Engineering Contracts and

Procurements Methods
Lec #01: Introduction

1
CONTENTS

• Engineering Contracts
• The reasoning of Contracts
• Types of Construction Contracts
• FIDIC condition of contract for construction
• Contract Administration
• Partnership, Joint venture and Consortium contracts
• Standard Forms of International Engineering construction contracts
• Litigation, Equity, Arbitration
• Claim Preparation and Dispute Resolutions

2
CONTENTS

• Procurement Process
• The Procurement Cycle
• Procurement Procedure
• Type of Procurement
• Standard Form of Bidding Documents (Civil Works)
• Prequalification Document for Procurement of Works and User’s Guide
• Public Procurement Rules
• Pre-qualification of Consultants and Contractors
• Specification Writing (General and Technical Provision)
• Assembling the Specification

3
CONTENTS

• Construction Law
• An introduction to law and contracts
• Labor Laws
• Local Law of contract v/s Contract Act 1872
• The Arbitration and Conciliation Law of Pakistan v/s Arbitration Act, 1940
• International Arbitral Tribunals for commercial, construction Industry and
Investment disputes arbitration
• Model Arbitration clauses in contracts
• The relevant part of civil procedure code (Code of Civil Procedure, 1908)
including civil actions arising from arbitration on contractual disputes. The
relevant part of law of Limitation (Limitation Act, 1908).

4
Recommended Books/Reading/References

• Abbett, R.W. (1960), Engineering Contracts and Specifications. Latest

Edition, John Wiley and Sons, Inc.
• Smith G.R., (2003). Contracts and Claims. In: Chen, W.F. and Richard
Liew, J.Y., The Civil Engineering Hand Book. Latest Edition. CRC Press
LLC.
• Standard Procurement Document “Prequalification Document for
Procurement of Works and User’s Guide”, The World Bank, Latest
Version

5
WHAT IS A CONTRACT?

6
A contract is an exchange of promises between two or more parties
to do, or refrain from doing, an act which is enforceable in a court of
law.
Any kind of agreement written or verbal by a private person or a firm
for carrying out the work is called a contract.
It is a binding legal agreement between two parties.
CONTRACTOR
Any private person or firm who enters into an agreement with
another person or department for any work to perform within the
legal boundaries.

7
Contract
• A contract is a legally binding or valid agreement between two parties. The law
will consider a contract to be valid if the agreement contains all of the following
elements:
• offer and acceptance;
• an intention between the parties to create binding relations;
• consideration to be paid for the promise made;
• legal capacity of the parties to act;
• genuine consent of the parties; and
• legality of the agreement.
• An agreement that lacks one or more of the elements listed above is not a valid
contract.

8
Contract
• The contract, in terms of enforceability, includes an offer and an
acceptance, has consideration for the exchange, clearly sets out the
terms of the agreement without ambiguity and is signed by the
involved parties who have the proper capacity to enter into the
contract

9
Why do we use contract in construction?
• Describe scope of work
• Establish time frame
• Establish cost and payment provision
• Set fourth obligations and relationship
• Minimize disputes
• Improve economic return of investment
• Risk Transferring

10
Why have a contract at all?

• From a client’s perspective

• firm offer, competitive basis, price, time, quality
• From a contractor’s perspective
• profit, risk, business

11
 FORMATION OF A SIMPLE CONTRACT

Offer + Acceptance = Agreement

Agreement + Intention + Consideration = Contract

12
A Valid Contract Must:

A. Be between competent parties.

B. Accomplish a lawful purpose.
C. Include an offer and acceptance of that offer.
D. Involve an exchange of value.

13
A. Competent Parties, B. Lawful Purpose
A. Competent parties:
• Legal age
• With appropriate authority
• Mentally competent

B. Lawful purpose:
• Does not violate applicable laws
• Compatible with public policy

14
C. Offer and Acceptance

Anything said or done that shows a willingness to exchange value.

• Offers and acceptances may be:
• Written
• Spoken
• Demonstrated through action

15
D. Exchange of Value

Both parties must receive something:

• Financial or non-financial
• Directly or indirectly
• Also called “consideration”

16
Example of Exchange of Value

Buyer receives:
• Financial value — product or service
• Non-financial value — lower risk
Seller receives:
• Financial value — payment
• Non-financial value — experience

17
“Terms and Conditions”

The words in the contract

Rights and responsibilities of the parties:
• Term — a specific promise
• Condition — a modification of a term

18
19
Form of Contracts

1) Written

2) Oral

3) Partly oral and written

20
Classes of Contract

Contracts by Deed
• A deed is a formal legal document signed, witnessed and delivered to
effect a conveyance or transfer of property or to create a legal
obligation.

Simple contracts
• Simple contracts are informal contracts and may be made in any way –
in writing, orally or they may be implied from conduct

21
Bilateral & Unilateral
Bilateral contracts
• A promise by one party in exchanged for a promise by another
party
• A one to one contract

Offeror Offeree
The person who The person to whom
make the offer the contract was made

Example : Sale of goods contract

• The Buyer promises to pay the price
• The Seller promises to deliver the goods
22
Unilateral contracts
• A promise by one party in exchanged for an action by
another party
• A one to all contract

Many
1 Offeror
Offerees

Example :
X promises a reward to anyone who will find his lost wallet.
X bound himself to the promise, but no one is bound to search for
the lost wallet. But if Y, having seen the offer, recovers the wallet
and returns it, he is entitled to the reward. 23
Essential elements of a Contract

1) Agreement
One party make the offer, another party accepts the offer
and both achieve it.
2) Consideration
Both parties must have provided consideration, i.e, each
side must promise to give or do something for the other.

3) Intention to create legal relations

The parties must have intended their agreement to have
legal consequences. The law will not concern itself with
purely domestic or social agreements.

24
4) Capacity
The parties must be legally capable of entering into a
contract.

5) Absence of Vitiating factors

Absence of factors that are going to invalidate a contract,
i.e :undue influence, mistake, misrepresentation, illegality

25
Thanks

26