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
1. 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
2. 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.
FIDIC Condition of Contract
Priority of contract Document
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
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.
 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.
3. Suspension
The Employer or the Contractor may
terminate the Contract if the other party
causes a fundamental breach of the
Contract.
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
When providing such security to the
Employer, the contractor shall notify the
Engineer of so doing.
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.
Suspension
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.
 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
occurs or a Variation is issued which makes
it impossible for Completion to be achieved 2. any cause of delay referred to in
by the Intended Completion Date without
the
Contractor taking steps to accelerate the
remaining work and which would cause the
Contractor to incur additional cost.
1. the amount or nature of extra or
additional work.
these Conditions.
3. exceptionally adverse climatic
conditions.
4. any delay, impediment or
prevention by the Employer, or
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 Valuation of Variation

The Contractor shall provide the Engineer All variations referred to in Clause 51
with a quotation (with breakdown of unit and any additions to the Contract Price
rates) for carrying out the Variation whenwhich are required to be determined in
requested to do so by the Engineer. The accordance with Clause 52 (for the
Engineer shall asses the quotation, which purposes of this Clause referred to as
shall be given within seven days of the “varied work”) shall be valued at the
request or within any longer period statedrates and prices set out in the Contract if,
by the Engineer and before the Variation is
in the opinion of the Engineer the same
ordered. 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 The Engineer with the Employer and the
timing of its execution do not cause the cost Contractor. Suitable or prices shall be
per unit of quantity to change, the rate in agreed upon between the Engineer and
the Bill of Quantities shall be used to the Contractor. In the event of
calculate the value of the Variation. If the disagreement the Engineer shall fix such
cost per unit of quantity changes, or if the rates or prices as are in his opinion,
nature or timing of the work in the Variation appropriate and shall notify the
does not correspond with items in the Bill Contractor accordingly with a copy to the
of Quantities, the quotation by the employer. Until such time as rates or
Contractor shall be in the form of new rates prices agreed or fixed; the Engineer shall
for the relevant items of work. 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,
war, hostilities, invasion, act of foreign 2. Destruction of or damage to
enemies, rebellion, revolution, insurrection properly. whether of the Employer
or military or usurped power, civil war, riot or third parties, or
commotion or disorder (unless restricted to 3. Injury or loss of life.
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,
 Whatever decision is reached by the Certificate or valuation of the Engineer,
Dispute Review Expert. Either party may the matter In first place be referred in
writing to the Engineer, with a copy to
give notice to the other to refer a decision of
the Dispute Review Expert to an Arbitrator the other party. Such reference shall state
within 28 days of the Dispute Review that it is made pursuant to this Clause, no
Expert’s written decision. If neither party later than the eighty-fourth day after the
refers the dispute to arbitration within the day on which he received such reference
next 28 days, the Dispute Review Expert’s the Engineer shall give notice of his
decision will be final and binding. 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.

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. Descriptions of schedule of bill of materials.

2. Technical specifications.
3. Approved general arrangement drawing.
4. Special condition of contract.
5. 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.