English for Civil Engineering

Discussing
Contract
Juvrianto CJ, S.Pd., M.Pd.
What is CONTRACT?

The word as ‘Contract’ in human activities is so general under legal contest. In

construction, the main important thing is that work information is enough to carry
out the works though Contract also can be seen every projects.

The reason behind to include the contract is for helping to parties to overcome
the situation where something goes wrong then no parties are willing to accept
the fault or consequence of the problem.

A formal contract incorporating the terms described in the tender may be sent to
the successful bidder for execution.
What is purpose of CONTRACT?

The key purpose of a contract is to act as a tool for structuring the relationship
and recording what the parties have agreed to do for and with each other. The
contracting process itself, during which the parties identify each of the issues
which are important to them and negotiate to agree a mutually acceptable
balance of risks and responsibilities, can be just as useful as the contract itself in
building a foundation for a successful lasting relationship
Reasons Why Contracts are Important Business and Management Tool

1. Contracts protect both you and your client.

One of the most basic building blocks of good business is having a valid and
concrete contract. Contracts, by nature, are meant to be a safeguard for both
parties of the business agreement. When you and your client agree upon the
terms of a contract and sign, you’re taking the preemptive step to quell any
potential disagreements. If things go south, your contract gives you the ability to
enforce those terms.
2. Contracts prevent misunderstandings.

When your agreement has been hashed out between both parties, write it all
down. Having clear and concise terms that both you and your client agree to will
help shape the expectations and guide the performance of your duties. Your
contract ensures that both parties understand what the expectation is and what
either of you will be receiving during and at the end of your working relationship.
With everything written down, it’s easy to go back and refer to the contract when
there’s a hiccup in your working relationship or a question about your agreed-
upon service.
3. Contracts specify what rights the client is purchasing and what rights you retain.

When you take a photo, you own the rights to sell copies of that image as well as
display the image publicly (amongst many other rights). Some clients may be
unaware or uncomfortable with this, so your contract should be explicit and state
exactly what rights you will retain in regards to those images and what rights your
client will have to them.
4. Contracts stipulate the payment process.

You didn’t go through the whole process of prepping your gear, driving to the
location, shooting an event for X amount of hours, proofing and editing the
images, and delivering them to the client for you to not get paid for your hard
work. Having a signed contract means that you and your client have agreed ahead
of time how and when you’ll be paid, and what happens when they stiff you at the
end of the road.
5. Contracts are legally binding.

Once your contract has been signed, both you and your client are held to certain
terms that have been agreed upon beforehand. If you are found in any way to be
in violation of these terms, your client can take legal action against you, and vice
versa if your client is in violation of your contract.
Your contract is the safety net you get to rely on if negative scenarios happen to
crop up. This is the piece of paper you get to wave in court to prove that you’ve
agreed to terms and they’re not happening so you’re due recompense.
What is The Main Roles CONTRACT?

1. They serve as a record of commitments for both parties

At their very core, contracts are relationships. Two parties agree to work together,
and forge a connection that if fostered well and beneficial on both sides, can last
years. A contract is the visual representation of that relationship.

2. They prevent conflicts and mitigate risk

Contracts often go through a negotiation process that ensures both sides are
getting the best deal possible. Good negotiation should lead to a mutually
successful outcome that prevents conflict down the line and sets the foundation
for a strong partnership moving forward.
3. They help an entire organization maintain compliance
Unless employees have a legal background, it’s likely they’re often not thinking
about compliance. Having a process set in place for contracts, or better yet, a
contract management platform in place, helps employees remember they need to
create a contract that has to be approved by Legal or another party.

4. They serve as a collaboration and communication tool

From their very creation, contracts are by nature relational and collaborative.
Teams can work together to determine their needs through the creation of a
contract, building healthy communication and opening up collaboration across
departments.
5. They help generate revenue
Contracts are the binding agreement that says one side will deliver services in
exchange for payment. Being able to have contracts processed efficiently and
under the right terms helps companies generate more revenue. A blockade to a
signed contract means a blockade to more revenue. Faster contract processes
mean organizations are able to sign more deals and bring in more income.

6. They increase operational efficiency

Looking at contract processes and evaluating the greatest needs for improvement
will help organizations work more efficiently as a whole. Working faster and
smarter means using the right tools. Again, a contract management platform is
one of the best ways to automate contract processes. Instead of tedious emails, a
few clicks means an approval is on its way, and signatures take days or hours, not
weeks or months. Having all people, processes, and documents in one place is
critical for aligning with the current pace of business.
7. They extend a company’s brand and values
Although this may not be the first thing that comes to mind when most people
think about contracts, they are an extension of company brand. Sending out a
contract is a symbol that an organization cares about having a detailed record of a
relationship that they are making a commitment to. Everything from wording to
negotiations gives each party an idea of how the other functions. A solid company
brand shows through care in contract creation and the interactions that follow.
CONTRACT Types

 Lump Sum or Fixed Price Contract

 Measurement contract
 Turnkey Contract
 Design and Build
 Cost Plus Contracts
 Unit Price Contracts
 Time and Material Contracts
 Item rate contract
 Percentage rate contract
 Labor contract
 Piece-Work agreement
 Target Contract
1. Lump Sum or Fixed Price Contract

Under a Lump Sum or Fixed Price Contract, the contractor agrees to perform the
work specified and described in the contract for a fixed price. The price of a fixed
contract can only be changed upon the execution of a change order, under which the
owner and the contractor either
(1) Agree for the contractor to perform additional work that falls outside the scope of
the original work for an agreed upon extra compensation or
(2) Agree to remove certain work from the original scope of work and reduce the
price of the contract in proportion to the work that the contractor no longer has to
perform.
These types of contracts are appropriate when a clear scope and a defined schedule
have been reviewed and agreed upon.
2. Measurement contract

Measurement contracts (sometimes called “re-measurement” or ‘measure and value’

contracts) contains a Bill of Quantities ( BOQ ) provided by the employer or its
consultants, can be used in situations where the design (or type of works) can be
described in reasonable detail, but the amount cannot. The contractor will quote
against each BOQ item and enter a unit rate or unit price to build up the total
contract price on basis of those BOQ quantities. During the construction period, the
actual quantity of works executed under each BOQ item will be jointly measured and
valued at the quoted rate for interim payment purpose.
A measurement contract might also be appropriate on projects where the design has
not been completed in sufficient detail for bills of quantities to be produced.
It should be possible to describe the works in sufficient detail to determine a
programme and to obtain rates from tenderers. Generally tenderers rates will be
based on drawings and approximate quantities.
3. Turnkey Contract

A turnkey contract is a business arrangement in which a project is delivered in a

completed state. Rather than contracting with an owner to develop a project in
stages. The developer is hired to finish the entire project without owner input. The
builder or developer is separate from the final owner or operator, and the project is
turned over only once it is fully operational. In effect, the developer is finishing the
project and “turning the key” over to the new owner.
This type of arrangement is commonly used for construction projects ranging from
single buildings to large-scale developments.
4. Design and Build

Design and Build procurement works on the basis that the main contractor is
responsible for undertaking both the design and construction work on a project, for
an agreed lump-sum price.
Design and build projects can vary depending on the extent of the contractor’s
design responsibility and how much initial design is included in the employer’s
requirements. Nevertheless, the level of design responsibility and input from the
contractor is much greater on design and build projects than a traditional contract
with a contractor’s designed portion.
5. Cost Plus Contracts

The Cost Plus Contract is a type of a construction contract under which the owner
agrees to pay the complete cost of the materials and labor needed to needed to
build the project along with a fee for the contractor’s overhead and profit. This
contract type is favored where the scope of work is highly uncertain or indeterminate
and the type of labor, material, and equipment needed to build the project is also
uncertain in nature.
This type of contract involves payment of the actual costs, purchases or other
expenses generated directly from the construction activity. Under this arrangement,
complete records of all time and materials spent by the contractor on the work must
be maintained. Cost Plus Contracts must contain specific information about certain
pre-negotiated amount (some percentage of the material and labor cost) covering
contractor’s overhead and profit. Costs must be detailed and should be classified as
direct or indirect costs.
6. Unit Price Contracts

Unit Price Contracts are based on anticipated quantities of items which are counted
in the project in addition to their unit prices. The final price of the project depends
upon the quantities required to carry out the work. Generally, these types of contracts
are suitable only for construction and supplier projects which involve accurate
identification of different types of items, but not their numbers, in the contract
documents. These types of contracts are oftentimes used on excavation projects.
7. Time and Material Contracts

Time and Material Contracts are usually preferred if the project scope is not clear, or
has not been defined. The owner and the contractor must establish an agreed hourly
or daily rate, including additional expenses that could arise in the construction
process. The costs must be classified as direct, indirect, mark-up, and overhead.
Sometimes the owner might want to establish a cap or specific project duration to
the contractor that must be met, in order to have the owner’s risk minimized.
8. Item rate contract

For this contract, contractors are required to quote rates for individual items of work
on the basis of schedule of quantities furnished by the client’s department.

9. Percentage rate contract

In this form of contract, the client’s department draws up the schedule of items
according to the description of items sanctioned in the estimate with quantities,
rates, units and amounts shown therein.
10. Labour contract

This is a contract where the contractor quotes rates for the item work exclusive of the
elements of materials which are supplied by the client’s Department.

11. Piece-Work agreement

This is that for which only a rate is agreed upon without reference to the total
quantity of work to be done or the quantity of work to be done within a given period.
Mistakes in CONTRACT

A contract can be voided under common law rules for mistake in the following
situations:

 Common mistake (where the mistake is shared by both parties, is fundamental

and directly affects the basic definition of what the parties are contracting for).
The mistake will render the contract void if it robs it of all substance.
 Mutual mistake (where the parties are at cross-purposes with one another). If,
from the parties’ words and conduct, only one possible interpretation of what
was agreed can be deduced, the contract will still be valid. Otherwise it will be
void.
 Unilateral mistake (where one party is mistaken and the other knows or ought
to have known of the mistake). If the mistake relates to the fundamental nature
of the offer the contract can be voided.