1.

Conditions and what is meant by Force Majeure (Three clauses) and case: If I am the
owner and I frame the contract clause, then the benefit of doubt must be given to the
opposite party.

 Conditions of Contract:
o The "Conditions of Contract" are a fundamental part of any construction
contract.
o They lay out the rights and obligations of the parties involved (e.g.,
owner/employer, contractor, engineer).
o These conditions cover a wide range of aspects, from defining the roles and
responsibilities of each party to how the contract is administered, including
payments, variations, and termination.
 Force Majeure:
o Force majeure is a legal concept that excuses a party from fulfilling its
contractual obligations when events beyond their control prevent them from
doing so.
o A typical force majeure clause lists specific events, such as:
 Acts of God (e.g., floods, earthquakes)
 War or hostilities
 Government actions
 Strikes
 Epidemics
o The clause may also include a general statement to cover other unforeseen
events.
o Case Example:
 One document presents a case where a generator breakdown led to
losses for a contractor.
 The client argued this was a force majeure event, but the arbitrator
disagreed.
 The arbitrator reasoned that the client could have taken steps to prevent
the loss by providing a standby generator.
 This example illustrates that the interpretation of a force majeure
clause is highly dependent on the specific circumstances and the
wording of the clause.
 Three Clauses:
o The documents don't provide three distinct force majeure clauses. Instead,
they discuss the elements that a force majeure clause should contain (events
beyond control, etc.) and how it is interpreted.
 Case: Benefit of Doubt:
o While there's no explicit rule that the "benefit of the doubt" must always go to
the opposite party when the owner frames the clause, contract interpretation
principles are important.
o Clauses must be clear and unambiguous. If a clause is poorly written and leads
to multiple reasonable interpretations, a court or arbitrator may interpret it
against the party that drafted it (the owner, in this case). This is a general
principle known as "contra proferentem."

Different steps of Contract Management

Contract management involves overseeing the contract lifecycle. Key steps and aspects
mentioned in the documents include:

 Contract Formation:
o The construction contract formalizes the relationship between the
owner/employer and the general contractor.
o This involves defining the scope of work, responsibilities, processes, payment
terms, and completion dates.
o Contracts are prepared with legal input, reviewed, approved, and signed by the
parties.
 Contract Administration:
o Contract clauses address important issues that arise during the project.
o The FIDIC Red Book, for example, outlines procedures for:
 Testing completed works
 Taking over the works (provisional acceptance, punch lists, final
acceptance)
 Defects liability
 Contract Closeout:
o This involves final acceptance of the work, issuance of performance
certificates, and clearance of the site.
o FIDIC clauses 11.9 and 11.11 are relevant to this stage.
 Dispute Resolution:

Contracts often include mechanisms for resolving disputes, such as arbitration.

Different steps of project management

 The steps in contract management are:

o Identifying the Type of Contract
o Preparation of Contract Document
o Entering into the Contract
o Implementing & Managing the Contract
o Contract Closure
 Identifying the Type of Contract:
o Various types include PPP/EPC/Item Rate.
o The selection depends on factors like the client’s objectives, organization's
capabilities, timeframe, and risk appetite.
o For Item Rate contracts, the package size is important.
o More preparation is required by the Client for Item Rate and Lump Sum
Contracts.
 Preparation of Contract Document:
o This requires considerable expertise.
o Main components include Scope of Work, Conditions of Contract,
Specifications, Time Schedule, Bill of Quantities, and Drawings.
o Model Contract Documents exist, with FIDIC being an ideal format for
Conditions of Contract.
o Key issues include workable time periods, equitable risk allocation, fair
escalation formulas, and clear identification of data.
o Client responsibilities include obtaining clearances, land acquisition,
resettlement, and providing timely inputs.
  Entering into the Contract:
o This involves setting out bidding procedures, prequalification of bidders, pre-
bid meetings, fair negotiations, and contractor selection.
o Selection should consider capabilities and technical competence, and price.
o The contract document should provide sufficient clear data and an equitable
dispute resolution mechanism.
 Implementing & Managing the Contract:
o This includes contract administration, monitoring systems, reviews, and
claims management.
o A construction project has specific objectives, completion dates, and resource
constraints.
o A contract involves at least two parties, and contract law enforces promises.
o Contract managers should make speedy and conscious decisions considering
time and cost.
 Contract Closure:
o This is the final step, but the documents do not provide details on the closure
process.

What are the major contract documents

 The main components of a contract document include:

o Scope of Work
o Conditions of Contract (General & Special)
o Specifications
o Time Schedule
o Bill of Quantities
o Drawings
 A bidding document consists of:
o Invitation for bid
o Instruction to bidders - Contractors Bid
o Letter of Acceptance
o Letter to proceed with the work
o Agreement form
o General Conditions of Contract
o Special Conditions of contract /Conditions of Particular Applications(COPA)
o Contract Data
o Specifications - Specifications for building - Specifications for electrical
works - Additional Conditions of contract - List of approved Makes
o Drawings - List of Drawings Bills of quantities - Bills of quantities for
building works - Bills of quantities for electrical works
o Form of Schedules - Bid Security (Bank guarantee) - Performance Bank
Guarantee - Bank Guarantee for Advance PaymentMeasurement systems
Addendum(Corrigendum)

Red Flag Clauses for Project Management (7 clauses - variation, delay, etc.)

The "Red Flag Clauses for Project Management" presentation highlights areas that can lead
to disputes and require careful attention:

 Time Extension and Delay:

 o Clauses dealing with delays and extensions of time are critical.
o Contracts should clearly define how delays are assessed, what constitutes an
excusable delay, and how time extensions are granted.
 Suspension of Work:
o The owner may have the right to suspend work, but the conditions for
suspension must be clearly defined.
o The contractor's rights and entitlements during suspension (e.g., for cost
reimbursement) must also be addressed.
 Variations:
o Variations (changes to the work) are a common source of disputes.
o Clauses should establish procedures for:
 Ordering variations
 Valuing variations
 Adjusting the contract price and time
o Cases VI and VII in the "Red Flag Clauses for Finance Management"
presentation illustrate disputes arising from variation clauses.
 Payment Related Clauses:
o These clauses define how and when the contractor gets paid.
o Key aspects include:
 Payment schedules
 Milestone payments
 Retention money
 Performance guarantees
 Inspection:
o Clauses covering inspection of the works are important.
o FIDIC clause 7.3 (2017 edition) details inspection procedures, including the
rights and obligations of both parties.
 Performance Certificate:
o FIDIC clause 11.9 deals with the issuance of the performance certificate,
marking a significant stage in contract completion.
 Clearance of Site:
o FIDIC clause 11.11 addresses the contractor’s responsibility for clearing the
site after completion.
 The documents highlight several "red flag" areas in contract clauses, particularly
those related to finance and project management:
o Variation Clause:
 Clauses dealing with changes in the quantity of work can be
problematic.
 CPWD Clause 12-A, for instance, grants the Engineer-in-charge the
authority to change work quantities, which can lead to disputes over
rates and payment.
 The documents provide a case example where a contractor claimed
compensation for losses due to non-payment of revised rates for
quantities exceeding 12.5% of the Bill of Quantities (BOQ).
o Payment Related Clauses:
 Clauses related to Performance Guarantee (PG) are crucial. These
clauses should clearly specify the time limit and mode of payment.
 They should also outline the actions to be taken if the contractor fails
to comply with payment provisions and address whether the deposit is
interest-bearing and the conditions for its refund.
 o Time Extension and Delay:
 Clauses concerning time extension and project delays are significant.
 FIDIC Clause 11.9, for example, deals with the issuance of a
performance certificate.
o Clearance of Site:
 FIDIC Clause 11.11 addresses the contractor’s responsibility to clear
the site and remove materials after completion.
o Suspension of Work:
 Contract conditions often allow the owner to suspend work, which can
impact project timelines and costs.
o Inspection:
 FIDIC Clause 7.3 (2017 edition) details inspection rights, including the
activities the employer's personnel may conduct on-site and during
material procurement.
o Contractor’s risk and cost:
 FIDIC clause 7.3 mentions that if contractor fails to give notice, the
engineer requires the work to be uncovered, then the work is to be
reinstated and made good at the contractor’s “risk and cost”.

How the Project is to be closed

The documents, particularly those referencing FIDIC, outline project closure:

 Tests on Completion:
o The FIDIC Red Book emphasizes testing to ensure the works meet the
contract requirements.
o This involves the contractor carrying out tests, witnessed by the engineer.
 Taking Over of the Works:
o This is a multi-stage process in FIDIC.
 Provisional Acceptance: The employer may take partial possession.
 Punch List: The engineer identifies remaining defects.
 Final Acceptance: The employer takes full possession after defects
are fixed.

 Performance Certificate:
o FIDIC clause 11.9 requires the engineer to issue a performance certificate to
the contractor after the defects notification period expires.
 Clearance of Site:
o FIDIC clause 11.11 mandates that the contractor clear the site, removing
equipment and materials.

ADRs mechanisms

 ADR stands for Alternative Dispute Resolution. It refers to methods of resolving

disputes outside of traditional litigation.
 The documents mention several ADR mechanisms:
o Arbitration: A formal process where a neutral third party (arbitrator) makes a
binding decision.
 o Mediation and Conciliation: Processes where a neutral third party helps the
parties negotiate a settlement.
o Dispute Review Boards: These are often used in large construction projects
to provide ongoing dispute avoidance and resolution advice.
 The Arbitration Council of India (ACI) has been set up to promote ADR in India.
o The documents highlight that Alternative Dispute Resolution (ADR) methods
are becoming increasingly popular for resolving construction disputes.
o The cheapest and most preferred method is amicable settlement through direct
negotiations.
o When direct negotiations fail, conciliation (involvement of a third party) can
be helpful.
o If ADR methods are unsuccessful, arbitration or litigation in a court of law
may be necessary.

Major contents of the arbitration agreement

 An arbitration agreement is a contract where parties agree to resolve disputes through

arbitration.
 According to the documents, it must include that:
o The arbitral tribunal will determine the parties' substantive rights.
o The tribunal will do so impartially and judicially.
o The agreement is legally enforceable.
o The tribunal will decide on a specific, already-defined dispute.
 An arbitration agreement is a written agreement to submit present or future
differences to arbitration.
 It can be contained in:
o A document signed by the parties
o An exchange of letters, telex, telegrams or other means of telecommunication
which provide a record of the agreement

An exchange of statements of claim and defense in which the existence of the agreement is
alleged by one party and not denied by the other.

When the award declared by the arbitrator can be set aside?

 The documents state that a court may have to interfere, or the parties may approach
the court to set aside the award.

However, the specific grounds for setting aside an award are not elaborated upon in these
documents

Duties and responsibilities of the arbitrator

The documents detail numerous duties of an arbitrator:

 Preliminary Actions:
o Check their appointment and qualifications.
o Hold a preliminary meeting or request written statements from the parties.
o Disclose any potential conflicts of interest.
 Conduct of Proceedings:
 o Act impartially.
o Apply principles of natural justice (fairness).
o Understand legal procedures and evidence.
o Ensure each party has the opportunity to present their case.
o Not communicate with one party in the absence of the other.
o Not delegate their decision-making authority.
 Scope and Timing:
o Not exceed the scope of the arbitration agreement.
o Adhere to the agreed-upon schedule for the arbitration.
 Award:
o The arbitrator's award must show their reasoning and consideration of
evidence.
o The award must be written, signed, and contain specific information (reasons,
dates, amounts, etc.).
 Arbitrators have several important duties and responsibilities:
o Integrity and Impartiality: Arbitrators must be persons of high integrity and
complete impartiality. They are required to provide a certificate of
impartiality.
o Natural Justice and Practical Approach: They should believe in applying
principles of natural justice and have a practical approach.
o Technical and Legal Knowledge: Arbitrators should be technically proficient
with domain knowledge and understand legal procedures.
o Evidence and Compliance: They must be able to understand the implications
of a party's failure to comply with evidence requirements.
o Award Content: The arbitral award should demonstrate the arbitrator's
thought process, including discussions and consideration of facts and
evidence. While a detailed judgment isn't required, the award should indicate
the trend of thought to minimize errors and arbitrariness.
o Award Attributes: The award must be written and signed, and it should
include the reasons for the award, the date and place of arbitration, the amount
of money awarded (if any), the parties involved, and any other necessary
information.
o Preliminary Meeting: Arbitrators may call for a preliminary meeting to
understand the issues and disputes.

Arbitration Council of India (ACI): The ACI also plays a role in maintaining a depository
of arbitral awards.

Interpretation of clauses

 The documents highlight that interpreting contract clauses is crucial in contract

management and dispute resolution.
 Construction contracts often give architects or engineers the authority to make initial
interpretations of drawings and specifications.
 These interpretations can have significant impact, as they may be considered final and
binding.
 The example of the generator breakdown and the force majeure clause demonstrates
how clause interpretation affects the outcome of a dispute.

Sources and related content