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Project Contracts & Tender: Module-Iv Chapter - 01
Project Contracts & Tender: Module-Iv Chapter - 01
Project Contracts & Tender: Module-Iv Chapter - 01
CHAPTER- 01
PROJECT CONTRACTS & TENDER
In the world of business, contracts are used for establishing business deals and partnerships. A contract is a
legal agreement. It is an exchange of promises by two or more parties to do, which resulting contract is
enforceable by law. Thus, though contract is necessarily an agreement, all agreements are not contracts.
Only those agreements that are enforceable by law are contracts. Fr an agreement to become enforceable by
law, it must satisfy certain essential elements called ‘essentials of valid contract’:
There must be an offer not order/force & an acceptance of that offer,
There must be an intention to create a legal relationship on the part of the parties to the contract,
The consent of the parties to the contract shall be free & genuine,
The parties to the contract shall be competent persons (not minor),
There must be a lawful consideration between the parties to the contract,
The object of the contract must be lawful & not one which the law disapproves,
The contract must not have been declared as void by any law in force in the country,
The meaning of the contract must be certain without any multiple interpretations,
The terms of the contracts shall be capable of performance,
A contract shall fulfill the necessary legal formalities,
In a project or program context, contracts typically involve the exchange of money in return for goods and
services. One or more parties may provide products or services in return to something provided by other
parties (client). The parties involved in the business engagement decide the type of the contract.
For example, a project contract may take the form of an agreement between a builder and a property owner
in which the builder agrees to build a house on the property by a certain time in a certain way and in
exchange the property owner give certain remuneration to the builder.
Usually, the type of the contract used for the business engagement varies depending on the type of the work
and the nature of the industry. The contract type is the key relationship between the parties engaged in the
business and the contract type determines the project risk.
Types of Contracts
1. Turnkey Contracts – In this contract, the entire responsibility of project execution is entrusted to the
contractor. The owner comes into the picture only when the project is completed & he turns the key of
the project to start further. Till such time, the project reaches at ‘ready to start stage’; the contractor
takes care of all aspects of project execution. This type of contract is entered into when the project
Conclusion
Projects have a life cycle. They are born from an idea, develop into a finished product or service, and then terminate.
As a project moves through this process, the project manager and senior management should continually monitor the