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Definition of Contract
 A contract is a binding agreement between two or more persons which

creates mutual rights and duties and which are enforceable at law.

COLLEGE OF ENGINEERING AND TECHNOLOGY  Construction contract is defined as an agreement among the parties, for
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND
execution of works, for the supply of materials, for the performance of any
MANAGEMENT
Course Name: Specification and Bill of Quantity (Arch 4122) service and providing labour for carrying out construction operations.

 It is expressly stated to include agreements for architectural design or

Chapter Four
surveying work or for providing advice on building, engineering, interior

CONSTRUCTION CONTRACT or exterior decoration or the laying out of landscape.

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Most construction works fall under one of the following two

2. ESSENTIALS OF AVALID CONTRACT groups;

 The contract shall be valid, the following conditions must eventually I. Public Works: Works which are constructed in the interest of the
operate. public. Typical of such works are highways, railways, dames, and
1. That the contract shall be made by parties legally competent to public buildings. These are financed by the government or public
contract bodies.
2. That the contract shall be made by free consent of the parties, II. Private Works: Works constructed for an individual, or group of
3. That there shall be definite offer or proposal and its acceptance. individuals or a corporation or body that is or proposes to be in
4. That there shall be a valid consideration. private business. are called private works and are met from private
5. That the subject matter of the contract shall be legal. funds.

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Contract parties Types of Contracts

 Whether it is a public or private work, the three contracting parties,
Owner, Engineer and Contractor are essential.
• Contracts for the civil engineering works may be
broadly classified as under:
 The Owner can be an individual, a firm or a public body which
1. Lump- sum contract
initiates and finances the work. 2. Item rate or unit price or admeasurements contract
 The Engineer or a firm of Consulting Engineers is employed by the 3. Cost- plus- percentage fee contract
4. Cost plus fixed fee contract
owner to advise him, to negotiate for him, and to protect his 5. Cost plus variable fee contract
interests. 6. Target contract
7. Labor contract
 The 'contractors' responsible to execution of the work.
8. Hybrid contract

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Mode of payment to contractor Cont.……

 A lump- sum contract is usually an 'entire' contract and such  Cost plus Fixed Percentage :- In this type of contract, the
no payment can be recovered until the whole work is
contractor is given a certain percentage over the actual cost
completed.
of construction.
 An item rate contract is one which the contractor agrees to
carry out the work as per drawings, bill of quantities and  Cost plus Variable Percentage For this type of contract, the
specifications :-
contractor agrees to a penalty if the actual cost exceeds the
 A Cost plus Fixed Fee contract The amount of fee is
estimated project cost, or a reward if the actual cost is below
determined as a lump sum from a consideration of the scope of
work, its approximate cost, nature of work, estimated time of the estimated project cost.
construction, manpower and equipment requirements etc.
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Termination of Contract III. Termination by Breach

 A contract may be terminated under the following situations. Breach means non performance of an activity. A breach of a
I. Termination by Performance contract occurs under the following conditions:

A contract is automatically terminated when both the parties a) Non Performance when the party fails to carry out the contract

have performed their obligation satisfactorily under the work.

agreement b) Defective Performance where the party under takes the contract
work but fails to performance it as the contract requires, such as not
II. Termination by Agreement
constructing a building in accordance with the specifications. (It is
The parties under the contract may agree to termination of a
also called sub standard performance)
contract at any time in its life time if it is based on payment in lie
c) Anticipatory Breach of contract is where the breach occurs before
of performance.
the date for performance of the contract. It may come about by
express repudiation or by implied repudiation.
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IV. Termination by Impossibility of performance Contract Administration

 Practical impossibility (Unforeseen conditions)  Administration: is a process that ensures the successful completion of the
project under consideration with substantial compliance of the Terms of the
 For example, Sub soil characteristics previously assumed to be
Contract.
satisfactory for a bridge pier foundation may be determined unsuitable
Contract Administration activities include:
after the signing of the contract making the construction of the pier
 Identify contractual responsibilities of stakeholders;
impossible, and such a contract could not be enforced.
 Review submitted (Integrated) Schedules and Breakdowns for operations such as
 Death or illness of one of the parties Organizational

V. Termination by Force ;- This may be due to  Resources Breakdowns and Schedules

 War  Record, Monitor and Evaluate Progress of Mobilizations,

 Revolution (Civil War)  Report Project Status daily and/or periodically and Completions;
 Change of government
 Certify qualities of materials
 Natural calamities or devastations
 Administer contract changes; and Mediate disputes.
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CONTRACT DOCUMENTS The agreement should contain:

 The date of agreement;
 the following construction documents included in
 The names and address of contracting parties;
Contract document :-
 A brief description of the scope of work;
 Contract Agreement,
 A list of contract documents with their precedence (reference to
 Conditions of Contract (General and Specific),
other documents);
 Specifications and Bill of Quantities (BOQ),
 The procedures for payment;
 Drawings,
 The contract time or dates for start and completion;
 Addenda, and
 The signatures of contracting parties and witnesses;
 Supplementary Contracts (Change Orders).
 International construction documents are also often based on
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forms.
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Conditions of Contract
A. General Conditions of Contract, GCC
 BaTCoDA - Ethiopian Building and Transport Construction
A document called the General Conditions is an essential part of the contract.
Design Authority for inspection
It defines the responsibilities of the parties involved in the contract, the owner and the  FIDIC - The International Federation of Consulting Engineers
general contractor. It describes the guidelines that will be used in the administration of (commonly known as FIDIC, acronym for its French name
the contract. Fédération Internationale Des Ingénieurs-Conseils) is an
 The conditions are intended to govern and regulate the obligation of formal contract. international standards organization for construction technology
 Various standard forms of General Conditions have been developed by different and consulting engineering.
organizations such as
 JCT stands for the Joint Contracts Tribunal.
FIDIC,ICE, JCT, BaTCoDA, MoWUD and PPA etc.
 ICE stands International Contract Engineering
 These forms are familiar to all parties concerned, and the wording is not only clearly
understood, but has also been tested in the courts
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Special conditions of contract may include topics such as:

B. Special Conditions of Contract, SCC
 The number of copies of contract documents to be received by the
contractor,
 The purpose of the Special Conditions is to provide
 Survey information to be provided by the owner,
an extension of the General Provisions of the
 Materials provided by the owner,
contract to fit the specific project at hand.
 Changes in insurance requirements,

 It is also known as Conditions of Particular  Requirements for security and temporary facilities,

Application, CPA.  Procedures for submittal and processing of shop drawings,

 Cost and schedule reporting requirements, and

 Traffic control and street cleaning requirements

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CLAIMS and DISPUTE Improper Claim proper Resolution

1. Definition
 A claim can be defined as a request for additional financial
compensation and/or a request for a time extension.

 A construction claim is the assertion of a right demanding either

additional time or/and payment due to the result of an action.

 Construction disputes are disagreements or conflicts between proper Claim

stakeholders of a construction project. The dispute can be between
any two or more stakeholders like owners, contractors,
subcontractors, and suppliers.
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Dispute resolution may have the following aspects/dimensions:

A .Dispute Prevention
 Preventive,
The following aspects may contribute to the prevention of
 Non-Judgmental/ Amicable settlement: construction disputes.
-Negotiation,  To have a well-planned, studied, and designed project;
-Mediation, and  To have a clear, accurate and complete tender dossier, and
-Conciliation. document;

 Judgmental/Non –Amicable settlement  To have a clear, accurate and complete contract document;

 Adjudication,  To have a balanced (intermesh of allocation and distribution

of risks, rights and obligations among the contracting
 Arbitration, and
parties) contract document;
 Litigation.
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B. Amicable Settlement C. Judgmental Settlement

Negotiation • The very feature of the judgmental dispute resolution is that the third
Negotiation is a give and take process, a serious attempt to reach a settlement
party known as the court judge, the arbitrator or the adjudicator
agreement/ Negotiation (B/n the contracting parties, win-win, without third
decides the case before him/her for the parties.
party),
Mediation is simply a facilitated or assisted negotiation.
 The mediator helps disputing parties to understand the dispute in way that  Under the judgmental dispute resolution the following are recognized:
will maximize their chances to reach a mutually acceptable and lasting
solution.  Adjudication:

Conciliation is a voluntary form of dispute resolution where a neutral  Arbitration; and

party, the Conciliator, is appointed to facilitate negotiation between the
 Litigation.
parties in dispute and to act as a catalyst for them to reach a resolution of their
dispute.
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C. Judgmental Settlement .
Adjudication
Adjudication can be defined as a process whereby an appointed neutral and
impartial party is entrusted to take the initiative in ascertaining the facts; the
law relating to a dispute and to reach a decision within a short period of time.

Arbitration
Arbitration is a process whereby parties in dispute agree to submit the
matter in dispute to the decision of a person or persons in whom they have
confidence, trust and undertake to abide by that decision.

Litigation
Litigation takes place at the court of law having jurisdiction over the case. The courts
play here their dispute resolution role.
Litigation is the most serious and adversarial method of dispute resolution

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