1. which is enforceable by law to provide something in return for something
else from a second party". as stipulated in Article 864 of the Iraqi Civil Law.
A construction contract is an important document as it outlines the scope of
work, risks, duties and legal rights of both the contractor and the owner.
Civil engineering contracting contracts are administrative (governmental)
contracts governed by standard documents issued by the Iraqi Ministry of
Planning and internationally, the World Bank or FIDIC.
The two parties of contract are owners and one or more contractors. The
owner, often referred to as the 'employer' or the 'client', has full authority to
decide what type of contract should be used for a specific project to be
constructed and to set out the legally-binding terms and conditions in a
contractual agreement.
Essentials of a Valid Contract are:
1. There must be an agreement or meeting the minds
2. The agreement must be between parties competent to enter into a contract
3. The Parties must give free consent
4. The agreement must be supported by lawful consideration.
5. Subject matter must be definite and lawful
Contract types in construction:
There are many types of contracts that may be used in the construction
industry. Construction contracts are classified according to different aspects.
They may be classified according to the method of payment to the
2. total value of the contract can be calculated by multiplying identical units of
work by a fixed unit price.
4. Cost plus: are often used when the scope has not been clearly defined, such
as when the project design is still being finalized and the employer wants to
begin construction.
The most common cost-plus contracts are:
a. Cost plus fixed fee.
b. Cost plus fixed percentage contract.
c. Cost plus—with a guaranteed maximum price.
d. Cost plus variable percentage contract.
e. Target estimate contract.
5. Turnkey: The contractor being responsible for performing both design,
construction and project financing. Owner payment is then made at the
completion (when the contractor turns over the “key”). Partial payments may
be made in milestone such as certain arrival of machine, etc…
6. Project management contract: The Construction Management Contract is for
use on construction projects where the employer appoints separate
contracts
to carry out the works, and a construction manager to oversee the completion
of the works for a fee.
7. Public–Private Partnership (PPP): PPPs are a viable avenue for governments
to benefit from private capital and technical know-how.
8. Build-Operate-Transfer (BOT): The company is responsible for performing
the design, construction, long-term financing, and temporary operation
of the project. At the end of the operation period, which is usually more
than ten years, the operation of the project is transferred to the employer.
What is the Agreement?
3. contrary, the main elements of a contract are the agreement and its
enforceability by law.
2. Every agreement is not a contract, but every contract is an agreement.
3. An agreement does not need to be submitted in writing, but contracts are
usually written and recorded.
4. The Agreement does not legally obligate any party to perform. In a
contract,
people are legally obligated to fulfill their role.
5. The scope of an agreement is wider than a contract which is covers only
those agreement which have legal enforceability.
Contract contents:
It is customary in construction projects to have documents contained in the
contract in order for the owner to specify the scope of his work to the fullest
extent, and the contractor can study and analyze the project in order to be
able to accurately submit his proposal to implement the project. Figure The
contents of the contract can be described as follows:
It is a written agreement document between the two parties to the contract to
implement a specific engineering project, namely the employer (the
contracting party), usually symbolized in the construction contract by the
first party, and the implementing agency (the contractor) symbolized by the
second party. This contract (the agreement) governs and defines the
technical, financial and legal relationship between them throughout the
validity of the specified and clarified period in accordance with the terms of
the contract, which is composed of articles, clauses and conditions
specifying the type, scope and method of work, and the rights and duties of
all parties to the contract.
4. listed.
the contract and the
that are considered complementary to
project will not be implemented without
them, including, for example:
a) Work program and method of implementation.
b) Equipment and labor schedules.
It means the final formal agreement between
both the owner and the contractor, which is legally binding on
the two parties on the contents of the contract, including the
contractor’s approval to carry out the construction works in
return for sums of money paid by the owner, in
a certain manner and an agreed time based on the terms that
have been agreed
upon It is worth.
c) The full name of each of them.
d)The name of the witnesses to the contract, usually an official
body familiar with the legal aspects.
e) The name of the project to be implemented: giving an overview of
its
main contents.
d) The total time to implement the project, and its total cost.
c) The method of material dealing between the owner and the
contractor.
5. in easy-to-understand language.
The contract must contain the fines for delay in terms of how to deal
with them, the time of their implementation and their cost.
Standard Documents by planning ministry:
In the past, the general conditions for contracting civil engineering works
issued by the Ministry of Planning were the documents approved in
contracting for the implementation of projects. The Ministry of Planning
issued under its letter No. 7505 on 9/4/2017, which included not adopting
the general conditions of contracting in new contracts. The 18 standard
documents were issued, which are almost identical to the terms of FIDIC,
which is the International Federation of Consulting Engineers, which was
founded in 1913 and headquartered in Geneva in Switzerland, and this
abbreviation is taken from the French (Fédération Internationale Des
Ingénieurs-Conseils).
1. General Tenders for executing general works.
2. Limited Tenders for executing the general works
Works contracts are used for projects if all information (documents,
technical specifications, plans and bills of quantities) are available to the
employer.
3. General tenders for the contracts of designing and
executing general works.
4. limited general tenders for the contracts of designing and
executing general works.
Design and implementation contracts are used for
projects whose
information (documents, technical specifications, plans and bills of
quantities) are not available to the employer.
5. General tenders for the (Turnkey) contracts to execute public works.
6. 1. Construction Contract - Red Book
2. Electromechanical Works Contract - Yellow Book
3. Industrial Works Contract - Orange Book
4. The Short Contract - The Green Book
5. B.O.T Contract - Silver Book
6. Consulting Services Contract - White Paper
The FIDIC Red, Yellow and Silver Books known as the FIDIC Rainbow
Suite.
The difference between public tender and
limited tender:
Public Tender:
It is from one stage that includes (announcing - opening -
analysis - awarding - signing a contract) and it contains the
qualification and evaluation criteria that the Bid Analysis
Committee is working on. Limited Tender: It’s from two stages;
The first stage is the qualification: according to the independent
standard
document (pre-qualification document) that includes
announcement - opening - analysis) and does not include awarding.
The second stage: Direct invitation to at least 6 qualified
companies, and the
analysis is carried out according to the limited tender document that
includes (invitation - opening - analysis - awarding - signing a contract).
7. increase in the contract sum, a written notice shall be given before he
proceeds to execute the work. If the contractor believes the additional cost is
involved for reasons including but not limited to:
1. A written interpretation from the engineer.
2. A written order for a change in the works issued by the engineer.
3. Force majeure.
5. Delays due to employer causes.
6. Design deficiency or incomplete design.
7. Delayed payments by the employer; Contractual breaches by the employer
and/or the engineer then a claim shall be submitted with full
substantiation of the relevant facts. The contractor’s claim shall include an
estimate of the costs and of probable effect of the delays to the
progress of the works.
Dispute RESOLUTION:
To prevent all disputes and litigation, it is usually agreed by the parties that
any claim, question, difficulty or dispute arising from the agreement in place
or the construction process shall be first submitted to the engineer to address
the issue. Upon review of the claim, the engineer shall take one or more
of the following preliminary actions within fourteen (14) days (or
similar as noted in the contract) of receipt of a claim:
1. Request additional supporting data from the claimant.
2. Submit a schedule to the parties indicating when the engineer expects to act.
3. Reject the claim in whole or in part stating the reasons for rejection.
4. Recommend approval of the. claim by the other party; or
5. Suggest a compromise.
If a claim has not been resolved within a specified period in the
8. the following methods approved in the provisions of the contract:
Mediation is a method of conflict resolution that, in fact, contains elements
of negotiation and arbitration. The mediator is usually a third party who tries
to persuade the parties to the dispute to agree to resolve the dispute in a way
that works for everyone. Accordingly, the mediator must have high
negotiation skill, as well as full knowledge of technical issues related to
construction project disputes. Usually, the parties to the dispute agree to
resolve their differences by following the method of mediation, provided
that an agreed mediator is chosen by both parties. If the disputed issue
cannot be resolved in mediation, they went to arbitration or courts as the
9. What are the procedures followed for arbitration?
Arbitration procedures differ from one country to another, but
most of them agree on the basics, which are:
Termination of the contract and withdrawal of the
project:
Termination of the contract means its cancellation before the expiry of the
time period specified in the contract documents. Most construction contracts
include a clause that the project owner has the right to withdraw works from
the contractor, terminate the contract, and in some cases confiscate the
insurance, for the following main reasons:
1. In the event of the contractor’s bankruptcy, submitting an application to
declare his bankruptcy, or having been financially insolvent.
2. If he delays in executing one of the phases of the project’s clauses in
accordance with the approved time schedule with a period of time
that is stipulated in the terms of the contract.
3. If the contractor breaches any of the terms of the contract, neglects his
obligations stipulated in the contract, or suspends implementation work for
a period of time stipulated in the contract.
4. The contractor assigning part of the work items to another contractor in
violation of the instructions of the owner or his representative in this
regard.
5. If it is proven to the owner that the contractor is using fraud, manipulation or
bribery.
10. work, in accordance with the terms contained in the contract. The contractual
relationship does not end with the withdrawal of the work from the
contractor. When the contract is terminated at the request of the owner alone,
the contractor should be compensated for the missed profit such as if he was
work was completed in full but the court can reduce the compensation owed
to the contractor upon termination of the contract by the amount of the
remaining time.
Employers have generally more extensive termination rights. The
employer may, without cause, order the contractor in writing to
suspend, delay, or interrupt the works in whole or in part for such
period of time as the employer may determine.
Contractors generally have relatively limited termination rights in
construction contracts. Contractors are typically entitled to terminate a
contract in the following specific events:
• Failure by the employer to pay the cost of work
• The employer has breached the financial agreements
• Employer fraud to prolong suspend work
• Employer insolvency
contract can be discharged where:
1. The contract is valid, or comes to an end because it has been carried out.
2. Contractor death
3. Announcement of bankruptcy of the employer
4. Expiry by agreement
5. Impossibility to implement
6. The majeure forces
7. Termination of the contract (judicial ruling)
11. 1. The inability of the owner to finance the project partially or completely.
2. Owner desire to make modifications, additions or changes to the project.
3. Inability of the contractor to implement the work items at the required rate of
time in project scheduling.
4. Contractor's bankruptcy.
5. The contractor's failure to comply with the orders issued by the owner or his
representative to the directives relating to the progress of the project,
6. Stopping as a result of natural disasters or bad weather conditions.
If the suspension out of the will of the parties, the contractor has the request
right to extend the contract by the amount suspended time but not additional
sums.
Changes in engineering projects can be defined as: Making developments in
the contract documents, with a written agreement between the
contractor and the owner, these developments may be modifications,
additions, or alterations to the project clauses specified in the contract.
Conditions for change in construction projects:
1.The owner has the right to make changes in the project in the interest of the
general objective of the contract.
2.The contractor must be making the required changes.
3.The change must be in writing and signed by the owner.
Any modification in the value or time of the contract of the contract will be
evaluated by appropriate means.
12. 1. Extent of the need for change and the consequences thereof.
2. What is the time period required for the change, and the extent of its impact
on the general plan of the project?
3. The capabilities of the contractor to make this change without affecting the
rest of the project items.
4. The feasibility study for changes in the project, and does the project budget
allow for the change to be made or not?
