the Main contractor and
the Sub-Contractor,
In certain States, (like Maharashtra) Main and Sub Contractors are treated as single legal Entity. Therefore, there
is no VAT/TDS applicable between the transactions of the Main and the Sub-Contractor . The VAT Forms are
exchanged between the Main and the Sub Contractors to declare that they have discharged VAT liability for their
portions of the Contracts. In such cases, the Main Contractor gets the deduction of the value of the work
executed by the Sub Contractor. The main and the Sub Contractor are jointly and severally responsible for the
compliance under the works contract provisions of the VAT Act .
In certain states ( other than Maharashtra), the Main and the
Sub Contractors are treated as separate legal Entities, like separate two dealers under the VAT Act. Therefore, in such
provisions , Sub contractor charges applicable VAT/Composition Tax to the Main Contractor, avails Credit of the VAT paid
on the inputs and the Main contracts also charges VAT/Composition Tax applicable to the Contractee/Customer and avails
the Credit available to him against the VAT paid to the Sub-Contractor. They are assessed / audited separately under the
State VAT Act provisions.
It is advisable that the Main Contractor and the Sub Contractor should discuss all the relevant VAT provisions before opting
for the specific method of levy of VAT / Composition Tax to avoid complications at a later date.
On certain Works Contracts both VAT (WC) & Service Tax are applicable on the Contract price since there involves the
transfer of property in goods (sale of goods / materials) subject to VAT levied by the State Government and rendering of
Taxable Service subject to Service Tax levied by the Central Government. Thus, the both the state & the Central
Governments levy VAT & Service tax on the same taxable base i.e. Contract Price, respectively.
The Contracts /Taxable services where both VAT and Service Tax are applicable are shown as under ,
Please note that in such Works Contracts / Taxable Services, the working for levy of VAT & Service Tax is to be done,
separately, as per the provisions of VAT & Service Tax. Only in the case where the Contractor opts for A-1 legal option of
actual labour deduction method, he can pay Service Tax on the actual labour portion and VAT on actual Material value.
Otherwise only A-2 (Standard deduction) and B (Composition Tax) options are available under VAT and No deduction for
levy of Service Tax for the Contractor. The Abatements are available under the Service Tax law for specific Taxable
Services towards the value of material / goods involved in the same. Like 67% Abatement from the contract value is
available under the Construction Services .
The Central Government amended the definition of ` Sale’ under the Central Sales Tax Act, 1956 from 11.5.2002. With the
said amendment, the states are empowered to levy C.S.T. on the interstate works contract. By the said amendment, the
concept of `Interstate works contract’ was introduced in the C.S.T. Act by inserting in the definition of `Sale’ , the words
“Transfer of Property in goods involved in execution of works contract” .
When the Contractor dispatches his goods from one State to another under a individuals works contract, it is a interstate
works contract. The sections 3,4,5 of the C.S.T. Act are applicable to such deemed sales in the interstate works contract.
Accordingly, the State of dispatch can collect the Central Sales Tax on such deemed interstate sales . The Contractors may
not be allowed the interstate depot transfers in the cases of indivisible works contracts since such dispatches are made to
the sites of the contractee situated in other state and the same are earmarked for the specific contractee. The Contractor
would invoice to the Contractee from the state of dispatch and would charge CST as applicable , with or without C/D
Forms.
Recently, the CST Act was further amended to explain, the deductions available on the total contract price to the
Contractor to arrive at the material value. Please note that in interstate works contracts also, the C.S.T. is payable only on
the Material Value/Price’ of the Contract and not on the Labour’ portion of the Contract.
The examples of interstate works contract would be that of Contractor from Mumbai, dispatching goods from his Mumbai
plant to the site in Chennai (Tamil Nadu) under a indivisible works contract or A Manufacture in Mumbai dispatching his
own material to a processor in Surat and the processor returns back the processed material back to the Mumbai
Manufacturer. The Surat processor would charge 4% CST against `C’ form on the material value of his invoice amount
being a interstate works contract in his hands .
Please note that when it is an interstate works contract, the Contractee would raise an invoice on the Customer situated in
other state with applicable rate of CST on the Material value of the contract, but the Customer would not deduct any
amount towards TDS since there is no provision of T.D.S. under the CST Act. TDS is to be deducted only in the local works
contracts where the Contractor has charged VAT/Composition Tax.
In short, if the Contractor dispatches goods from his state to the State of the Contractee (Customer) under an indivisible
works contract, it is a interstate Works contract in the hands of such Contractor subject to levy of CST which is collected by
the state of dispatch . However, in the interstate works contracts also , C.S.T. is payable only on the `Material Value’ of
the Contract .
9. How the Contractee / Customer should look into the Works Contract purchases for Minimum cost.
Under the VAT System, the Contractee/Customer can avail the full VAT Credit/Set off of the VAT paid to the Contractor
through the tax Invoices, provided such purchases are not in the Negative list of set off/VAT Credit.
However, in the cases where the Contractees / Customers do not get any VAT set off / Credit, they should note the
following points to reduce their VAT Cost,
(a) To decide the Best option of “Levy of VAT/Composition Tax” before the execution of the Works Contract Commences.
(b) To insist the Contractor to buy maximum inputs from local vendors only and the VAT Credit thereof should be passed
on to the Contractee by reducing his sale price , accordingly .
( c ) In case of free issues supplied by the Contractee / Customer to the Contractor , if the price of the contractor is `Net
off’ the material value supplied by the Contarctee then there is no negative VAT impact to the Contractee . Otherwise,
there is VAT cost in the hands of the contractee with regards to the VAT paid on the purchases made by the Contractee
and given as free issues to the Contractor.
(d) Prescribed % of TDS payment to the government and timely issuance of TDS certificates to the Contractors.
(e) To insist the Contractor to show the VAT applicable, separately on the invoice (Tax Invoice, in the case if the
Contractee can avail the credit)
(f) To add the clause in the agreement with the Contractor, “If any additional liability on Account of VAT (WC) arises at a
future date shall be borne by the Contractor”.
10. The summary of the Main Points with regard to provisions of levy of VAT/Composition Tax under the State
VAT Act & Rules.
Deemed Sales (WC) are taxed under the provisions of the State VAT Act, there are no separate Works Contract
Acts.
For local works contract transaction State VAT (WC) is applicable and for interstate works contract transaction ,
the Central Sales Tax (C.S.T.) is applicable as covered under the CST Act.
No VAT/CST is applicable on the pure labour Jobs (No material of the Contractor / Job worker is involved)
Under the State VAT Acts, VAT is applicable on the `Material Value” of the Contracts only as determined by the
three options as discussed earlier and under the C.S.T.Act also CST is applicable on the `Material Value’ only.
In the contracts , `where both the sale of goods and rendering of Taxable service are involved, both VAT &
Service Tax is payable on the same contract price subject to the relevant provisions under both the VAT &
Service Tax Laws.
Proper clauses of VAT/CST should be incorporated in the Agreements between the Contractor and Contractee to
avoid litigation.
Under the VAT System both the Contractor and the Contractee can avail full VAT set off/Credit subject to the
Negative List.
The Contractee should ask for the price reduction from the Contractor to pass on the `VAT Benefit’ availed by the
Contractor on his local purchases.
I am sure the Readers will get useful information in this article on “VAT & Works Contracts” and both the Contractor and
Contractee can plan their works contracts transactions in a better and cheaper way in future.
(ii) civil maintenance works contract –two per cent of the total amount payable to such
dealer;
(iii) All other works contracts –five per cent {4% till 12th Feb 2012} of the total amount
payable to such dealers:
Provided that no deduction under sub-section (1) shall be made where –
(a) no transfer of property in goods (whether as goods or in some other form) is involved in
the execution of works contract; or
(b) transfer of property in goods (whether as goods or in some other form) is involved in
the execution of works contract in the course of inter-State trade or commerce or in the
course of import;
or
(c) the dealer produces a certificate in such form as may be prescribed from the assessing
authority concerned that he has no liability to pay or has paid the tax under section 5:
Provided further that no such deduction shall be made under this section, where the
amount or the aggregate of the amount paid or credited or likely to be paid or credited,
during the year, by such person to the dealer for execution of the works contract including
civil works contract does not or is not likely to, exceed rupees one lakh.
Explanation.– For the purpose of this section –
1.(a) the term ‘ person’ shall include –
(i) the Central or a State Government;
(ii) a local authority;
(iii) a corporation or body established by or under a Central or State Act;
(iv) a company incorporated under the Companies Act, 1956 including a Central or
State Government undertaking;
(v) a society including a co-operative society;
(vi) an educational institution; or
(vii) a trust;
1.(b) the term “civil works contract” shall have the same meaning as in the Explanation to
section 6.
(2) Any person making such deduction shall deposit the sum so deducted to such authority,
in such manner and within such time, as may be prescribed.
(3)Any person, who makes the deduction and deposit, shall within fifteen days of such
deposit, issue to the said dealer a certificate in the prescribed form for each deduction
separately, and send a copy of the certificate of deduction to the assessing authority, having
jurisdiction over the said dealer together with such documents, as may be prescribed.
14. Penalties – (1) Whoever employs any child or permits any child to work in contravention of the provisions of
Sec. 3 shall be punishable with imprisonment for a term which shall not be less than three months but which may
extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to twenty
thousand rupees or with both.
(2) Whoever, having been convicted of an offence under Sec. 3, commits a like offence afterwards, he shall be
punishable with imprisonment for a term which shall not be less than six months but which may extend to two
years.
(3) Whoever –
(a)fails to give notice as required by Sec. 9, or
fails to maintain a register as required by Sec. 11 or makes any false entry in any such register; or
(b)fails to display a notice containing an abstract of Sec. 3 and this section as required by Sec. 12; or
(c)fails to comply with or contravenes any other provisions of this Act or the rules made thereunder;
shall be punishable with simple imprisonment which may extend to one month or with fine which may extend to
ten thousand rupees or with both