2.Contract Basics and Contract Documents

8/3/2019 2.Contract Basics and Contract Documents

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.

ontract

Contentsofthechapter

2.1Principlesofcontract

2.2Types

of

construction

contract

2.3Contractdocuments

2.4ContractManagement

. .

2.4.2Claimsanddisputemanagement


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. Construction contact basically follow the basic

contact

In the area of construction activities it defines the

relationship of the parties involved with regards to

their obligations, responsibilities and privileges in the

work and it is part of the common law


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Mutualagreement

Legalobjectives

Legalcapacityoftheparties


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Musthave

evidence

that

there

was

ameeting

of

Offer clear&unambiguous

Acceptanceclearly

accepting

deal

offered


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What is a le al ob ective ?

The thing being contracted for must be legal in andof itself

Most construction contracts are legal

Assumes correct party issues the contract ut some contract mo cat ons may e ega

thus, unenforceable

Modifications beyond scope of the partys authority

Cardinal changes


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Insimplest

form,

parties

must

be

Mentallycompetent

Legalauthoritytoissuesandexecutecontracts

Mayhavetobeproperlylicensedtohavelegalcapacity


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In exchange for the offer to perform, the recipient

Money (most typical)

Without consideration a contract is not valid &

unenforceable


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Generally,no

circumstance

inwrittenformtobeenforceable


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Identityof

parties

Scopeofthework

r cean paymen erms

Commercialtermsandconditions

ro ect

execut on

p ans


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Provisionof

Ethiopian

law

of

contract(thecivilcode)

According to George Krzeczunowicz, the

summarized as,

orma ons o con rac

Effects of contract


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Ever contractisana reement butnotever

agreementis

acontract

Theintroductoryarticlesofthecivilcodeenumeratestherequisitesforavalidcontract,

Definitionofcontract AccordingtotheEthiopianlawofcontract(Article

1675ofthecivilcode)

morepersonsasbetweenthemselves,create,vary,orextinguishobligationofproprietarynature


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,

1.The parties are capable of contracting and

give t eir consent sustaina e at aw

2.The object of the contract is sufficientlydefined and is possible & lawful

.

prescribed by law if any.


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1.Performance

.

3.Non

performance

of

contract


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The due effects of a contract whether lain or

ascertained by interpretation under are fulfilled byperformance

following

Whoshall

pay

(Art

1740)

Towhomheshallpay(Art174144)

Objectofpayment(Art174554)

y

Timeofpayment(Art174554)

Transferofrisk Art174554)


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The due effects of a contract whether plain orascertained by interpretation under are fulfilled byperformance, unless varied by the principles art1731(1),which provides that lawfully formed bind theparties

Nonperformance ,

party may, according to circumstances request theenforcement of the contract or on the contrary

contract

He may also require that damage caused him by the


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2.2Typesofconstructioncontract


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In a unit price contract the owner and the contractoragree as to the price that will be charged per unit for the

major elements of the project. The owner/designer will typically provide estimated quantities

for the project, then ask contractors to "bid" the job bycalculating unit prices for these items and calculating a final

price , ,included within the unit prices that are provided

The owner then compares the final prices and selects the low

that in many projects (heavy engineering projects being aperfect example), it is difficult to quantify accurately the worknecessary.


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Unit Price contract: Example


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In a cost lus contract arran ement also called a

reimbursable or a time and materials contract, thecontractor works on the project and is reimbursed by the

owner or ts costs, p us s pa e t er an a t ona

agreedupon fee or is paid a fee that is a percentage of

It is important for the owner to spell out clearly in

advance what costs will be reimbursed and which costs

are to be covered by the fee. By using this type of contract the contractor can start

wor w t out a c ear y e ne pro ect scope, s nce a

costs will be reimbursed and a profit guaranteed


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.

2. Cost+fixed

cost

3. Cost+ ixe ee+pro its aring


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Cost Plus Fee Type Combinations


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2.3Contractdocuments

ConstructionDocuments

Includebothbidre uirementsandthecontractdocuments

Bidding

requirements

NoticetoBidders

ProposalForm

ContractDocuments

ConditionsoftheContract

Specifications(Divisions01through16)

Drawings

Addenda ChangeOrders

Agreement


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NOTICETOBIDDERS/INVITATIONTO

BID

that design documents are available and job isadvertised to contractors who documents who are

are capable of completing the work at reasonable

price.

The purposes of an Invitation to Bid are to attract

bidders in sufficient numbers to ensure fair

parties who might be interested in submitting


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Itshouldconsistofthefollowingelements:

1. Project Title.

State the name of the project, its location,.

2. Identification of Principals.

State the name and address of the architect orssu ng agency, toget er w t t e ate oissue.

3. Time and Place for Receipt of Bids.

State the time and place where bids will bereceived and whether they will be publiclyo ened or not.


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4.ProjectDescription.Provide a brief but adequate description of the project, and any

unusual features so that the bidder will be the be in a in position todetermine whether he or she has the financial and technical ability toundertake the construction of the project.

5.TypeofContract.

State whether bids are being solicited for a single or

segregated contract and on what basis.7.BidSecurity.

State whether a Bid Bond or other type of bid guarantee will berequired to ensure the execution of the contract.

8.

Guarantee

Bonds.

State whether Performance Bonds and Labor and MaterialsPayment Bonds will be required to ensure the completion of

.


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The Proposal Form establish the intent of thecontractor to enter into a contract to complete thework specified at the cost indicated in theproposal.

on proposal, an acceptance of offers results and acontractual relationship is established.

Award of notice is communicated to thecontractors proposal with a notice to proceed.


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Contract documents ra hic and written describe

the proposed construction (the Work) that resultsfrom performing services, furnishing labor, and

equipment into the construction,

A. Contract FormsB.Conditions of the Contract

C. Specifications (Divisions 01 through 16)

D. DrawingsE. Addenda


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A. CONTRACTFORMS

Agreement

PerformanceBond

PaymentBond

Certificates

The written document signed by the owner and thecontractor that is the legal instrument binding the partiesto t e contract.

Defines the relationship and obligations between ownerand contractor


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PERFORMANCE BOND

Provides a guarantee that if the contractor defaults of fails

to perform, the surety will either complete the contract in

the penal amount for such completion

PAYMENT BOND

rov e a guarantee t at su contractor, mater a supp ers,and others providing labor, material goods, and services tothe project will be paid

CERTIFICATE Includes certificates of insurance, certificates of

com liance with a licable laws and re ulations


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CONTRACTDOCUMENTS(Cont)

B.CONDITIONSOFCONTRACT

thepartiesinvolvedintheconstructionproject.

2types:GeneralandSupplementaryconditions

GENERALCONDITIONSGeneral clauses that establish how the project is to be

.

Contain basic expressions of rights, duties, and limitations

of the entities involved.

Usually in the form of published standard documents thatinclude principles common to most construction

. . ,


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SUPPLEMENTARY CONDITIONS

Modify or supplement general conditions as need to

provide for requirements specific to a project. They are not

s an ar ze ocumen s an are prepare or spec c

project needs.


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Define the qualitative requirements for products,materials, and workmanship upon which the contract is

based and it is organized into 16

Dictionary Definition: "Specifications are written or Printed

,contract and describing qualities of material and mode of

construction, and also giving dimensions and other

n orma on no s own n e raw ngs.


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D) ADDENDA

Written or graphic documents issued to clarify, revise, add

to, or delete information in the original bidding documents.

addenda to be issued anytime prior to execution of thecontract.

E) CHANGE ORDER:

After the construction agreement has been signed,

to be done are accomplished by change orders.These can be issued any time during the contract period


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