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.
Modes of
entering Building contracts
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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