Contract Indian vs. Fidic

NICMAR

Assignment On

DIFFERENCES BETWEEN INDIAN CONDITIONS OF CONTRACT AND FIDIC CONDITIONS OF CONTRACT

MCM 314: CONTRACT LAWS AND CLAIMS

Submitted By: Apoorva Ajmera Roll No. G03103

N ATI O N A L I N S T I T U T E O F C O N S T R U C T I O N MAN AGEMENT AND RESEAR CH

GOA CAMPUS Assignment:Study a contract executed under the Indian Contact Act and a Contract executed under FIDIC condition of Contract and prepares a report giving a measure Difference between the two contract conditions Following are the measure differences between Indian and FIDIC conditions of contract:S.NO.

Indian Condition of Contract

FIDIC Condition of Contract

1.

Priority of contract Document

Priority of contract Document

The various Indian contract Condition have similar or slightly varying conditions regarding the priority of document. Each of these clauses of different Indian contract. these are explained below: 1. Agreement 2. Letter of acceptance, notice to proceed with the works 3. Contractor’s Bid 4. Contract Data 5. Conditions of Contract including Special Conditions of Contract 6. Specifications 7. Drawings 8. Bill of quantities and 9. Any other documents listed in the Contract Data as forming part of the Contract

As per FIDIC Red Book “Clause no.5.2” the condition is as follows : The Several Documents forming the Contract are to be taken as mutually explanatory of one another, but in case of ambiguities or discrepancies the same shall be explained and adjusted by the Engineer who shall thereupon issues to the Contractor Instructions thereon and in such event, unless otherwise provided in the contract, the priority in the contract, the priority of the documents forming the contract shall be as follows: 1. The contract Agreement. 2. The Letter of Acceptance. 3. The Tender 4. Part II of these Conditions. 5. Part I of these Conditions. 6. Any other document forming part of the contract.

Performance Security

Performance Security

The Performance Security (including additional security for unbalanced bids) shall be provided to the Employer no later than date specified in the Letter of Acceptance and shall be issued in an amount and form and by a bank or surety acceptable to the Employer, and denominated in Indian Rupee.

If the contract requires the contractor to obtain security for his proper performance of the contract, he shall obtain and provide to the Employer such security within 28 days after the receipt of the letter of acceptance, in the sum stated in the appendix to tender.

2.

3.

The Performance Security shall be valid until a date 28 days from the date of expiry of Defects Liability Period and the additional security for unbalanced bids shall be valid until a date 28 days from the date of issue of the certificate of completion.

When providing such security to the Employer, the contractor shall notify the Engineer of so doing.

Suspension

Suspension

The Employer or the Contractor may terminate the Contract if the other party causes a fundamental breach of the Contract.

The Contractor shall on the instruction of the Engineer suspend the progress of the Works or any part thereof for such time and in such manner as the Engineer may consider necessary and still during such suspension properly protect an secure the Works or such part thereof so far as is necessary in the opinion of the Engineer. Unless such suspension is: 1. Otherwise provided for in the Contract. 2. Necessary by reason of some default of or breach of contract by the Contractor, or which he is responsible.

Fundamental breaches of Contract include, but shall not be limited to the following: 1. The contractor stops work for 28 days when no stoppage work is shown on the current Programme and the stoppage has not been authorized by the Engineer. 2. The Engineer instructs the Contractor to delay the progress of the Works and the instruction is not withdrawn within 28 days. 3. The Employer or the Contractor is made bankrupt or goes into liquidation other than for a reconstruction or amalgamation. 4. A payment certified by the Engineer is not paid by the Employer to the Contractor within 56 days of the date of the Engineer’s certificate. 5. The Engineer gives Notice that failure to correct a particular Defect is a fundamental breach of Contract and the Contractor fails to correct it within a reasonable period of time

Such security shall be in the form annexed to these conditions or in such other form as may be agreed between the Employer and the contractor. The institution providing such security shall be subject to the approval of the Employer.

determined by the Engineer. 6. The Contractor does not maintain a security which is required. 7. The contractor has delayed the completion of works by the number of days for which the maximum amount of liquidated damages can be paid as defined in the Contract data. and 8. If the Contractor, in the judgment of the Employer has engaged in corrupt or fraudulent practices in competing for or in executing the Contract. When either party to the Contract gives notice of a breach of contract to the Engineer for a cause other than those listed under Sub-Clause 59.2 above, the Engineer shall decide whether the breach is fundamental or not. Notwithstanding the above, the Employer may terminate the Contract for convenience. If the Contract is terminated the Contractor shall stop work immediately, make the Site safe and secure and leave the Site as soon as reasonably possible. 4.

Extension of time

Extension of time

The Engineer shall extend the Intended In the event of: Completion Date if a Compensation Event 1. the amount or nature of extra or occurs or a Variation is issued which makes additional work. it impossible for Completion to be achieved 2. any cause of delay referred to in by the Intended Completion Date without these Conditions. the 3. exceptionally adverse climatic conditions. Contractor taking steps to accelerate the 4. any delay, impediment or remaining work and which would cause the prevention by the Employer, or Contractor to incur additional cost. 5. other special circumstances which may occur, other than through a The Engineer shall decide whether and by

Default of or breach of contract

by the Contractor or for which he how much to extend the Intended Completion Date within 35 days of the is responsible. Contractor asking the Engineer for a decision upon the effect of a Compensation being such as fairly to entitle the Event or Variation and submitting full Contractor to an extension of the Time supporting information. for Completion of the Works, or any Section or part thereof, the Engineer If the Contractor has failed to give early shall, after due consultation with the warning of a delay or has failed to Employer and the Contractor determine cooperate in dealing with a delay by this the amount of such extension and shall failure shall not be considered in assessing notify the Contractor accordingly with a the new Intended Completion Date. copy to the Employer. The Engineer shall within 14 days of receiving full justification from the Contractor for extension of Intended Completion Date refer to the Employer his decision. The Employer shall in not more than 21 days communicate to the Engineer the acceptance or otherwise of the Engineer’s decision. If the Employer fails to give his acceptance, the Engineer shall not grant the extension and the contractor may refer the matter to the Dispute Review Expert under Clause 24.1

5.

Variation

Variation

If the final quantity of the work done differs from the quantity in the Bill of Quantities for the particular item by more than 25 percent provided the changes exceeds 1% of initial Contract Price, the Engineer shall adjust the rate to allow for the change, duly considering, 1. justification for rate adjustment as furnished by the contractor, 2. economics resulting from increase in quantities by way of reduced plant, equipment, and overhead costs. 3. entitlement of the contractor to compensation events where such events are caused by any additional

The Engineer shall make any variation of the form, quality or quantity of the Works or any part thereof that may in his opinion, be necessary and for that purpose,

or if for any other reason it shall in his opinion be appropriate he shall have the authority to instruct the Contractor to do and the Contractor shall do any of the following: 1. increase or decrease the quantity of any work included in the Contract

work.

The Engineer shall not adjust rates from changes in quantities if thereby the Initial Contract Price is excepted by more than 15 percent, except with the Prior approval of the Employer. If requested by the Engineer, the Contractor shall provide the Engineer with a detailed cost breakdown of any rate in the Bill of Quantities. All Variations shall be included in updated Programmes produced by the Contractor.

2. Omit any such work (but not if the omitted work is to be carried out by the Employer or by another contractor). 3. change the character or quality or kind of any such work 4. change the levels lines, position and dimensions of any part of the Works, or 5. execute additional work of any kind necessary for the completion of the Works, or 6. Change any specified sequence or timing of construction of any part of the Works. No such variation shall in any way vitiate or invalidate the Construct, but the effect, if any, of all such variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to vary the Works is necessitated by some default of or breach of contract by the Contractor or for which he is responsible any additional cost attributable to such default shall be borne by the Contractor.

6.

Valuation of Variation The Contractor shall provide the Engineer with a quotation (with breakdown of unit rates) for carrying out the Variation when requested to do so by the Engineer. The Engineer shall asses the quotation, which shall be given within seven days of the request or within any longer period stated by the Engineer and before the Variation is ordered.

Valuation of Variation

All variations referred to in Clause 51 and any additions to the Contract Price which are required to be determined in accordance with Clause 52 (for the purposes of this Clause referred to as “varied work”) shall be valued at the rates and prices set out in the Contract if, in the opinion of the Engineer the same shall be applicable. If the Contract does not domain any rates or price applicable If the work in the Variation corresponds to the varied work-the rates and prices in with an item description in the Bill of the Contract shall be used as the basis for Quantities and if, in the opinion of the valuation so far as may be reasonable, Engineer, the quantity of work above the failing which after due consultation by

Limit stated in Sub Clause 38.1 or the timing of its execution do not cause the cost per unit of quantity to change, the rate in the Bill of Quantities shall be used to calculate the value of the Variation. If the cost per unit of quantity changes, or if the nature or timing of the work in the Variation does not correspond with items in the Bill of Quantities, the quotation by the Contractor shall be in the form of new rates for the relevant items of work.

The Engineer with the Employer and the Contractor. Suitable or prices shall be agreed upon between the Engineer and the Contractor. In the event of disagreement the Engineer shall fix such rates or prices as are in his opinion, appropriate and shall notify the Contractor accordingly with a copy to the employer. Until such time as rates or prices agreed or fixed; the Engineer shall determine provisional rates or prices to enable on-account payments to be If the Contractor’s quotation is included in certificates issued in unreasonable, the Engineer may order the accordance with Clause 60. Variation and make a change to the Contract Price which shall be based on Engineer’s own forecast of the effects of the Variation on the Contractor’s costs. If the Engineer decides that urgency of varying the work would prevent a quotation being given and considered without delaying the work, no quotation shall be given and the Variation shall be treated as a Compensation Event. The Contractor shall not be entitled to additional payment for costs which could have been avoided by giving early warning. 7.

Claims

Claims

Payments shall be adjusted for deductions for advance payments, retention, other recoveries in terms of the contract and taxes at source, as applicable under the law. The Employer shall pay the Contractor the amounts certified by the Engineer within 28 days of the date of each certificate. If the Employer makes a late payment, the Contractor shall be paid interest on the late payment in the next payment. Interest shall be calculated from the date by which the payment should have been up to the date when the late payment is made at 12% per annum.

Not with standing any other provision of the Contract if the Contractor intend, to claim any additional payment pursuant to any Clause of these Condition, or otherwise, he shall give notice of his intention to the Engineer with a copy to the Employer within 28 days after the event giving rise to the claim has first arisen.

8.

Special Risk

Special Risk

The Employer carries the risks which this The Contractor shall be under no liability Contract states are Employer’s risks, and whatsoever in consequence of any of the the Contractor carries the risks which this special risks referred to in Clause 65 Contract states are Contractor’s risks. whether by way of or indemnity or otherwise for or in respect of: Employer’s Risks 1. destruction of or damage to the The Employer is responsible for the Works save to work condemned excepted risks which are under the provisions of Clause 39 (a) in so far as they directly affect the prior to the occurrence of any of execution of the Works in India, the risks of the said special risks, 2. Destruction of or damage to war, hostilities, invasion, act of foreign properly. whether of the Employer enemies, rebellion, revolution, insurrection or third parties, or or military or usurped power, civil war, riot 3. Injury or loss of life. commotion or disorder (unless restricted to the Contractor’s employees), and contamination from any nuclear fuel or nuclear waste or radioactive toxic explosive, or (b) a cause due solely to the design of the Works, other than the Contractor’s design. Contractor’s Risks All risks of loss of damage to physical property and of personal injury and death which arise during and in consequence of the performance of the Contract other than the excepted risks are the responsibility of the Contractor. 9.

Settlement of Disputes

Settlement of Disputes

The Dispute Review Expert (Board)* shall If a dispute of any kind whatsoever arises give a decision in writing within 28 days of between the Employer and the Contractor receipt of a notification of a dispute. in connection with or arising out of, the Contract or the execution of the Works. The Dispute Review Expert (Board)* shall be paid daily at the rate specified in the whether during the execution of the Contract Data together with reimbursable Works or after their completion and expenses of the types specified in the whether before or after repudiation or Contract Data, other termination of the Contract, including any dispute as to any opinion, The cost shall divided equally between the instruction, determination, Employment and the Contractor,

Certificate or valuation of the Engineer, the matter In first place be referred in writing to the Engineer, with a copy to the other party. Such reference shall state that it is made pursuant to this Clause, no later than the eighty-fourth day after the day on which he received such reference the Engineer shall give notice of his decision to the Employer and the Contractor. Such decision shall state that The arbitration shall be conducted in it is made pursuant to this Clause. accordance with the arbitration procedure stated in the Special Conditions of Contract. Unless the Contract has already been repudiated or terminated the Contractor shall in every case, continue to proceed with the Works with all due diligence and the Contractor and the Employer-shall give effect forthwith to every such decision of the Engineer unless and until the same shall be revised, as hereinafter provided in an amicable settlement or an arbitral award. Whatever decision is reached by the Dispute Review Expert. Either party may give notice to the other to refer a decision of the Dispute Review Expert to an Arbitrator within 28 days of the Dispute Review Expert’s written decision. If neither party refers the dispute to arbitration within the next 28 days, the Dispute Review Expert’s decision will be final and binding.

Comparison of Indian Contract with FIDIC condition of contract National Thermal Power Corporation 1. Priority of Contract Documents: As per NTPC Conditions of Contract “Clause no.24” the condition is as follows: In case of any Discrepancy in the drawings or between the drawings, technical specifications, and /or schedule or items/quantities, the Contractor shall seek clarification from the engineer and shall carry out the work in accordance with clarification furnished by the engineer. Several Documents forming the contract are to be taken as complementary to one another. The following order of preference shall be observed: 1. 2. 3. 4. 5.

Descriptions of schedule of bill of materials. Technical specifications. Approved general arrangement drawing. Special condition of contract. General condition of contract.

Any error in description, quantity or rate in bill of materials or any omissions thereof shall not initiate the contract or release the contractor from execution of whole or any part of the works comprised therein according to drawings and specifications or from any of the obligations under the contract. Comparison and comment Comparing the clause with FIDIC clause no. 5.2 one can observe that both the documents state that incase of discrepancies the contractor is required to seek clarification from the engineer and proceed as per the instructions furnished by the engineer, several documents forming part of the contract has been taken as mutually explanatory. The priority of document given by the NTPC has bill of materials as top most priority and conditions of contract being given the least priority FIDIC has put more emphasis on contract agreement whereas NTPC has stressed upon the technical matter deciding element incase of ambiguity. Technical details are susceptible to variation hence giving priority to these documents might create further complication to both contractor as well as NTPC. 2. Performance Security : As per NTPC condition of contract “clause no. 4.11” the condition is as follows The contractor shall submit an initial security deposit of 2.5% of the initial contract price in the form of a draft of any scheduled bank within 10 days of acceptance of tender. It will be released on expiry of maintenance guarantee period and satisfactory completion of rectification of defects and on issuance of “Final Acceptance Certificate” by the Owner and submission of “No claim Certificate” by the contractor. Comparison and Comment: 1. NTPC condition requires to submit the security deposit of 2.5% of initial contract price within 10 days of letter of acceptance where as FIDIC suggest Submission of performance security within 28 days of letter of acceptance. 2. As per NTPC condition security deposit will be returned after the issuance of Final acceptance certificate by owner and no claim certificate by contractor while FIDIC says performance guarantee to be returned with in 14 days after the issue of defect liability certificate.

3. Suspension : As per NTPC conditions of contract “Clause no. 45.1” the condition is as follows:

The owner may suspend the work in whole or part at any time by giving the contractor notice n writing to such effect stating the nature, the effective date and duration of such suspension. Comparison & comment: Both conditions requires engineer’s/owner to provide instruction in writing to the contractor before suspending the work and the contractor is required to resume the work immediately after the notice for resumption by the engineer/Owner. 4. Extension of Time:

As per NTPC conditions of contract “Clause no. 3.4” the condition is as follows: 1. Force Majeure. 2. Major challenges or substantial addition to the work ordered by the Owner adversely affecting the completion time. Extension of time shall be as per decision of the Owner. 3. Delay in handing over the site etc. Comparison & Comment: NTPC conditions suggest the extension of time to be decided by the owner for the conditions such as Force Majeure, Substantial change in the work and delay related to handing over the site. Incase of FIDIC conditions then an event under the extension of time is clearly spelt out avoiding any scope of ambiguity later on. Also as per FIDIC conditions, engineer determines the extension of time after due consultation with contractor and employer. 5. Variation: As per NTPC conditions of contract “Clause no. 15.1” the condition is as follows: The owner/engineer shall have the right, during the performance of the agreement to make any condition to, alterations in and omission from the works or any alterations in the kind or quality of the materials to be used there in and shall give notice thereof in writing to the contractor. As per NTPC conditions of contract “Clause no. 15.3” the condition is as follows: The contractor shall not carry out any work extra to or make any omission or additions to or omission from the works or any deviation from any of the provisions of the agreement, stipulation, specification, or contract drawing without the previous consent in writing from the engineer. Comparison & Comment NTPC condition suggest that the contractor is liable to carry out any conditions or alterations or omissions from the work in the kind of quality or material to be used for work on instructions of engineer whereas FIDIC condition has given detailed version, including all the possible variations that the contractor is required to follow on instruction of engineer.

FIDIC condition also specifies that if the increase or decrease is due to inadequate quantities of bill then it will not be considered as variations. While NTPC conditions also bring out that if there is a requirement of increase or decrease in work and which is not specifically mentioned but is required to complete in any of the documents hall be carried out by the contractor at no extra cost 6. Valuation of Variation: As per NTPC conditions of contract “Clause no. 15.3” the condition is as follows: Should it be found necessary to execute any item of work which is not included in the schedule of items and as such no contract rate is available, the rate for such items of work shall be fixed as per the following procedure. 1. Where the extra works are of similar character under similar conditions as to any of item of work appearing in the contract agreement, then the rates for such extra items shall be derived from contract rates of similar/closest items of work. 2. Where the nature of items is such that the rate for same cannot be derived as per article 12.01 i) then the rate shall be established based on the market rates and taking into 20% over cost of labour and materials to cover supervision, overheads and profits. The norms followed by CPWD or MES, as may be approved by the engineer with the concurrence of the owner regarding labour and material content, shall be adopted for this purpose. 3. Where the nature of extra work is such that it has to e got executed through a specialized agency, the agency shall be got approved from the owner on recommendation of engineer and decision of the owner regarding appointment of the agency and the rates shall be final and binding. Comparison & Comment: FIDIC condition states that the variations will be valued on the rates in the bill of quantities if it is with in 15% in case it exceeds 15% the rates shall be decided by the engineer with due consultation with employer and contractor, if rates in bill of quantities are applicable it will be considered for varied work, if the rates are not available then it will be fixed based on contractor rates or else the engineer shall fix the rates with due consultation with the employer and the contractor . In case of disagreement the engineer shall fix the rates.