STUDY OF AMBIGUITIES IN CONTRACT

CONDITIONS AND CLAUSES

Professional Practice II
Kushal Jain [1004]
Maulik Panchal [1303]
Details of Contract Studied
• Type of Contract: Item rate contract
• Name of Work: Grade seperator
project near Apsara border,
Delhi.
• Estimated Cost : 162 Crores INR
• Client: PWD, GNCTD.
• Contractor: AFCONS Infra Ltd.
• Consultant: Crapht consultants
 Clause
Quality of Materials, Plant and Workmanship
1
• Original Clause
All materials, plant and workmanship shall be:
• 1. a. Of the respective kinds and quality as
described in the contract and in accordance with the
Engineers instructions and subject to tests as the
Engineer may require at any or all places, such as
manufacturers facility, site, during fabrication,
preparation etc, as specified in the contract.
b. The Contractor shall provide all assistance
required by Engineer for carrying out the tests.
 Clause 1
Remarks
Who will cover the costs of these tests and at what
rate is not mentioned in the clause
• Redrafted Clause
Clause 1
All materials, plant and workmanship shall be:
• 1. a. Of the respective kinds and quality as described in
the contract and in accordance with the Engineers
instructions and subject to tests as the Engineer may
require at any or all places, such as manufacturers facility,
site, during fabrication, preparation etc, as specified in the
contract.
b. The Contractor shall provide all assistance required
by Engineer for carrying out the tests. Costs of tests are
covered by the contractors quoted rates for the works.
c. All samples shall be provided by the Contractor
free of costs.
Subcontracting
Clause 2
• Original Clause
The Contractor shall not, without the prior consent of
the Employer assign the contract or any part thereof.
The contractor shall not subcontract the whole of the
works. Part of the works may be subcontracted after
obtaining Engineers prior consent. Any such consent
shall not relieve the Contractor from any liability or
obligation under the contract. The contractor shall
remain responsible for all the acts, defaults and/or
neglect of the contractual requirements and
obligations by any Subcontractor
• Remarks
Clause 2
In case, contractor is willing to subcontract
major part of the total work, and if he does not
get the permission from engineer, due to lack of
eligibility of the subcontractor, the project may
suffer.
• Redrafted Clause
Clause 2
The Contractor shall not, without the prior consent of the
Employer assign the contract or any part thereof. The
contractor shall not subcontract the whole of the works.
Part of the works may be subcontracted after obtaining
Engineers prior consent. If the amount of work to be
subcontracted exceeds 10% of the total contract value by
single subcontractor, the contractor shall also submit the
pre-qualification document for subcontractor as specified.
Any such consent shall not relieve the Contractor from any
liability or obligation under the contract. The contractor
shall remain responsible for all the acts, defaults and/or
neglect of the contractual requirements and obligations
by any Subcontractor.
Advance Payment
Clause 3
• Original Clause
1. The Employer shall make interest free advance payment to the
Contractor of the amounts stated in the Contract Data, against
submission of an Unconditional Bank Guarantee in a form and by a
bank acceptable to the Employer in amounts and currencies equal
to the advance payment. The guarantee shall remain effective until
the advance payment has been repaid, but the amount of the
guarantee shall be progressively reduced by the amount repaid by
the Contractor. Interest will not be charged on the advance
payment.
2. The Contractor is to use the advance payment only to pay for
Equipment, plant and Mobilization expenses required specifically for
execution of the Works. The Contractor shall demonstrate that
advance payment has been used in this way by supplying copies of
invoices or other documents to the Engineer.
Remarks
Clause 3
• Time of submission of invoices is not mentioned
• There is no clarity in the clause for actions against
contractor if he uses the advance for purposes
other then mobilization.
• Redrafted Clause
Clause 3
• The Contractor is to use the advance payment only to
pay for Equipment, plant and Mobilization expenses
required specifically for execution of the Works. The
Contractor shall demonstrate that advance payment has
been used in this way by supplying copies of invoices or
other documents to the Engineer. Contractor has to
submit the invoices within a month of receiving the
advance. If contractor fails to do so or uses the fund for
other then mobilization he will be charged 2% interest
on the amount which is not utilized on mobilization.
 Clause 4
Payments
Original Clause
• 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 20 days of the date of issue of each Interim payment
certificate
• Within 28 days of the date of issue of the Certificate on
Completion
• Within 56 days of the date of the final payment certificate
• No payment of interest shall be made to the contractor for
delayed payment if any.
• Remarks
Clause 4
If contractor is not paid for the delayed payment
it will increase contractor’s risks which
ultimately lead to increased project cost
Redrafted Clause
Clause 4
• 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 20 days of the date of issue of each Interim payment
certificate
• Within 28 days of the date of issue of the Certificate on
Completion
• Within 56 days of the date of the final payment certificate
• Payment of interest shall be made to the contractor for
delayed payment if any @ 1% per month up to maximum of
3%.
Communications
Clause 5
Original Clause
• A notice shall be effective only when it is delivered (in terms of Indian Contract
Act).
• All communications from Engineers Representative shall have the same effect
as though given by the Engineer. The Engineer shall however retain the
authority to disapprove any work, materials or Plant in the event of the
Engineers Representative failing to do so or revoke the decisions/instructions
issued by the Engineers Representative.
• All certificates, notices or instructions to be given to the Contractor by the
Employer or the Engineer under the terms of Contract shall be sent by post,
cable, fax, e mail to or placed at the Contractors principal place of business
or such other address as the Contractor shall nominate for that purpose.
• Any notice to be given to Employer or to the Engineer under the terms of the
Contract shall be sent by post, cable, fax or e mail to or left at the respective
addresses nominated for that purpose given in contract data.
• Change of address shall be informed to respective parties well in advance.
 Clause 5
Remarks
• Engineer is not taking responsibility of the
decisions taken by Engineers representative.
• “Well in advance” term may not convey the same
meaning for both the parties, as it does not give
any specific time period.
 Clause 5
Redrafted Clause
• All communications from Engineers Representative
shall have the same effect as though given by the
Engineer. The Engineer shall however retain the
authority to disapprove any work, materials or
Plant in the event of the Engineers Representative
failing to do so.
• Change of address shall be informed to respective
parties at-least before 10 working days.