CONTRACT and ARBITRATION

CONTRACT

• CoA has many publications but has never

published a standard form of contract.
• Most Architects follow the standard format of
contract given by Indian Instt of Architects.
• There is also the Indian Contract Act 1872.
• IIA contract form is an outcome of study of all
building activities and is widely adopted by
architects but the foundation is provided by
Indian Contract Act, 1872
 INDIAN CONTRACT ACT, 1872

1. Short title
• This Act may be called be the Indian Contract Act, 1872.
• Extent, commencement - It extends to the whole of except the State of Jammu and Kashmir; and it shall come into
force on the first day of September, 1872.
2. Interpretation -clause
In this Act the following words and expressions are used in the following senses, unless contrary intention appears from
the context:
• (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to
obtaining the assent of that other to such act or abstinence, he is said to make a proposal;
• (b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted.
A proposal, when a accepted, becomes a promise;
• (c) The person making the proposal is called the "promisor", and the person accepting the proposal is called
"promisee",
• (d) 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 to abstain from doing, something, such act or abstinence or
promise is called a consideration for the promise;
• (e) Every promise and every set of promises, forming the consideration for each other, is an agreement;
• (f) Promises which form the consideration or part of the consideration for each other, are called reciprocal
promises;
• (g) An agreement not enforceable by law is said to be void;
• (h) An agreement enforceable by law is a contract;
• (i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the
option of the other or others, is a voidable contract;
• (j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable
 IIA CONTRACT FORM, 1979
IIA Form consists of 3 parts:
• Articles of Agreement
• General Conditions of Contract
• The Appendix
• Other attachments like general specifications, bill of
quantities, plans, schedule of payment (item rate contract),
general specs, supplemental specs describing the scope of
work in lump sum contract.

Building work is of varying nature and suffers setbacks due to

a number of unexpected circumstances like rise in cost of
construction due to inflation and budgetary provisions, site
conditions, change in design etc.
 COMPOSITION OF CONTRACT

VOLUME 1
• LIST OF CONTENTS;
• Notice Inviting Tender
• Instruction for filling the tender
• Tender form
• Annexure A- Format for Declaration of Current Works
• Annexure B- List of Drawings
• General Conditions of Contract
• Special Conditions of Contract
• Schedule of Fiscal SApects

VOLUME 2
• Technical Specifications
• Bill of Quantities

VOLUME 3
• Drawings
 GENERAL AND SPECIAL CONDITIONS
OF CONTRACT
• General Conditions of Contract cover the
general terms and conditions of the contract.
• The Special Conditions of Contract are an
extension of and are to be read in conjunction
with the General Conditions of Contract.
Should there be any contradictory
requirements in the two, the requirement as
per the Special Conditions of Contract shall
prevail.
 GENERAL CONDITIONS OF CONTRACT
1. DEFINITIONS:
• In the Contract (as hereinafter defined) the following words and expressions shall have meanings
• hereby assigned to them, except where the context otherwise requires: (In alphabetical order)
• 1.1 Approved/Approval:
• Approved/Approval shall mean and include approved/approval accorded by the
• Institute/Architect in writing.
• 1.2 Approved Equal:
• Approved Equal shall mean an alternative product or service approved by the
• Institute/Architect as being equivalent to that specified in the Contract Documents.
• 1.3 Architects / Services Consultants:
• Architect shall mean M/s ARVIND VIVEK AND ASSOCIATES having its office
• at B – 4/ 103, Safdarjung Envlave, New Delhi – 110029.
• 1.4 Basic Rate - Material:
• Basic Rate shall mean the landed cost at site including all taxes, royalties, cartage,
• handling etc. but excluding wastage and WCT / VAT.
• 1.5 Contract:
• The Contract shall mean and include the Contract Agreement and its supporting
• documents forming part thereof, executed between the Parties (Institute and the agency
• to whom the work is awarded) thereto for the purpose of proper execution and
• completion of the Work in accordance with the Contract Documents.
• 1.6 Contractor:
• The Contractor shall mean and include the person or persons, firm, company or
• consortium who‟s tender has been accepted by the Owner / Project Manager and
• includes the Contractor's legal representatives, successors and permitted assign.
• 1.7 Contractor‟s Representative:
• The Contractor‟s Representative shall mean the person or party duly appointed by the
• Contractor to act for and on its behalf on a day-to-day basis during the construction of
• the Work and the Project. Any action to be taken by the Contractor may be taken on the
• Contractor‟s behalf by the Contractor‟s Representative. The Contractor‟s Representative
• shall be considered a “key person” for purposes of Clause 11.1 of the General Terms of
• Contract.
• 1.8 Contract Documents:
• The Contract Documents shall collectively mean and include Contract Agreement and
• the documents mentioned therein as forming part thereof and would also include all
• modifications thereof and additions thereto incorporated in and made to any of those
• documents during the term of the Contract.
• 1.9 Contract Price / Sum:
• Shall mean the sums referred to in the Contract Documents for the Contractor‟s
• performance of the Work.
• The Contract Price is inclusive of all taxes, including sales tax, entry tax, octroi, works
• contract tax, Turn over tax, VAT, ESI, PF contribution and all other statutory taxes and
• levies if any applicable to the contractors/workers etc., and the Owner shall not be
• responsible in any way whatsoever to pay for the same.
 SPECIAL CONDITIONS OF CONTRACT
(S.C.C.)
• 1. GENERAL:
• The Special Conditions of Contract are an extension of and are to be read in conjunction with the
• General Conditions of Contract. Should there be any contradictory requirements in the two, the
• requirement as per the Special Conditions of Contract shall prevail.
• 2. DRAWINGS:
• i. Contract / Tender Drawings duly signed by the Architect / Consultants are diagrammatic but
• shall be followed as closely as actual construction permits. Any deviations made shall be in
• conformity with the direction of the Project Manager and with the prior approval of the
• Project Manager.
• ii. Architectural drawings shall take precedence over Structural drawings, which in turn shall
• take precedence over services drawings in regard to all dimensions.
• iii. The Contractor shall verify all dimensions at the Site and bring to the notice of the Project
• Manager discrepancies if any, the Project Manager's decision in this respect shall be final.
• 3. WORK TO BE CARRIED OUT BY LICENSED PERSONS/FIRMS:
• Technically competent persons or firms holding valid licenses shall only carry out any special
• service installations included in the scope of the Work.
• 4. INSPECTION AND TESTING OF MATERIALS:
• The Contractor shall, if so required, produce manufacturers' test certificates for any particular
• batch of materials supplied by him. The tests carried out shall be as per relevant Indian
• Standards and shall be carried out at Government approved test facility specified by the Project
• Manager.
• For checking setting out and testing materials at the Site the Contractor shall provide the
• following minimum testing equipment:
• i. Theodolites / Total Station
• ii. Automatic levels
• iii. Steel tapes
• iv. Weighing machines
• v. Spirit levels, plumb bobs
• vi. Micro meters
• vii. Thermometers
• viii. Hydraulic testing machines
• ix. Smoke test machines
• x. Complete concrete testing lab equipment
• xi. Moisture meters
• xii. Complete sets of sieves
• xiii. Oven.
• All such equipment shall be calibrated at specified frequency for accuracy at a Testing Facility
• approved by the Project Manager and calibration certificates will be submitted to the Project
• Manager.
• 5. REFERENCE DRAWINGS:
• The Contractor shall maintain on site one set of all Drawings issued
 Execution of Stamp

• The contract is executed on stamp paper of

the value as prescribed under the Indian
Stamp Act, 1899 and must be signed and
sealed. Unstamped documents cannot be
admitted in evidence before an arbitrator or
court.
• Proper stamping prior to the execution of the
contract results in saving of time, labour,
money.
 Classification of Contract:

Contracts can be classified into :

• Lump sum contract
• Item rate contract

Lump sum Contract is an agreement in which the contractor needs to complete the
work as shown in the drawings and described by specifications, supplying all materials,
labour and other implements.

Item rate contract: This type of contract deals in measurement of each item of the
work as given in the bill of quantities.
• Sum to be paid is arrived at, based on the rates quoted against each item.
• In the bill of quantities, all the items are described in detail along with quantities.
• Both contractor and owner need to be very specific to avoid any increase or
decrease of quantities.
• Sometimes clauses ate added to take care of the variation in quantities e.g if super
structure items exceed the quoted quantity by up to 25% in execution, the
contractor cannot claim revised rates.
 LUMP SUM CONTRACT
Lump sum contract has further two sub divisions:
• Lump sum contract or fixed sum contract.
• Area based contract.
• Turn key contract/ package deal

Lump sum or concept of entire contract is based on the following:

• Contract is indivisible
• No part payments can be recovered
• Obligation of the owner to make payment only when the work is fully complete.
• In practice, such jobs are rare because contractors are not willing to do job unless part payment is
assured.

Area based contract is based on unit rate per sq m of plinth area. The problem in this system is the
ambiguity in area and its mode of measurement. Earlier terms like carpet area and built up area have
been replaced by plinth area or built up plinth area.

In turnkey projects, the builder/ developer/ contractor buys the land, employs the architect and
completes the job for the client, usually a society. This is based on payments by instalments as the work
progresses and the estimate is based on specified rate per sq m.
 ARBITRATION
IIA form of contract enrols two contracts in one:
• Construction Contract
• Arbitration Agreement.
 Methods to resolve dispute on
agreements:
Arbitration: Method of settling disputes between 2 or more parties
whereby they appoint one or more persons to adjudicate upon the
said disputes. Arbitration aims at establishing a domestic tribunal by
the parties to adjudicate upon the dispute. Arbitration and Conciliation
Act, 1996 helps in enforcing the decision as well as in laying down
rules, regulations and procedures.

ADRM (Alternative Dispute Resolution Methods):

• Mediation: A process involving intervention by a neutral person
appointed by both parties to settle the dispute. This person is the
Mediator and enjoys the confidence of both the parties and
possesses expertise in the subject.
• Conciliation: A process alternative to arbitration in which both
parties appoint one or more, even a committee of conciliators with
expertise in the field
 Advantages of Arbitration:

• Legal formalities are cut short and a decision

can be reached faster.
• Savings in cost and time
• Privacy as hearing is not public.
• Usually Arbitrators are people who possess
knowledge on the subject so decisions are
more fair.
 THE ARBITRATION AND CONCILIATION
ACT, 1996
• No.26 of 1996
• [16th August, 1996]
• An Act to consolidate and amend the law relating to domestic arbitration, international commercial
arbitration and enforcement of foreign arbitral awards as also to define the law relating to
conciliation and for matters connected therewith or incidental thereto.
• General provisions
• 2.Definitions.-
• (1) In this Part, unless the context otherwise requires,-
• (a) "arbitration" means any arbitration whether or not administered by permanent arbitral
institution;
• (b) "arbitration agreement" means an agreement referred to in section 7;
• (c) "arbitral award" includes an interim award;
• (d) "arbitral tribunal" means a sole arbitrator or a panel of arbitrators;
• (e) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High
Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions
forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but
does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small
Causes.
 POWERS AND DUTIES OF ARBITRAL
TRIBUNAL
• The members should not have interest; direct
or indirect in the subject matter of the
dispute.
• To conduct proceedings with equal treatment
to all parties; giving full opportunity, sufficient
notice of hearings, order on inspection.
• Seek assistance of court if needed.
ROLE OF UMPIRE IN ARBITRATION
• A person chosen to decide upon an arbitration
that has not been resolved because the
appointed arbitrators are unable to reach an
agreement
 culmination
• Agree:
Party moves the Court for Rule of Court
otherwise no binding
• Disagree:
File Objection ; only hears objection…no
evidence; can appeal in a higher court.