An agreement which is
entered into by a owner of a site with a contractor for construction of a
building is known as building contract agreement. Generally an owner of a site
look out for a reputed and reliable builder for construction of building over his
property and after finalizing one enters into an building contract agreements.
Building contract
agreements are defined as agreements between the contractor and a another
person called the owner or the employer for construction
of buildings and other structural work proposed to be constructed, which fall
within the category of ordinary contracts and are governed by the provisions of
Indian Contract Act including the basic rules as envisaged under the said Act
such as, competency of the parties to the contract, consent, existence of
consideration to the agreement and not against the public policy.
There are
two methods which are generally used by the owners and the contractors as
detailed below:
Contract entered after inviting tenders: In this method tenders are invited by the owner of the site for 3
or more contractors by advertising or issuing the tender. Thereafter the best
tender is choosen and the tender amount is accepted with other terms and
conditions. Acceptance by the owner of the property constitutes a valid
contract. The agreement should contain all the necessary and mandatory terms
and conditions, particulars of the work required to be done and the schedule of
quantities and rates in order to constitute a valid contract. This method of
agreement is generally followed by the Government, Local authorities,
Architects and other public corporations and trusts.
Contract by directly executing agreement: Under this method the agreement is directly entered into by the
contractor and the owner. They straight away negotiate and enter into a
construction agreement and averments pertaining to the tenders cannot be looked
into for evidence unless some ambiguity in the interpretation of recitals in
the agreement exists. This method is generally adopted by commercial firms or
individuals.
Format of the agreement: The
architect will also have a construction agreement which will be in the printed
form wherein blanks are filled in by hand or some provisions are altered by
hand, if necessary. While doing so it must be kept in mind that that there
should be no discrepancies between the written words or those in printed. In
case of any inconsistencies or discrepancies the written words will prevail
over the printed words as the the words filled in the blanks will express the
intention of the parties.
Appointment of an Architect: An
architect is immediately appointed who has to be duly qualified after the
search for the contractor is over or after the contractor is finalized. The mode
of entering into an agreement depends upon the architect and the contractor.
The architect prepares preliminary drawings and estimates and then prepares
working drawings and specifications and bills of quantities and other documents
relevant for the contract. In order to carry out the day to day supervision of
the work, a clerk of works or resident engineer is appointed and also to see
that the instructions of the Architect and structural engineer are complied
with by the contractor.
Types of Building Contracts:
Building
contracts are generally of four types as listed below
Lump sum contract: Under
this type of contract, a mutual negotiation is arrived in between the parties
whereby the contractor agrees to carry out the work for a fixed amount
irrespective of anything else. This method is not advisable as it may lead to a
lot of confusion.
Items rate contract: In this
type of contract work is divided into several items of work and the contractor
quotes price of each item including the remuneration that will be paid in
accordance with the work carried out at the rates agreed upon, which can be
assessed with the help of a qualified Architect or a Civil Engineer.
Percentage contract: In this
type of contract a percentage of amounts on the total actual cost of the
building is paid to the contractor as agreed earlier.
Cost plus percentage contract: In this
category, the contractor gets the actual cost of work as well as certain
percentage over and above the said cost which is accepted by the owner.
General conditions of a building contract
Apart
from the above, the Architect also has to decide on any dispute if arises
regarding the construction work and give his decision by issuing a certificate
to that effect. Further he also has to administer and keep an check on the
daily construction work.
Appointment of Sub-Contractor
A sub
contractor can be appointed by a contractor for carrying out either for the
whole work or part of the work, with or without the consent of the owner.
Privity of contract does not arise between the owner and the sub contractor in
cases where the consent of the owner is not obtained and the contractor alone
will be liable for all the acts done by the Sub-Contractor. Similarly the
Sub-Contractor does not derive any right to raise claim against the owner
pertaining to the construction contract. It is advisable to enter into a
construction agreement after complying with all the necessary formalities as
provided in the statute and the same must be reduced in writing to manifest the
specific duties and obligations vested on all the necessary parties as many construction
projects are left incomplete due to high construction cost and to lack of
co-ordination between the owner, contractor and the architect. It is very
important to incorporate all the terms and conditions of the contract clearly
to avoid unnecessary dispute and successful completion of the project.
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