WELCOME TO HRTC

LECTURES ON FIDIC BASED CONTRACT

WHAT FIDIC STANDS FOR?

 FEDERATION INTERNATIONALE DES

INGENIERS-CONSEILS

 HAVING HEAD OFFICES IN ‘GENEVA’

SWITZERLAND
 FIDIC RAINBOW FORMS OF
CONDITIONS FOR VARIOUS CONTRACT
What is the FIDIC family of contracts?
The FIDIC 'Rainbow Suite' of New Contracts was published in 1999
and includes:
 the New Red Book: Conditions of Contract for Construction for
Building and Engineering Works Designed by the Employer;
1987/1992 version was called Red Book popularly called FIDIC-4
whose General Conditions are made part of Standard Form of
Bidding Documents published by PEC
 the Yellow Book: Conditions of Contract for Plant and
Design-Build; the 1987/1999 Yellow Book was the
conditions of contract for Electrical & Mechanical Works.
 the Silver Book: Conditions of Contract for EPC/Turnkey
Projects;
 the Green Book: Conditions of Short Form of Contract

 In 1996 FIDIC -4 the position of Adjudicator over and above the

Engineer was added.
FIDIC RAINBOW FORMS OF CONDITIONS FOR
VARIOUS CONTRACTS

These 'new' forms were first editions and designed to be user

friendly, with a standardized approach and a reduction in the
General conditions from over 70 to 20 clauses.
 Additional forms in use since 1999 include:
 the Blue Book: Contract for Dredging and Reclamation
Works;
 MDB/FIDIC Contract: FIDIC conditions incorporated in
the standard bidding documents of multilateral development
banks;
 the White Book: Client/Consultant Model Services
Agreement;
 the Gold Book: FIDIC Design, Build and Operate Projects.
Brief Introduction of Proposed Talk

EXCHANGE OF EXPERIENCE & STUDY

IN FIDIC FOR CIVIL CONSTRUCTION
WHY THE DEBATE IS CONFINED TO
FIDIC-4 CONDITIONS OF CONTRACT?

 General Conditions of FIDIC Conditions of

Contract for Works of Civil Engineering
Construction, 4th Edition 1987 reprinted 1992
has been made the base document in PEC
published ‘Standard Form of Bidding
Documents (Civil Works)’ – June 2007 which
is, by and large, used in local contracts not
funded by Foreign Banks.
SPEAKER’S INTRODUCTION-I
Engineer Sajid A. Qureshi
Adovcate High Court

A. Holds postgraduate degrees in Engineering;

Economics; Law; Political Science; English; Urdue
& Diploma in MEM from USA

B. Is author of Books on (1) Contract Law (2) Business

Laws (3) Contractual Scheme of FIDIC (4)
Arbitration & Arbitral Award (5) Arbitration Manual
(for Guidance of MES Officers) (6) Basic Concepts
of Construction Claims (7) Construction Contracts
Management)
 SPEAKER’S INTRODUCTION-II
C. Advisor on Construction Contract & Claims to
(1) Ghazi -Barotha Hydropower Project with
Impregilo (2) Chasma Hydropower Project with
Hyundai (3) Mangla Dam Raising Project with
CWE (4) Lowari Rail Tunnel Project with
Sambu-JV (5) Telecom Tower & Tele-House
Project with PTET (6) Golen Gol Hydropower
Project Chitral (7) Reconstruction of AJK
University with Sambu-Sarco JV (8) Optical
Fiber Project with Telecom Australia (9) M-4
Section I (Faisalabad - Gojra) with CWE and a
dozen other contractors including EMAAR-DHA
& HQ FWO
 SPEAKER’S INTRODUCTION-III

D. Field of Professional Services: Construction

Contracts; Construction Claims; Arbitration on
Construction Disputes (both local as well as
Institutional); Court Matters on Business
disputes
STARTING SESSION QUESTION – ANSWERS

 FOR 15 MINUTES PARTICIPANTS SHALL

QUESTION THE SPEAKER SO AS TO
ENABLE HIM IN ASSESSING THE LEVEL AT
WHICH THE SUBJECT SHOULD BE
ADDRESSED WITH THE SOLE AIM TO
MAKE THE TALKS COMPREHENSIBLE FOR
ALL HAVING WIDE RANGE OF
EXPERIENCE IN UNDERSTANDING THE
USE OF FIDIC CONTRACTS & THEIR
APPLICATION ON DIFFERENT ROJECTS
CONDITIONS OF CONTRACT

 GENERAL CONDITIONS OF CONTRACT

(GCC)
 PARTICULAR CONDITIONS OF CONTRACT
(PCC)
 SPECIAL CONDITIONS OF CONTRACT
(SCC)
 COMPOSITE CONDITIONS OF CONTRACT
(COC)
CLAUSE 5.2 COC – First portion
 5.2 Priority of Contract Documents
The several documents forming the Contract are to be taken as mutually
explanatory of one another, but in case of ambiguities or discrepancies the
same shall be explained and adjusted by the Engineer who shall thereupon
issue to the Contractor instructions thereon and in such event, unless
otherwise provided in the Contract, the priority of the documents forming
the Contract shall be as follows:
(1) The Contract Agreement (if completed);
(2) The Letter of Acceptance;
(3) The Tender;
(4) Part II of these Conditions;
(5) Part I of these Conditions; and
(6) Any other document forming part of the Contract.
CLAUSE 5.2 COC – Second portion
(l) The Contract Agreement (if completed)
(2) The Letter of Acceptance: •
(3) The completed Form of Bid,
(4) Special Stipulations (Appendix-A to Bid)
(5) The Particular Conditions of Contract Part II
(6) The General Conditions Part I;
(7) The priced Bill of Quantities (Appendix-D to Bid,
(8) The completed Appendices to Bid (B, C, E to L)
(9) The Drawings
(10) The Specifications; and
(11) (any other).
In case of discrepancies between drawings, those of larger scale
shall govern unless they are superseded by a drawing of later date
regardless of scale. All Drawings and Specifications shall be
interpreted in conformity with the Contract and these Conditions.
Addendum, if any, shall be deemed to have been incorporated at the
appropriate places in the documents forming the Contract.
 CLAUSE 10.1 COC
10.1 Performance Security

If the Contract requires the Contractor to obtain security for his proper performance of the Contract, he shall obtain and provide to the
Employer such security within 28 days after the receipt of the Letter of Acceptance, in the sum stated in the Appendix to Tender. When
providing such security to the Employer, the Contractor shall notify the Engineer of so doing. Such security shall be in the form annexed
to these Conditions or in such other form as may be agreed between the Employer and the Contractor. The institution providing such
security shall be subject to the approval of the Employer. The cost of complying with the requirements of this clause shall be borne by
the Contractor, unless the Contract otherwise provides.

The Contractor shall provide Performance Security to the Employer in the

prescribed form. The said Security shall be furnished or caused to be furnished by
the Contractor within 28 days after the receipt of the Letter of
Acceptance. The Performance Security shall be of an amount
equal to 10% of the Contract Price stated in the Letter of
Acceptance. Such Security shall, at the option of the
bidder, be in the form of either (a) bank guarantee from
any Scheduled Bank in Pakistan or (b) bank guarantee
from a bank located outside Pakistan duly counter-
guaranteed by a Scheduled Bank in Pakistan or an
insurance company having at least AA rating from
PACRA/JCR.
The cost of complying with requirements of this Sub-Clause shall be borne by the Contractor.
 CLAUSE 12.2 GCC
12.2 Not Foreseeable Obstructions or Conditions

If, however, during the execution of the Works the Contractor encounters physical
obstructions or physical conditions, other than climatic conditions on the Site, which
obstructions or conditions were, in his opinion, not foreseeable by an experienced
contractor, the Contractor shall forthwith give notice thereof to the Engineer, with a copy
to the Employer. On receipt of such notice, the Engineer shall, if in his opinion such
obstructions or conditions could not have been reasonably foreseen by an experienced
contractor, after due consultation with the Employer and the Contractor, determine:

(a) any extension of time to which the Contractor is entitled under Clause 44, and

(b) the amount of any costs which may have been incurred by the Contractor by reason of
such obstructions or conditions having been encountered, which shall be added to the
Contract Price,

and shall notify the Contractor accordingly, with a copy to the Employer. Such
determination shall take account of any instruction which the Engineer may issue to the
Contractor in connection therewith, and any proper and reasonable measures acceptable
to the Engineer which the Contractor may take in the absence of specific instructions from
the Engineers.
 CLAUSE 30.2 GCC
 30.2 Transport of Contractor's Equipment or
Temporary Works

 Save insofar as the Contract otherwise provides, the

Contractor shall be responsible for and shall pay the cost of
strengthening any bridges or altering or improving any road
communicating with or on the routes to the Site to facilitate
the movement of Contractor's Equipment or Temporary
Works and the Contractor shall indemnify and keep
indemnified the Employer against all claims for
damage to any such road or bridge caused by such
movement, including such claims as may be made
directly against the Employer, and shall negotiate
and pay all claims arising solely out of such damage.
 CLAUSE 30.3 GCC
 30.3 Transport of Materials or Plant

 If, notwithstanding Sub-Clause 30.1, any damage occurs to any bridge or road
communicating with or on the routes to the Site arising from the transport of materials
or Plant, the Contractor shall notify the Engineer with a copy to the Employer, as soon
as he becomes aware of such damage or as soon as he receives any claim from the
authority entitled to make such claim. Where under any law or regulation the haulier of
such materials or Plant is required to indemnify the road authority against damage the
Employer shall not be liable for any costs, charges or expenses in respect thereof or in
relation thereto. In other cases the Employer shall negotiate the settlement of
and pay all sums due in respect of such claim and shall indemnify the
Contractor in respect thereof and in respect of all claims, proceedings,
damages, costs, charges and expenses in relation thereto. Provided that if
and so far as any such claim or part thereof is, in the opinion of the
Engineer, due to any failure on the part of the Contractor to observe and
perform his obligations under Sub-Clause 30.1, then the amount, determined by
the Engineer, after due consultation with the Employer and the Contractor, to be due to
such failure shall be recoverable from the Contractor by the Employer and may be
deducted by the Employer from any monies due or to become due to the Contractor and
the Engineer shall notify the Contractor accordingly, with a copy to the Employer.
Provided also that the Employer shall notify the Contractor whenever a settlement is to
be negotiated and, where any amount may be due from the Contractor, the Employer
shall consult with the Contractor before such settlement is agreed.
 CLAUSE 30.1 GCC
30.1 Avoidance of Damage to Roads

 The Contractor shall use every reasonable means to

prevent any of the roads or bridges communicating with
or on the routes to the Site from being damaged or
injured by any traffic of the Contractor or any of his
Subcontractors and, in particular shall select routes,
choose and use vehicles and restrict and distribute loads
so that any such extraordinary traffic as will inevitably
arise from the moving of materials, Plant, Contractor's
Equipment or Temporary Works from and to the Site
shall be limited, as far as reasonably possible, and so
that no unnecessary damage or injury may be
occasioned to such roads and bridges.
END OF PRESENT DISCUSSION

THANK YOU
 Introduction to Contracts

In order to avoid future conflicts it is necessary

that the contract prescribes:
 the respective obligations of contracting parties in
clear terms, and,
 specifies as to when, or the time period within
which, the obligations undertaken in the contract are
to be performed.
 the events and circumstances whose risk of
occurrence is allocated to one party or the other.
 the mechanism to resolve the controversies/
disputes connected with or arising from the Contract
.
A well-drafted contract states:
 What each party shall do (duty)?
 When the party shall do its contracted duty?
 What if the party fails to do its duty at the prescribed
time (breach)?
 Within what time period the entire contract shall be
completed?
 Who would take the risk of the specified unforeseen
event or circumstances (causation)?
 How and to what extent would the party resultantly
suffering from such unpredictable occurrence be
compensated (claim/damages)?
 How would the party proceed to get compensation?
Mobilization & Performance Schedule

In view of his contractual duties/

obligations and the prescribed
completion period the contractor
mobilizes his resources and
prepares his performance
schedule to meet the completion
deadline so fixed.
Wishful Scenario
If every thing goes well in
accordance with what had been
foreseen by the parties at the
time of making the contract then
the contractor usually succeeds in
completing the contract in the
scheduled time.
Track record of construction industry

 For completing any project on time is not so

good.
 Usually public sector construction projects
overrun their completion schedule by more than
40 percent and some of them overrun their
original time targets by more than 80 percent.
 Delay in the timely completion of construction
projects is the major reason for contractual
disputes and claims.
 Of course, there are other causes of claims also.
Events Intervening Performance

 Some events and occurrences may

intervene during the performance which
do not allow the contractor to complete
his performance within the given
completion period.

 His performance is impeded/hampered

not necessarily due to his own default.
When Events Adversely Affect
Performance

Events within the contractor’s control

or beyond his control may adversely
affect his performance for which the
contract may or may not compensate
the contractor for loss of time or/and
extra costs incurred during the
impeding occurrences.
 Slow Progress - Clause 46.1

A good ‘Contract Manager’ develops

the necessary insight to identify the
cause that leads to slow progress or
disruption of an on-going contractual
activity and then find out as to
whether or not the said cause leads to
a claim in his favour under the
provisions of the contract
Compensatory Provisions

Provisions of the contract may allow

compensation to the contractor if he
himself has not caused the impeding
event and the other party
(Employer/Client/ Owner) has
undertaken the risk of such
happening upon him under the terms
of the contract.
 HOW TO READ THE CONDITIONS
OF CONTRACT

 ALWAYS READ IN REVERSE STARTING

WITH PCC PART II B, THEN PCC PART II
A; AND THEREAFTER GCC. PREPARE A
COMPOSITE CLAUSE CONSISTING OF
GCC AS MODIFIED BY PCC BY ANY
DELETION OR INSERTION DICTATED BY
PCC. COMPOSITE CLAUSE IS REFERRED
TO AS COC (Conditions of Contract)
COMPOSITE CLAUSE 5.2 CALLED 5.2 COC

 5.2 Priority of Contract Documents



 The several documents forming the Contract are to be taken as mutually explanatory of one another, but in case of ambiguities or discrepancies the same shall be explained and adjusted by the
Engineer who shall thereupon issue to the Contractor instructions thereon and in such event, unless otherwise provided in the Contract, the priority of the documents forming the Contract shall be
as follows:


 (1) The Contract Agreement (if completed);



 (2) The Letter of Acceptance;



 (3) The Tender;



 (4) Part II of these Conditions;



 (5) Part I of these Conditions; and



 (6) Any other document forming part of the Contract.

 ( l)The Contract Agreement (if completed)
 (2) The Letter of Acceptance: s •
 (3) The completed Form of Bid,
 (4) Special Stipulations (Appendix-A to Bid)
 (5) The Particular Conditions of Contract Part II
 (6) The General Conditions Part I;
 (7) The priced Bill of Quantities (Appendix-D to Bid,
 (8) The completed Appendices to Bid (B, C, E to L)
 (9) The Drawings
 (10) The Specifications; and
 (11) (any other).
 In case of discrepancies between drawings, those of larger scale shall govern unless they are superseded by a drawing of later date regardless of scale. All Drawings and Specifications shall be
interpreted in conformity with the Contract and these Conditions. Addendum, if any, shall be deemed to have been incorporated at the appropriate places in the documents forming the Contract.
WILL IT HELP A CONTRACT MANAGER
TO KNOW THE RUDIMENTARY LAW?

 IT DEFINITELY HELPS HIM TO PERFORM

HIS DUTIES DILIGENTLY. SO WITH THE
CLAUSE SELECTED FOR CASE STUDY
IDENTIFIED ABOVE WITH MAKE HIM
WISER THAN BEFORE.
What is a Claim?

Demand for such compensations in

terms of time and money is called
‘Claim’. Successful management of
claims gives an edge to the contractor
because through such claims he can
make good the loss of time and
money occasioned by the claim
events.
Risk Allocation

The main objective of any contract is

to allocate risks between the
contracting parties. Risks of likely
events and occurrences affecting the
performance of contract are allocated
between the contractor and the
Employer/Client through various
provisions of the contract.
Primary Source of Claim
Contractual Scheme of Risk Allocation

Claims may not end up as

disputes if the parties clearly
understand the risk allocation
established by their contract or
its governing law.
SITE INSPECTION – CLAUSE 11.1

 Inspection of Site to discover:

 The form and nature of Site, including sub-
surface conditions;
 Hydrological Conditions

 Climatic Conditions

 Extent & nature of work and materials

required for construction
 Means of Access to Site

 Accommodation required
Claims Provisions in Contract

 the Changes Clause (51.1);

 the Differing Site Conditions
Clause (12.2);
 the Changed Conditions Clause
(11.1);
 the Suspension of Work Clause
(40.1 & 69.4).
Types of Contractual Risks

There are two types of contractual

risks:
 first those that have been expressly

stated in the contract to be allocated

to a particular party, and,
 second those risks that are deemed to
be included in the contract by the
operation of the law governing the
contract.
Cost & Time Claims for Compensable
/ Excusable Delays

Understanding the contractual allocation

of risks is fundamental to identifying
claims arising from these risks. FIDIC,
4th Edition, Red Book (Conditions of
Contract for Civil Works) makes the
Employer/Client expressly responsible
for the risks connected with certain
events and occurrences.
 Delayed Drawings/Engineer’s
Instructions
 Work Program submitted by the
contractor is an indicator to the Engineer
as to when the drawings or instructions
should reach the contractor without
affecting his performance adversely.
 Failure or inability of the Engineer to
issue any drawing or instruction, for
which the Contractor has given prior
notice, is a claim-able event.
 Obstructions or Adverse Conditions encountered
during Performance of Contract

 Ordinarily, the contractor is not expected to

encounter any physical obstruction or
decelerating physical condition during the
execution of the Works.
 However, adverse effect on the performance of
the contract caused by climatic condition on Site
is not recognized as a physical condition that
would entitle the contractor to relief under this
provision in so far as the cost compensation is
concerned. Time compensation is allowed
 Halting the Progress of Execution
when Confronted with Antiques etc.

 The contract requires the contractor to be

watchful in case he finds fossils, coins and
antiques of geological or archeological
interest on site during execution of the
contract.
 Upon discovery of these or suchlike

articles on work site he is required to halt

further progress of work and inform the
Engineer immediately
 Instructed Suspension of
Contract Execution
 The Engineer has authority under the contract
to suspend the execution of the Works or hold
back the contractor from performing any part
of the contract if he thinks that the same is
necessary.
 The contractor is duty bound to comply with
such an instructed suspension. During
suspension the contractor is required to
protect and secure the works already executed.
 Reasons for Suspension entailing no
compensation
The contractor is not compensated for
suspension ordered for following
reasons:
 due to some default of the contractor, or,
 in view of climatic conditions on site, or,
 is necessary for proper execution of
Works or their safety, or,
 when the instructed suspension is
already provided for in the contract.
Opted Suspension of Contract
Execution

Whenever payment of a certified

amount is delayed by the
Employer/Client the contractor,
among other remedies such as
interest and termination of contract,
is also entitled to suspend execution
of whole of the contracted Works or
any part of such Works.
Possession of Site and its Access

 Immediately upon the issuance of ‘Notice to

Commence’, the Employer is duty bound to
make appropriate proportion of the work site
available to the contractor for work.
 In addition the Employer is also duty bound
to give proper access to the work site so that
the contractor can move in his construction
resources and commence work on the
available site.
 Prescribed Risks of the Employer/
Client

 War:,
 Revolt:
 Ionizing Radiation:
 Pressure Waves:
 Unrest:
 Employer’s Occupation of Works:
 Design Failure:
 Forces of Nature/Act of God:
 Variations
 The Engineer has vast powers to vary
the contracted Works but usually he
is deprived of any power to vary the
contract.
 Contractor is to comply with the
instruction to vary the quantity,
quality, form, character, kind,
position and dimension of the Works.
 Additional Tests
 The Contract always prescribes the tests
that are to be performed before, during or
after the execution of the Contract.
 These prescribed tests being part of work
to be carried out under the Contract they
are deemed to have been accounted for,
both in terms of cost & time, by the
Contractor in his bid.
Delay Claims

 The term ‘delay’ in construction activity is

used to represent the ‘time’ during which
some part of the construction project has
been extended beyond what had been
originally planned.
 This extended time may have been caused

due to some unforeseen or unexpected

circumstance.
Delaying Incidents-I
 An incident that affects the performance
of a particular activity without affecting
the completion deadline is also called
‘delay’.
 It is not necessary that delay in
execution should necessarily disturb the
planned completion deadline.
 A delaying incident may originate from
within the Contractor’s organization or
from any other factor interacting with
the construction project.
Delaying Incidents-II
 The delaying incidents originating from
within the Contractor’s organization are
those which have been caused by the
Contractor or his representatives.
Mismanagement and absence of planned
execution by the Contractor may be
responsible for the delay that results.
Contractor is responsible to make good
the time lost due to such delays.
Delaying Incidents Outside
Contractor’s Organization
Delaying incidents outside the Contractor’s organization
may be caused by:
 Owner/Client/Employer, or,
 Designer, or,
 Other prime contractors, or,
 Subcontractors, or,
 Suppliers, or,
 Labour Unions, or,
 Nature, or,
 Other organizations and entities which participate in the
construction process.
Entitling Events for Extension of
Time
 the amount or nature of extra or additional
work, or
 any cause of delay referred to in these
Conditions, or
 exceptionally adverse climatic conditions, or
 any delay, impediment or prevention by the
Employer, or
 other special circumstances which may occur,
other than through a default of or breach of
contract by the Contractor or for which he is
responsible,
Procedure for Claiming
Extension of Time for Completion

Provided that the Engineer is not bound to make any

determination unless the Contractor has

 within 28 days after such event has first arisen notified

the Engineer with the Employer, and

 within 28 days, or such other reasonable time as may be

agreed by the Engineer, after such notification submitted
to the Engineer detailed particulars of any extension of
time to which he may consider himself entitled in order
that such submission may be investigated at the time.
Interim Extension of Time
Where an event has a continuing effect such that
it is not practicable for the Contractor to submit
detailed particulars within the period of 28 days
referred to in Sub-Clause 44.2(b), he shall
nevertheless be entitled to an extension of time
provided that he has submitted to the Engineer
interim particulars at intervals of not more than
28 days and final particulars within 28 days of
the end of the effects resulting from the event.
Valuation of Variation

 BoQ Rates
 Rates derived from BoQ Rates

 New Rates
TIME IN CONTRACTS
INTRODUCTION
CONTRACTUAL REQUIREMENTS ON TIME
& CONSEQUENCES OF THEIR BREACH

 WHEN A PARTY FAILS TO MEET ‘TIME FOR

PERFORMANCE’ IT MAY ENTAIL END OF
CONTRACT OR DAMAGES (LIQUIDATED &
UNLIQUIDATED)
 WHEN A PARTY FAILS TO PAY WITHIN
STIPULATED TIME IT MAY RESULT IN
TERMINATION OR INTEREST PAYMENT.
 WHEN A PARTY FAILS TO GIVE TIMELY NOTICE
IT MAY RESULT IN LOSS OF ENTITLEMENTS.
 WHEN A PARTY FAILS TO UNDERTAKE
ADMINISTRATIVE DUTIES IT ATTRACTS NO
SANCTIONS.
PHRASES ABOUT TIME USED IN
CONTRACTS
 TIME FOR PERFORMANCE.

 TIME OF THE ESSENCE - ORIGINALLY.

 TIME OF THE ESSENCE -BY NOTICE.

 TIME AT LARGE.

 REASONABLE TIME.
TIME FOR PERFORMANCE - I
 TIME FOR PERFORMANCE MAY:
 EITHER BE FIXED BY REFERENCE TO ‘SPECIFIED
DATES’;
 OR BE FIXED BY REFERENCE TO CONSTRUCTION
‘PERIOD’.
 WHEN THE TIME FOR PERFORMANCE IS BY
REFERENCE TO A CONSTRUCTION PERIOD THEN
THERE MUST BE AN IDENTIFIABLE COMMENCEMENT
DATE FROM WHERE THE COUNT-DOWN OF
CONSTRUCTION PERIOD HAS TO START.
 IT ALSO MUST BE EXPRESSED CLEARLY AS TO
WHETHER THE CONSTRUCTION PERIOD IS
INCLUSIVE OR EXCLUSIVE OF HOLIDAYS.
 TIME FOR PERFORMANCE - II

 BUILDING FORMS OF CONTRACT USUALLY

SPECIFY COMPLETION DATE.
 CIVIL ENGINEERING FORMS OF CONTRACT
USUALLY SPECIFY A TIME FOR COMPLETION
LEAVING THE COMPLETION DATE TO BE
CALCULATED BY THE ENGINEER IN VIEW OF
COMMENCEMENT DATE.
 THERE IS NO BAR ON THE CONTRACTOR FOR
FINISHING EARLIER THAN THE DUE DATE.
 CONTRACTORS MAY BE REQUIRED TO
PERFORM ‘REGULARLY & DILGENTLY’.
 TIME OF THE ESSENCE - I

 IN THE CONTRACTUAL CONTEXT THE PHRASE

‘TIME IS OF THE ESSENCE’ OF THE CONTRACT
MEANS THAT IT IS NOT A MATTER OF
COMPLETING THE CONTRACT AS SOON AS
POSSIBLE BUT OF COMPLETING THE CONTRACT BY
A ‘SPECIFIED DATE’.

 WHEN IN ANY CONTRACT TIME IS OF ESSENCE

THEN FAILURE TO COMPLETE BY THE AGREED
DATE WILL BE TAKEN TO BE A BREACH OF A
FUNDAMENTAL CONDITION OF CONTRACT WHICH
GIVES THE OTHER PARTY A RIGHT TO TREAT THE
CONTRACT AS ‘REPUDIATED’ – THE END.
 TIME OF THE ESSENCE - II
 WHEREAS IN SUPPLY CONTRACTS FAILURE
TO DELIVER ON TIME ENTITLES THE OTHER
PARTY TO REFUSE ACCEPTANCE OF THINGS
SUPPLIED.

 ON THE OTHER HAND, IN CONSTRUCTION

CONTRACTS IF THE CONTRACTOR FAILS TO
FINISH ON TIME THEN THE EMPLOYER HAS
THE RIGHT TO DISMISS THE CONTRACTOR
FROM THE SITE WITHOUT ANY LIABILITY TO
PAY FOR THE UNFINISHED WORK.
 TIME OF THE ESSENCE – BY
NOTICE
 IN CONTRACTS WHERE TIME IS NOT
ESSENTIAL ORIGINALLY IT CAN BE MADE
ESSENTIAL BY NOTICE TO THE
CONTRACTOR WHEN:
 THE EMPLOYER CONSIDERS THAT
REASONABLE TIME FOR PERFORMANCE
HAS ELAPSED, AND,
 THE REMEDY OF LIQUIDATED DAMAGES
SEEMS INADEQUATE, AND,
 TERMINATING THE CONTRACT UNDER THE
EXPRESS PROVISIONS SEEMS TOO RISKY.
 TIME AT LARGE - I
 THE PHRASE ‘TIME AT LARGE’ IS LOVED
BY CONTRACTORS, IN MOST CASES,
WITHOUT KNOWING ITS TRUE
IMPLICATION.

 THIS PHRASE DOES NOT SUGGEST THAT

THE CONTRACTOR HAS AS MUCH TIME
TO COMPLETE THE CONTRACTED WORKS
AS HE WANTS.
 TIME AT LARGE - II
 TIME BECOMES AT LARGE WHEN THE
OBLIGATION TO COMPLETE THE CONTRACTED
WORKS WITHIN THE SPECIFIED TIME FOR
COMPLETION EXPIRES WITHOUT FURTHER
EXTENSION.

 THE OBLIGATION TO COMPLETE THE

CONTRACTED WORKS THEREAFTER
TRANSFORMS INTO OBLIGATION TO COMPLETE
WITHIN A REASONABLE TIME. WHEN THE TIME
BECOMES AT LARGE THE OBLIGATION TO
COMPLETE DOES NOT BECOME UNFETTERED.
 REASONABLE TIME - I
 WHAT IS REASONABLE TIME FOR
PERFORMING THE CONTRACT DIFFERS
FROM CASE TO CASE AND IS TO BE
DETERMINED KEEPING IN VIEW THE
CIRCUMSTANCES OF EACH CASE.
 WHERE A CONTRACT IS TO BE PERFORMED
IN REASONABLE TIME IT WOULD MEAN
THAT THE PARTY RESPONSIBLE TO
PERFORM THE CONTRACT PERFORMS IT
FAITHFULLY, EVEN BELATEDLY, SO LONG AS
SUCH DELAY IS CAUSED BY EVENTS BEYOND
HIS CONTROL AND HE HAS NEITHER ACTED
NEGLIGENTLY NOR UNREASONABLY.
 REASONABLE TIME - II
 THE PRINCIPLES OF COMPLETION WITHIN
REASONABLE TIME ARE APPLIED TO
CONTRACTS WHERE ‘SPECIFIED TIME’ FOR
PERFORMANCE HAS BEEN SUBSTITUTED BY
‘REASONABLE TIME’ FOR PERFORMANCE.
 THE PRINCIPLES OF PERFORMANCE WITHIN
REASONABLE TIME ALSO APPLY TO
CONTRACTS WHERE NO TIME FOR
COMPLETION OF PERFORMANCE HAS BEEN
SPECIFIED IN THE CONTRACT.
LIQUIDATED DAMAGES
&
EXTENSION OF TIME
IN
CONTRACTS
INTRODUCTION
BASIS OF CONTRACT CLAIMS

 LIQUIDATED DAMAGES (LDs) & EXTENSION

OF TIME (EOT) FREQUENTLY FORM BASIS OF
CONTRACTUAL CLAIMS MADE UNDER THE
STANDARD CONTRACTS.

 LDs & EOT ARE COMPLEX SUBJECTS

 THE LAW ON TIME & DAMAGES CONTINUES

TO DEVELOP WITH INCREASING FLOW OF
JUDGMENTS FROM COURTS.
WHAT IS CONTAINED IN
INSTRUCTIONS TO
BIDDERS (ITB)?

CONTENTS OF INSTRUCTIONS TO BIDDERS

INSTRUCTIONS TO BIDDERS

ITB describes:

(a) the bidding documents,

(b) the preparation of bids,
(c) submission of bids,
(d) bid opening and its evaluation
(e) the award of contract.
INSTRUCTIONS TO BIDDERS
 About a dozen appendices to bid are also
annexed with the Instructions. The Forms of Bid
Security, Performance Security, Contract
Agreement and Mobilization Advance Guaranty
are also appended. Tender drawings and
Specifications are attached to these Instructions.
These instructions also contain the methodology
of bid preparation, sealing and submission. ITB
is accompanied by the Conditions of Contract
and other Special Stipulations, if any.
Evaluation of Bids:
 A substantially responsive bid is one which:
 (i) meets the eligibility criteria;
 (ii) has been properly signed;
 (iii) is accompanied by the required Bid
Security; and,
 (iv) conforms to all the terms, conditions and
specifications of the Bidding Documents,
without material deviation or reservation.
A material deviation or
reservation is one which:

 (i) affects in any substantial way the scope,

quality or performance of the Works;
 (ii) limits in any substantial way, inconsistent
with the Bidding Documents, the Employer's
rights or the bidder's obligations under the
Contract; or ,
 (iii) is such that its adoption/rectification would
affect unfairly the competitive position of other
bidders presenting substantially responsive bids.
Evaluation and Comparison of Bids:

 The Employer will evaluate and compare

only the Bids determined to be substantially
responsive in accordance with ITB. In
evaluating the Bids, the Employer will
determine for each Bid the evaluated Bid
Price by adjusting the Bid Price as follows:
 (a) making any correction for errors;
 (b) excluding Provisional Sums and the
provision, if any, for contingencies in the
Summary Bill of Quantities, but including
competitively priced Daywork; and,
 (c) making an appropriate adjustment for
any other acceptable variation or deviation.
Evaluation and Comparison of Bids

 The estimated effect of the price

adjustment provisions of the
Conditions of Contract, applied
over the period of execution of
the Contract, is not be taken into
account in Bid evaluation.
AGREEMENT & CONTRACT
COMPARED

‘All Contracts are

Agreements but every
Agreement is not a Contract’
– Requirements which
elevate an Agreement to the
legal status of a Contract.
ESSENTIAL PARAMETERS OF A
CONTRACT
 ‘all agreements are contracts if made by free
consent of parties competent to contract, for
a lawful consideration and with a lawful
object’. The law further provides that the
agreement which the party contends to be a
contract should not be a type of transaction
held to be void under the statute. Transactions
held to be void as per the law or on the basis of
public policy are mentioned in the Contract Act
of Pakistan.
Essentials of an agreement capable of
being enforced as Contracts

 (1) Bilaterality: It should ordinarily envisage

an exchange of obligations..
(2) Free Consent:.
 (3) Consideration: .

 (4) Not opposed to public policy: .

 (5) Not prohibited under any Statute:

(6) Certainty:
 (7) Competence:

 (8) Real Consent: .

REAL CONSENT
FREE CONSENT
TRUE CONSENT

CONSENT
TRUE & UNTRUE CONSENT
 (Real + Free) Consent = True Consent. That
means a consent which is ‘real’ as well as ‘free’
is True Consent.
 (Real – Free) Consent = Untrue Consent. That
means any consent which is real but not free is
Not True Consent
 (Free – Real) Consent = Untrue Consent.
Meaning thereby that any consent given freely
but not really is Not True Consent
LEGAL IMPACT OF UNTRUE
CONSENT
Whereas an unreal consent creates no
agreement, the consent that is not free,
renders the transaction voidable, because
although the agreement has been reached
under compulsion but the consenting party
was well aware that the consent being given,
though real, would have not been given if he
was free to decline.
VOID AGREEMENTS
 UNLAWFUL AGREEMENTS
 RESTRAINT OF TRADE
 RESTRAINT OF LEGAL PROCEEDINGS
 RESTRAINT OF MARRIAGE
 WITHOUT CONSIDERATION
 UNCERTAIN AGREEMENTS
 WAGERING AGREEMENTS
VOIDABLE CONTRACTS
 COERCION
 FRAUD
 MISREPRESENTATION
 UNDUE INFLUENCE
DOCTRINE OF SEVERABILITY

 Doctrine of severing/separating the valid from

the invalid (void) part of the Contract.
 In case of non-severability the entire contract
is invalid.
 Applies to consideration as well as
performance part of the contract.
DOCTRINE OF RESTITUTION

 When a contract comes to an end for any

reason the parties have to restore each other
the respective liabilities accrued upto the date
when contract ends.
 Restitution does not apply to unlawful and
wagering agreements.
PRIVITY OF CONTRACT

 Only the parties to contract can sue each other

and no stranger can sue.
PRIVITY OF CONSIDERATION

 Pakistani law differs from the common law in

respect of this doctrine.
 Third party can pay the consideration and also
receive benefits from the contract.
QUASI CONTRACTS
 OBLIGATION OF MINOR/LUNATIC FOR
NECESSARIES OF LIFE
 INTERESTED PERSON MAKING PAYMENT
ON BEHALF OF OTHERS
 OBLIGATION TO PAY FOR ENJOYMENT OF
NON-GRATUITOUS ACT – QUANTUM
MERUIT
 OBLIGATION OF FINDER OF LOST GOODS
 OBLIGATION OF PERSON IN CASE OF
MISTAKEN DELIVERY OR PAYMENT
CONTINGENT CONTRACTS
 CONTRACT CONTINGENT UPON THE HAPPENING
OF EVENT IN UNSPECIFIED TIME
 CONTRACT CONTINGENT UPON NOT HAPPENING
OF EVENT IN UNSPECIFIED TIME
 CONTINGENT UPON WAY A PERSON ACTS IN
UNSPECIFIED TIME
 CONTINGENT UPON EVENT HAPPENING IN FIXED
TIME
 CONTINGENT UPON EVENT NOT HAPPENING IN
FIXED TIME
PERFORMANCE,
BREACH &
DISCHARGE OF
CONTRACTS
PERFORMANCE
PERFORMANCE
PARTICULAR
GENERAL
PERFORMANCE
DEVOLUTION OF LIABILITY
PERFORMANCE
TENDER OF PERFORMANCE
PERFORMANCE
APPROPRIATION OF PAYMENT
PERFORMANCE
JOINT PROMISES
JOINT PROMISES

 LIABILITY TO PERFORMANCE IS JOINT AS

WELL AS SEVERAL

 CONTRACTUAL RIGHT TO BE DEMANDED

JOINTLY ONLY
PERFORMANCE

Complete Performance,
Part Performance,

 Substantial Performance

Specific Performance
PERFORMANCE EXCUSED
BY LAW

FRUSTRATION
PREVENTION

NOVATION
RULES OF PERFORMANCE-I
 If the contract stipulates performance without
request and no time is fixed for
it then; the promisor must perform in
reasonable time.
 When performance is to be without request
and a day is fixed for it, then: the
promisor may give his performance at any time
of the said day, in usual hours of business, at
appointed place.
RULES OF PERFORMANCE-II
 When performance is to be on application by
promisee and a day is fixed then: the promisee
must apply for performance, at proper place
and during usual hours of business.
 When performance is to be without application
and no place of performance is pre-fixed then:
the promisor must apply to promisee for
appointing a proper place for performance and
perform there.
RULES OF PERFORMANCE-
III
 The manner and time of performance is to be
as prescribed or as sanctioned by the
promisee. (It is sanction when promisor
proposes a manner and promisee approves it.
It is prescribed when promisee specifies a
manner of performance on his own motion).
PERFORMANCE OF
CONTRACT
 PERFORMANCE OF RECIPROCAL
PROMISES
 PERFORMANCE OF JOINT PROMISES
 DEVOLUTION OF LIABILITY TO PERFORM
 REMITTING PERFORMANCE
 PERFORMANCE EXCUSED BY LAW –
FRUSTRATION; PREVENTION; TENDER OF
PERFORMANCE
BREACH OF CONTRACT
 ANTICIPATORY BREACH
 PRESENT BREACH
DISCHARGE OF CONTRACT
 DISCHARGE BY PERFORMANCE
 DISCHARGE BY TENDER OF
PERFORMANCE
 DISCHARGE BY BREACH
 DISCHARGE BY PREVENTION
 DISCHARGE BY FRUSTRATION
 DISCHARGE BY AGREEMENT –
NOVATION; ALTERATION; RECISSION
REMEDIES IN CONTRACT
 RIGHT TO RESCIND THE CONTRACT
 RIGHT TO COMPEL SPECIFIC
PERFORMANCE
 RIGHT TO COMPENSATION
 RIGHT TO DAMAGES – GENERAL;
SPECIAL; LIQUIDATED; NOMINAL
BREACH OF CONTRACT
PRESENT BREACH

ANTICIPATORY BREACH
DISCHARGE OF CONTRACT
DISCHARGE BY PERFORMANCE
DISCHARGE BY TENDER OF PERFORMANCE
DISCHARGE BY BREACH
DISCHARGE BY RESCISSION
DISCHARGE BY NOVATION
DISCHARGE BY ACCORD
DISCHARGE BY BANKRUPTCY
DISCHARGE BY JUDGEMENT
DISCHARGE BY RELEASE
DISCHARGE BY MERGER
TYPICAL CONTRACTS

INDEMNITY
 GUARANTY

 BAILMENT

 AGENCY
INDEMNITY

CONCEPT & LAW

INDEMNITY

Undertaking by which one party

promises to save the other from loss
caused to him by the conduct of any
other person, is called a ‘Contract of
Indemnity’.
AIM OF INDEMNITY

 Either to:
a) secure a party against loss or
damage.
 Or to:

b) make good the loss already

occasioned or incurred.
PARTIES TO INDEMNITY
CONTRACT

 INDEMNIFIER

 INDEMNITY-HOLDER
BID BOND
 In nature, a bid bond is an indemnity bond
whereas in effect it waives the right of the
offeror to retract from his proposal once it has
reached the offeree.
 It contains a promise whereby a public agency
is protected in case the bidder withdraws his
bid before contest or declines to enter into
contract on its acceptance.
GUARANTY

CONCEPT & LAW

GUARANTY

A “contract of guarantee” is a contract

to perform the promise, or discharge
the liability, of a third person in case
of his default.
PARTIES TO CONTRACT OF
GUARANTY

 SURETY
 PRINCIPAL DEBTOR

 CREDITOR
WARRANTY- I

Warranty is a contract
between the seller and the
buyer of goods wherein the
seller undertakes to be
responsible for:
WARRANTY- II
 Title of sold goods – the seller warrants
that in case his title to goods is challenged, he
would answer for the same and be liable for
results in case of any defect in his title,
 Quality of the thing sold – the seller
warrants that the quality of the thing sold is
proper and the thing is flawless in so far it
concerns its quality,
 Quantity of the thing sold – the seller
warrants that the thing has been supplied in
correct quantities and he would answer for
any short-fall.
Types of a Contract of
Guaranty
 Contract of Surety-ship is a
tri-partite agreement between the
creditor, principal debtor & the
surety.
 Contract of Guarantee, on the

other hand, is between two parties:

the Creditor & the Surety.
Bank Guarantee
A "bank guarantee" is a guarantee executed by
a scheduled bank in favour of a party at the
instance of another party. It is an
unconditional promise to pay a certain sum of
money as and when ordered by the party in
whose favour the guarantee is executed.
Liability arising from a bank guarantee is
absolute and unconditional.
GUARANTIES UNDER THE
CONTRACT

 Mobilization Advance Guaranty

 Performance Guaranty

 Advance Payment Guaranty

 Liquidated Damages Guaranty

 Retention Money Guaranty

Continuing Guaranty

 How Continuing Guaranty differs

from One Time/Single Transaction
Guaranty?

 How Continuing Guaranty is

Revoked?
Continuing Guaranty
A guarantee can be given for a single
transaction or for a series of transactions.
The guarantee extending to a series of
transactions is called "continuing
guarantee". A continuing guarantee can
either be for all the transactions between the
creditor and the principal debtor falling
within the time period which has been
guaranteed or may be up to a maximum
specified amount irrespective of the
number of transactions or the time span in
which the guaranteed amount is reached.
Revocation of Continuing
Guarantee

 By Notice to Creditor

 By Death of Surety
BAILMENT

CONCEPT & LAW

Bailment

A “bailment” is the delivery of goods

by one person to another for some
purpose, upon a contract that they
shall, when the purpose is
accomplished, be returned or
otherwise disposed of according to
the directions of the person delivering
them.
NECESSARY INGREDIENTS OF
BAILMENT
 Actual or Constructive delivery of
possession. The thing bailed must change
hands - the bailor handing it over to the
intended bailee.
 Delivery of thing has to be for a definite
Purpose.
 In addition to any other terms the parties should
have stipulated a contract to return the thing
bailed on the accomplishment of the intended
purpose. The thing may as well be redelivered to
any party named by the bailor or disposed of the
way desired him.
DELIVERY OF POSSESSION
 Actual delivery of possession means
physical handing over of the thing bailed,
 In Constructive delivery of possession,
the goods remain where they are. Some of
the typical deliveries adjudged by the courts
as constructive are:
 Delivery of Railway receipt amounts to
delivery of goods entrusted to Railway.
 Pledging goods to secure loans and
continuing their use with the permission of
pawnee makes the pawner a bailee.
PURPOSE OF BAILMENT

 BAILMENT FOR USE

 BAILMENT FOR CARRIAGE

 BAILMENT FOR CUSTODY

 BAILMENT FOR WORK

 BAILMENT FOR SECURITY/

PLEDGE
BAILMENT FOR WORK

RIGHT TO PARTICULAR LIEN

RIGHTS OF BAILOR
 Compensation for injury to goods: When
goods are not used in accordance with
conditions of bailment.
 Avoid the bailment: When the bailed goods
are used without authority, the bailor is at
liberty to end the bailment.
 Benefits accruing on bailed goods: Any thing
growing out of the bailed goods belongs to the
bailor.
DUTIES OF BAILEE
 o Take reasonable care of goods.
 o Not to mix bailed goods with own goods
without bailor's consent.
 o Not to make unauthorized use of goods bailed.
 o Return the bailed goods on time.
 o Not to set up defense that goods do not belong
to bailor.
 o Return natural increases on bailed goods to
bailor.
DUTIES OF BAILOR

Bailor is duty bound to:

 Disclose faults in goods bailed.

AGENCY

CONCEPT & LAW

AGENCY

A contract of Agency is between a

person called an Agent and his
employer called the Principal.
"Agency connotes a relation existing
where one person has authority or
capacity to create a legal relation
between his Principal and third
parties".
AGENT

What can an Agent do?

"whatever any person can do
personally he can do the same
through an agent".
CLASSES OF AGENTS

 General agent
 Special agent

 Universal agent
GENERAL AGENT

General agent has authority to act

for his principal in all matters or
every matter concerning a particular
business/trade. A person appointed
to deal not with every matter but only
with matters of a particular nature, is
also a general agent.
SPECIAL AGENT

Special agent is authorized to

represent his principal in a
particular transaction or to do a
particular act for his principal.
UNIVERSAL AGENT
The authority of a Universal agent is much
wider who has power to:
 i) Do all acts which the principal can lawfully
do and delegate.
 ii) Transact all and any business of his

principal.
 iii) Completely dispose all the rights and
property of principal.
AGENCY
WAYS TO ESTABLISH AN AGENCY
 By express Appointment, called the Express
Agency.
 By Conduct, Situation or Relationship of the
parties, raising an Apparent/Implied Agency
that also includes Agency by Estoppel.
 By Necessity of the case, popularly known as
Agency of Necessity.
 By Customs of trade, a Customary Agency is
created.
 By Ratification, to authorize an unauthorized
act