Contract management sys

CONTRACTS MANAGEMENT

• Contract law is based on the Latin phrase pacta sunt servanda i.e. ‘promises must be kept’.

• History : During ancient times, Bartering, the way by which contract was taking place.((Grains V/s Cattle) (Clothes V/s Fruits), Consideration- Return Promise)

• Todays time : we enter into contracts so many times in a day that ‘contract’ has become an indispensable part of our life. (Purchase of milk, TV, electronics goods, house, services, telephone, internet, transport etc

CONTRACTS

• No individual or section of people can be fully independent or self-reliant in a developed society. One needs other’s help. To enforce commitment in this mutual give and take, one enters into written agreement with the other party.

• Contract : Legally binding exchange of promises or agreement between parties enforceable by law.

INDIAN CONTRACT ACT

INDIAN CONTRACT ACT, 1872: Determines the circumstances under which the promises made by

the contract shall be legally binding on them.

Offer + Acceptance = Agreement

Agreement + Enforceability at law = Contract

• ESSENTIALS ELEMENTS of CONTRACT– Offer and its acceptance– Free consent of both parties (not caused by coercion,

undue influence, fraud, misrepresentation or mistake) – Mutual and lawful consideration for agreement– It should be enforceable by law (hence, intention

should be to create legal relationship) – Parties should be competent to contract– Object should be lawful– Certainty and possibility of performance– Contract should not have been declared as void under

Contract Act or any other law • Communication, acceptance and revocation of

proposals

• Void Contract (An agreement not enforceable by law is said to be void)

– Agreement by incompetent person ( power of attorney , Legal owner)– Parties under mistake of fact ( Agreement to sale the goods on ship which has

already sunk)– Unlawful object or consideration – Agreement without consideration – Agreement in restraint of marriage – Agreement in restraint of trade – Agreement in restraint of legal proceedings – Uncertain agreement [Agreement to sell valves, oil etc.]– Wagering agreement [ eg. Election which party will win ]

– Agreement to do an impossible Act [Frustration- renting of hall which was burned subsequent to contract, death of party, change of law-import goods banned)

• Consequences of Breach of Contract – Compensation / Penalty is payable for breach of contract.

Remedies for breach of Contract

• Rescession of the contract ( Non supply of items, payment need not to be

done)

• Suit for damage (Compensation to injured party)

• Suit upon quantum merit ( as much as earned -as part supply or part

performance)

• Suit for specific performance ( Land , used vehicles)

• Suit for injunction (sale of property to another person X after agreeing to sell it to Y)

• CLASSIFICATION of CONTRACTS – According to formation:

a) Express contractsb) Implied contractsc) Quasi contract

• TYPES OF CONTRACT – Based on the scope of work required to be executed in CMM, NPCIL:

(a) SUPPLY CONTRACT (b) ERECTION CONTRACT (c) SERVICE CONTRACT

– Based on the method of execution :(a) LUMP SUM CONTRACT (b) ITEM RATE CONTRACT(c) RATE CONTRACT [DGS & D- Only Rates & Period fixed but not qty. ](d) RUNNING CONTRACT [DGS & D- Apart from rates & period qty is also fixed](e) COST PLUS CONTRACTS(f) TURN-KEY CONTRACTS

• CASE STUDIES

General Conditions of Contract

GENERAL CONDITIONS OF CONTRACT

1. INTRODUCTION

2. SUBJECT MATTER OF CONTRACT

3. GUARANTEES AND LIABILITIES

4. CONTRACT EXECUTION

5. CHANGE IN CONTRACT ELEMENTS

INTRODUCTION

1. Preamble

2. Definitions

3. Interpretation

SUBJECT MATTER OF CONTRACT

1. Scope of Facilities2. Time for Completion3. Contractor’s Responsibilities4. Purchaser’s Responsibilities5. Payment6. Price Adjustment7. Terms of Payment8. Taxes & Duties9. Securities

GUARANTEES & LIABILITIES

1. Completion Time Guarantee2. Defect Liability3. Functional Guarantees4. Transfer of Ownership5. Care of Facilities6. Indemnity7. Limitation of Liability8. Insurance9. Change in Laws & Regulations10. Force Majeure11. War Risks

CONTRACT EXECUTION1. Representatives

2. Work Program

3. Subcontracting

4. Subletting & Assignment of Contract

5. Design & Engineering

6. Procurement

CONTRACT EXECUTION (…Contd.)7. Installation

8. Insurance

9. Quality Assurance, Inspection, Acceptance & Rejections

10. Completion of Erection and Pre-Commissioning of The Facilities

11. Commissioning & Operational Acceptance of Facilities

CHANGE IN CONTRACT ELEMENTS

1. Change in Facilities

2. Extension of time for completion

3. Foreclosure of Contract

4. Suspension of Site Works

5. Determination/ Cancellation/ Termination of Contract in full or part

6. Settlement of Disputes

7. Secrecy

1. PREAMBLE

1. The scope of the contract in brief.

2. The status of the General Conditions of Contract in the contract.

3. The authority in NPCIL to exercise the rights and discretions for and on behalf of NPCIL.

2. DEFINITIONS

The words and phrases may have different meanings depending upon the context they are used. Therefore, it is necessary to define exclusive meaning of some important words and phrases used in the contract.

Some of the important definitions are :

"Contract" or "Purchase Order" shall mean the communication or document signed for and on behalf of the Purchaser by an Officer duly authorised confirming the acceptance of Tender or Offer of the contractor for and on behalf of the Purchaser on the terms and conditions mentioned or referred to in the said communication and other documents including Tender Document, Terms and Conditions of the contract and such other documents as may be expressly incorporated in the Contract by reference.

“Contractual Delivery Date” shall mean the stipulated date on which the contractor shall attain ‘completion’ of the Facilities, as specified in the purchase order.

“Contractual Mile Stone Date” shall mean the stipulated date on which contractor complete intermediate mile shall stone of despatch, erection, testing etc. as specified in the Special Conditions of Contract (SCC) / Purchase Order.

“Contract Price” shall mean the price as specified in “Section A – Item and Price Schedule” of the Contract subject to such addition and adjustment thereof or deduction there from, as may be made pursuant to the contract.

“Defect Liability Period” shall mean the period of validity of the warranties given by the contractor during which the contractor is responsible for defects with respect to the facilities or the relevant part thereof as provided in GCC clause 6.4 (Defect Liability).

“Effective Date” or "Commencement Date" shall mean the date of issue of Purchase Order on which the contract shall come into force.

"Excepted Risks" are the risks due to war, hostilities or warlike operations (whether a state of war be declared or not), invasion, act of foreign enemy & civil war, rebellion, revolution, insurrection, mutiny, usurpation of civil or military government, civil commotion, nuclear reaction, nuclear radiation, radioactive contamination, or any other occurrences that a contractor could not insure against, insofar as such risks are not normally insurable on the insurance market and are mentioned in the general exclusions of the policy of insurance taken out under the contract.

"Latent Defect" shall mean a defect, inherently lying within the material or arising out of design deficiency, which do not manifest themselves and/or was not reasonably discoverable during Defect Liability period.

3. InterpretationPriority of documents

Purchase contract issued by NPCIL comprises a number of documents all forming part of the contract. There may be overlapping areas addressed in more than one document. For the purpose of interpretation, the priority of documents are given in the GCC in the following order :-a)The contract agreement/Purchase Orderb)Special Conditions of Contract (SCC)c)General Conditions of Contract (GCC)d)Tender document excluding (b) & (c)

Purchaser’s RepresentativeFor commercial matters : Authorised Officer of C&MM – SGM/GM/AGM/DGMNodal Agency for contract execution for all technical matters : Project Manager from Procurement/Indenting Group.All Site related activities : Engineer-In-Charge as designated by PD/CCE

Subject Matter of Contract 1.Scope of Facilities

General overall scope of EPC/Supply Contract(s) are specified in the respective GCC. For EPC Package, the scope is defined right from design, engineering, procurement, manufacture, shop testing, quality assurance, transportation, unloading and storage at site, all site work - erection, commissioning, performance, testing and handing over.

1. Scope of Facilities (…contd.)Unless specifically excluded in the contract, the Contractor has to supply the materials that may not have been specifically mentioned in the tender/contract but that can be reasonably inferred being required for the Contractor to attain completion of his obligation.

2. Time for CompletionTime is the essence of the contract.

Failure to deliver in time is construed as breach of contract.

A breach in contract entitles the party suffering from such breach to claim damages from the other party who has breached the contract.

2. Time for Completion(..contd)In EPC Contract, in addition to overall completion date, intermediate milestone dates for supply/part installation can also be specified in the contract. These milestone dates are enforceable contractually and the Contractor can be made to pay damages (LD) for not adhering to these milestone dates.

2. Time for Completion(..contd)

However, in the event of overall completion within the final CDD, damages recovered for not adhering to intermediate milestone dates are refundable to the Contractor.

Contract Price and Payment

Contract Price

1. For contract(s) with contractual delivery period upto 12 months, the contract price shall be firm.

2. For contract(s) with contractual delivery period exceeding 12 months, the contract price shall be subject to price adjustment either in positive or in negative side.

Contract Price and Payment (…contd)

Price Basis

1. Price of supply items shall be on safe delivery basis to site.

2. Basic price (except for civil works) shall be exclusive of all taxes and duties.

3. For civil works, prices are inclusive of all taxes and duties.


Price Basis4. For indigenous supply items break-up shall be

shown between Ex-works price and safe delivery charges (i.e. inland transportation and transit insurance).

5. For imported supply items break-up shall be shown as FOB Price, ocean/air freight and marine insurance, port handling/customs clearance (excluding customs duty), inland transportation and inland transit insurance.

6. Price of commissioning/start-up spares shall be inclusive of basic price of the main equipment.


Contract Currency1. For contract awarded through global tendering,

foreign as well as Indian bidders can quote their price in Indian rupees and/or in any other three freely tradable foreign currencies, for supply items and expatriate field labour/ Supervisor for site work.

2. For other prices like transportation charges (both import and indigenous), transit insurance, port handling charges, erection & commissioning etc. and civil works in Indian rupees.


Price AdjustmentComponent of price eligible for price adjustment

1. Ex-works of price indigenous plant and equipment including spares.

2. FOB price of imported plant and equipment including spares.

For the above (1) & (2) Price Adjustment ceiling of 20% of the total Ex-works/FOB price in respective contract currencies shall apply.

3. Erection and commissioning price.

4. Civil works price.


Component of price eligible for price adjustment

5. No price adjustment is allowed on spares, tools, tackles and accessories. Engineering charges, testing charges, analysis charges etc. payable separately shall also not be eligible for price adjustment.

PRICE ADJUSTMENT FORMULA FOR SUPPLY PORTION

The price adjustment formula to be applied to the ex-works/ FOB price- component of the supply items shall be as follows:

EC ( F + a.Ml f1+ b.Nl f2 + c.Ol f3+ d.Pl f4+ e.Ql f5+ lb.Ll flb )

M0 N0 O0 P0 Q0 L0

f = Z0 Z1

Subscript ‘1’ refers to the indices/ exchange rates as on:a)90 days prior to the date of dispatch for labour component, and b)The expiry of 2/3rd period from the date of purchase order to the date of dispatch, for material component.

PRICE ADJUSTMENT FORMULA FOR ERECTION PORTION

Indian Currency portion of the Erection & Commissioning Services

The formula for calculation of the monthly price variation of the cost of erection portion of the works is indicated and explained below:

E1 = E0 (0.25 + 0.75F1)

F0

Ex-works/FOB component of the Items (excluding spares, tools and tackles)

7. Terms of PaymentFor supply –(a) 10% advance on unconditional order

acceptance.(b) 60% on pro-rata basis on despatch of items to

site.(c) 20% on receipt of items at site.(d) 7.5% on handing over of facilities to the

Purchaser.(e) 2.5% on completion of material accounting.Spares –(a) 75% on despatch of items to site.(b) 25% on receipt and acceptance of items at site.

7. Terms of Payment (…contd)For erection & commissioning –

(a) 10% on site mobilisation.

(b) 68% on pro-rata basis on completion of milestones as per approved billing schedule.

(c) 2% on compliance of industrial safety requirement, along with (b) above.

(d) 15% on handling over of facilities to the Purchaser.

(e) 5% on completion of material accounting.

7. Terms of Payment (…contd)For civil works –

(a) 10% on site mobilisation.

(b) 78% on pro-rata basis on completion of milestones as per approved billing schedule.

(c) 2% on compliance of industrial safety requirement, along with (b) above.

(d) 10% on handling over of facilities to the Purchaser.

7. Interest on Delayed PaymentInterest will be paid to the Contractor in the event of delay in release of balance payment.

a)In case of supply order, delay beyond 95 days from the date of receipt of goods at site.

b)In EPC contract, delay in release of payment against MRICAR beyond 95 days from the date of receipt of goods at site.

c)For final payment against handing over of facilities, delay beyond 45 days from the date of receipt of all supporting documents in acceptable form.

7. Interest of Delayed Payment(…Contd)

Rate of Interest Payable :

a) For Indian currency :

Prime Lending Rate (PLR) of State Bank of India.

b) For Foreign currency :

London Inter Bank Offered Rate (LIBOR)

8. Taxes & Duties

TO BE DEALT SEPARATELY IN DIFFERENT MODULE

9. Securities

1. Contract security for Performance Bond as well as for advance/stage payments shall be only in the form of Bank Guarantee

2. Bank Guarantee shall be from scheduled commercial bank in India or from a branch of Indian bank abroad.

3. Bank Guarantee shall be exactly as per the format given in the GCC.

9. Securities (…contd)4. Performance Security Bond (PSB) Bank

Guarantee of 10% of total contract value (supply plus erection) to be submitted within 30 days from the date of award of contract.

5. PSB BG validity till satisfactory completion of defect liability period and further claim period of 3 months. In case of EPC Contractor of foreign origin assigning site work to another entity, the entity for the site work shall submit another PSB Bank Guarantee of 10% of the value of the work assigned to him.

9. Securities (…contd)

6. Performance Security Bond (PSB) Bank Guarantee is extendable for extension in defect liability period.

7. PSB can be released on successful completion of defect liability period including extension, if any.

9. Securities (…contd)Bank Guarantee for advance/stage payments : 1. Bank Guarantee of the full value of advance/stage

payments valid till contractual delivery date with a further claim period of three months.

2. Bank Guarantee can be cancelled/reduced in value once in 6 months to the extent of adjustment of the advance/stage payment against bills paid.

3. Contractor has to extend the validity of both the Bank Guarantees for delay in supply/completion.

4. In the event of delay being caused by reasons attributable to Purchaser, Bank Guarantee extension charges shall be borne by the Purchaser.

9. Securities (…contd)

Latent Defect Bank Guarantee :1. 1% of the total value of supply items to

be submitted at the end of defect liability period valid for 5 years therefrom.

Indemnity Bond for Free Issue Material (FIM) :

1. Indemnity Bond indemnifying Purchaser against loss or damage of FIM issued for fabrication at Contractor’s works outside Purchaser’s site.

1. Completion Time GuaranteeThe Contractor is deemed to have given a guarantee for completion of Contract which shall be attained on or before contractual delivery date.

He is also deemed to have guaranteed that he shall adhered to contractual milestone dates.

2. Delay in SupplyDelay in Supply

Reasons for delay in supply can be classified into the three heads :

1. Delay attributable to the Contractor.

2. Delay attributable to the Purchaser.

3. Delay due to occurrence of one or more Force

majeure events.

Delay in Supply(…contd)Consequences of Delay

Where delay attributable to the Contractor

This provides option to the Purchaser :

1. Accept the delayed supply with recovery of liquidated damages at specified rate applicable for the Contractor.

2. To terminate the contract in full or parts and exercise the rights to the Purchaser available in GCC.

3. Liquidated DamagesIt is a predetermined compensation the Purchaser is entitled to recover from the Contractor in the event of delayed supply.

Rate of liquidated damages are 1%, 0.5% and 0.25% for contracts upto 1 year, beyond 1 year and upto 2 years and beyond 2 years duration of contracts respectively.

Only supply contract, liquidated damages to be levied on the value of the delayed portion only.

Liquidated Damages (…contd)For EPC Contract, liquidated damages to be levied for the total contract value.

In addition, for EPC Contract, liquidated damages to be also levied for failure by the Contractor on certain specified milestone dates of supply and/or erection activities.

In the event of such levy of liquidated damages on mile stone rates, if the final date is achieved the liquidated damages recovered on milestone to be refunded.

4. Defect LiabilityThe Contractor shall give warranty for plant, equipment and facilities supplied by them till completion of defect liability period.

Defect liability period for only supply contract is 18 months from the receipt at site or 12 months from the acceptance, whichever is earlier.

Defect liability for EPC packages, 18 months from the date of completion of facilities (satisfactory erection and pre-commissioning) or 12 months from the date of operational acceptance of the facilities, whichever occurs first.

If the Contractor fails to make desired repairs/replacement during the defect liability period, within 15 days of issue of notice, the Purchaser can get repaired/replaced done from alternative sources at the cost of the Contractor.

Extension of Defect Liability Period a) If facilities supplied under a contract could not

be operated during defect liability period due to defects, the defect liability period of the facility shall be extended by period equivalent to such non-availability period.

b) Defective parts of the facilities repaired in defect liability period shall have an independent 12 months warranty from the date of completion of such repair/replacement.

5. Latent Defect Liability

From the end of defect liability period, the Contractor will continue to be liable for latent defects of the plant and equipment supplied by him for another period of 5 years.

6. Transfer of Ownership Ownership of goods to pass from Contractor to the Purchaser for :

a)For indigenous goods supplied from within the same State as a site is located ownership of transfer when the goods are brought to site.b)Ownership of indigenous stores in interstate transaction shall be transferred on sale in transit basis.c)Ownership of imported stores, for direct order shall be transferred on FOB basis.d)Ownership of imported goods (through Indian Contractor) shall be transferred on high sea sale basis.e)In EPC Contract, transfer of ownership to the Purchaser notwithstanding the Contractor shall continue to responsible for successful handing over of the facilities to the Purchaser.

7. Care of the Facilities From commencement of the work on the facilities at site till successful handing over to the Purchaser, the Contractor shall remain responsible for care and custody of the facilities.

In the event of any loss and/or damage of the facilities or the equipment, the Contractor at its own expenses repair the affected items.

The Contractor shall also be responsible for loss or damage to the facilities caused by him or his sub-contractor in the course of work carried under his defect liability obligation.

7. Care of the Facilities(…Contd) Above obligation notwithstanding, the Contractor shall not be liable for any loss or damage to the facilities at site for which he could not get any insurance from the market to cover his risk.

There are only two risk which falls under this category namely-War and Nuclear incident.

The Purchaser should bear these loss even before handing over of the facilities.

The Contractor is also not liable for losses, loss of use in design, data or specifications provided by the Purchaser.

8. Indemnity The Contractor to provide the following Indemnity to the Purchaser.1)Intellectual Property Rights (IPR Identification)2)Indemnity against physical loss or damage to the facilities before handing over to the Purchaser.3)Indemnity against latent defects for a period of 5 years starting from completion of defect liability period.4)Indemnity against non-compliance of statue.5)Indemnity against damage of FIM.6)Indemnity against third party life and property loss claims arising out of nuclear events at site.7)Indemnity against taxes and duties.

9. Limitation of Liability

The Contractor shall not liable for any indirect or consequential loss or damage, loss of use, loss of production, loss of profit or interest costs. The liability of the Contractor to the Purchaser shall not exceed the total contract price.

10. Insurance The Contractor to take at his own cost, the following insurances for an EPC package contract.

a)Transit insurance as per ICC Clause A with war and SRCC provisions.

b)Storage-Cum-Erection risk insurance policy.

Both the above insurance policies shall be taken at full replacement value of the plant and machinery.

c) Insurance for contractor’s personnel.

d) Third party liability insurance.

e) Automobile liability insurance.

Insurance claim Proceeds shall come to the purchaser fisstThe Purchaser shall disburse the amount to the Contractor for expenses incurred in respect of repair/re-installation of the damage facilities.

11. Force Majeure Force majeure shall mean any event which is beyond the control of the Contractor or the Purchaser, which substantially affects the performance of the contract.Eg:a) War, hostilities or warlike operations (whether a state of war be declared or not), invasion, act of foreign enemy and civil war,b) Rebellion, revolution, insurrection, mutiny, usurpation of civil or military government, civil commotion,c) Embargo, import restriction, confiscation, nationalization, mobilization, commandeering or requisition by or under the order of Central, State Government or Local Authority in India or any other act or failure to act, of any local, state or national government in India,d) Riot, state/region/country wide transporters strike,e) Earthquake, landslide, volcanic activity, fire, flood or inundation, tidal wave, typhoon or cyclone, hurricane, storm, lightning and pressure waves or other natural disaster,f) Nuclear event causing nuclear radiation, radioactive contamination.

11. Consequences of Force Majeure No delay or non-performance by either party caused by any event of force majeure shall :a)Constitute a default or breach of the contract canb)Give rise to any claiming for damages or additional expenses caused thereby. c)The contract period shall get extended to cover delay caused by force majeure without levy of liquidated damages.d)Any increase in taxes and duties is also payable in the case of such extensions due to force majeure.e)No price adjustment to be applied during such extensions due to force majeure.

12. Change in Facilities Both Purchaser and the Contractor have the right to propose a change in facilities during the performance of the contract provided such change falls in the general scope of facility and does not constitute unrelated work.

No change made necessary because of any default of the Contractor shall be deemed to be a change and such change shall not result in any adjustment of the contract price or time for completion.

12. Change in Facilities(…Contd)When a change is proposed either by the Purchaser or the Contractor, the Contractor shall prepare a ‘Request for change proposal’ which shall include among the others the following :a)Description of the change.b)Effect on the time for completion.c)Cost of change d)Effect on functional guarantees.e)Effect on any other provisions of the contract.

12. Change in Facilities(…Contd)The Purchaser and the Contractor shall mutually agree upon all related points of the change proposal. On such agreement Purchaser shall intimate to the Contractor whether or not to proceed with the change.

If the Purchaser and the Contractor can not reach agreement on the price for the change and/or equitable time for completion or any other matters related to such change proposal, Purchaser may still instruct the Contractor to proceed with the change.

The Contractor to proceed with the change as per such instruction by the Purchaser. However, all issues need to be settled within 90 days from the date of issue of instruction to the Contractor to proceed with the change, failing which matter can be referred to arbitration.

13. Pricing the Change ProposalFor EPC contracts in which detailed engineering and BOQ is given by the Purchaser any change in quantity will be regulated as follows.

a)Items for which rates are available in the purchase order, total additional quantity upto +25% of the original purchase order value ordered within CDD will be paid at purchase order rate plus price adjustment.

b)For additional quantity beyond +25% of the purchase order value, any quantity ordered beyond CDD and for other new items, will be paid at FOR site price + 15%.

c)Any deduction in purchase order quantity will be done at purchase order rate.

14. Time for ExtensionTime for completion shall be extended if the Contractor is delayed in the performance by reason of any of the following :-a) Any change in the facilities.b) Any occurrence of force majeure.c) Any suspension order given by the Purchaser.d) Any delay in approval of drawing.e) Any default of the contract by the Purchaser.f) Delays attributable to the Purchaser.g) Any delay in issuing Erection Completion Certificate.

15. Time OverrunIn the event of delay in completion and handing over of the facilities beyond CDD by the Contractor due to specific site related issues for which Purchaser is responsible, the Contractor shall be entitled to compensate for additional expenses for extended stay at site to the extent required for such reasons in addition to extension of time.

16. Suspension of WorkPurchaser may order the Contractor suspend the work by giving notice for the following reasons :a) On account of any default of the Contractor.b) For proper execution of the facilities or part thereof.c) For safety of the facilities or part thereof such notice should clearly specify :i)Which performance (work) to be suspended.ii)Effective date of the suspensioniii)Reasons thereof.

16. Suspension of Work(…Contd.)The Contractor shall be entitled to an extension of the time equal to the period of every such suspension plus 25% based on above reasons.

If suspension period exceeds 30 days, the Contractor shall also be entitled for compensation.

Contractor may demobilize resources if suspension period exceeds 30 days.

However, the Contractor is not entitled for extension/compensation, if any default of the Contractor.

17. Prolonged SuspensionIf suspension order given by the Purchaser, other than the reason of the Contractor’s default or breach of the contract and Contractor’s works get suspended for more than 90 days then the Contractor may give a notice to the Purchaser for resumption of works (within 28 days of receipt of notice).If the Purchaser fails to do so within such period, the Contractor may by a further notice to the purchase to delete such part or whole of the facilities, as termination of the contract.No claim for deletion portion of the work by the Contractor.

18. Resumption of Work

Once permitted, the Contractor and the Purchaser shall jointly examine the facilities, plant and material affected by the suspension.

19. Foreclosure of ContractAfter acceptance of the tender/during execution of work, the Purchaser shall decide to abandon or reduce the scope of work.The Purchaser or Engineer-In-Charge shall give notice to the Contractor for foreclosure of contract.Upon receipt of the notice, the Contractor shall :a)Cease all further work.b)Terminate all sub-contract.c)Stop all further purchasing and/or sub-contracting.d)Remove all Contractor’s equipment from the site.

19. Foreclosure of Contract(…Contd)In such cases, the Purchaser shall have the option to take over Contractor’s material or any part thereof.

In the event of foreclosure of the contract under GCC, the Purchaser shall pay to the Contractor. The full amount of contract rates, properly attributable to supplies completed and/or the part of the facilities executed by the Contractor as of the date of foreclosure.

20. Termination of Contract in full or Part

The Purchaser without prejudice to any other right may terminate the contract forthwith as a whole or only such item of work in default, in the following circumstances.a)The Contractor shall offer or agree to give to any person in the Purchaser’s service any gift or consideration of any kind as an inducement.b) The Contractor shall enter into contract with the Purchaser in connection with which commission has been paid or agreed to be paid.c) The Contractor shall obtain a contract with the Purchaser as a result of wrong tendering.

20. Termination of Contract in full or Part(…Contd)

d) Adopts or has engaged ‘fraudulent practice’.e) Adopts or has engaged in ‘coercive practice’.f) Being an individual or if a firm, any partner thereof, shall at any time be adjudged insolvent.g) Being a company, shall pass a resolution or the court shall make an order for the liquidation of its affair.h) Shall suffer an execution being levied on his goods.i) Attempt to assign, transfer or sub-contract the entire works or any portion thereof without the prior written approval of the Purchaser.


In the event of default by the Contractor, the Purchaser may without prejudice to any other right, give a notice to the Contractor in the following circumstances : If the Contractor –a) Has abandoned or repudiated the contract.b) Has without valid reason failed to commence work.c) Persistently fail to execute the contract.d) Refuse or is enable to provide sufficient material services etc.e) At any time makes default in proceeding with the works with due diligence.


f) Commits default in complying with any of the terms and conditions of the contract.

g) Fail to deliver the stores.

h) Fail to complete the facilities and hand over it.

21. Termination of Contract on Death

If the contractor is an individual or a proprietary concern and the individual or the proprietor dies or if the contractor is a partnership concern and one of the partners dies then unless the purchaser is satisfied that the legal representative of the contractor are capable, the purchaser shall be entitled to cancel the contract as to its incomplete part without the purchaser being in any way liable to pay any compensation to the estate, of the deceased contractor and/or surviving partners.

22. Settlement of Dispute

Settlement by mutual consultation

If any dispute arise between the purchase and the contractor in connection with the contract regarding its existence, validity or termination or execution at the facilities, the parties shall seek to resolve any such dispute or difference by mutual consultation.

In case parties fail to resolve such dispute or difference by all such mutual consultations then the either party may give a thirty(30) days notice to the other party conveying its intention to commence Arbitration.

23. Settlement of Dispute (…Contd)

Settlement by Arbitration

Any dispute in respect of which notice of intention to commence Arbitration has been given, shall be finally settled by arbitration.

Consequent to issue of notice of intention to commence Arbitration by either party, both the purchase and the contractor shall appoint one Arbitrator each. These two Arbitrators shall agree between themselves and shall appoint third Arbitrator. The issue in dispute shall then be referred to these Arbitrators. The decision either by consensus or by majority of these three Arbitrators shall be final and binding on both the parties.

23. Settlement of Dispute (…Contd)

Settlement by Arbitration(…Contd)

For contract awarded to a foreign contractor or to a consortium in which the Foreign contractor is the lead partner, Rules of Conciliation and Arbitration of the International Chamber at Commerce shall apply to Arbitration proceedings.

For contract awarded to public sector enterprise, all matters in dispute to be settled through arbitration shall be referred to the permanent Arbitration mechanism (PAM) of the Dept. of Public Enterprise, Govt. of India.

Contract management sys

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Transcript of Contract management sys