PROFESSIONAL 

PRACTICE
MODULE III
MODULE III

Contract
General principles, Types of Contract, Discharge of contract, Contract 
Document, Contract drawings, Contract sum, Bills
Duties &Liabilities of Contractor, Architect and Employer under the 
contract
Administration of contracts, Determination
Certificate of Payments.
CONTRACT‐ Definition
• A contract is an agreement enforceable under law in which a contractor
undertakes execution of construction work for certain payment from an
owner.

• It is an agreement between 2 or more parties based on some terms &

conditions.

• To be legally valid it should be stamped and must be signed by owner and

contractor in the presence of two witnesses.

• Contract defined under Indian contract act 1872.

Indian contract act 1872
OBJECTIVE

• Ensure rights and obligations arising out of a contract are honoured.

• Legal remedies to an aggrieved party against party failing to honour his
part of agreement.
• Act makes it mandatory that this is done and compels defaulters to
honour their commitment.
• Parties to a contract, make rules for themselves.
• As long as they do not transgress some legal prohibition, parties can
frame any rules in regard to subject matter of their contract and law will
give effect to their contract.
TYPES OF CONTRACT
TYPES OF CONTRACT
LUMPSUM CONTRACT: 

Contractor agrees to work as per a fixed sum.
Owner provides the specifications of work.

Advantages: 
• Owner aware about cost of project before construction.
• Avoids lot of details and accounting by both owner and contractor.

Disadvantage: Any unforeseen hazard during construction‐ contractor 
in adverse situation.
TYPES OF CONTRACT
UNIT PRICE CONTRACT: 

 Price paid as per unit of work carried out.

 Variations in this type: Bill of quantities contract and schedule of rates contract.

Bill of quantities contract:

• Based on unit cost of items of construction.
• Contractor profit and other expenses can be included Advantages: 
in unit cost. Provides owner a competitive bid
• Quantities and drawings fixed, minor changes
accepted. Disadvantage: 
Owner needs to measure the quantity 
• Owner provides drawing, quantities and of work.
specifications. Final price not known precisely until 
• Type of work: large infrastructure construction in the last work completed.
government sector.
TYPES OF CONTRACT
UNIT PRICE CONTRACT:

Schedule of rates contract

• Quantity not known before. Advantages: 
• Contract signed based on unit cost of item of work. Provides owner a competitive 
bid
• More items of inserted.
• In some works it is difficult to specify the exact Disadvantage: 
items. Owner needs to measure the 
quantity of work
• No guarantee that all the items are used in Final price not known 
construction. precisely until the last work 
completed.
• Type of work: underground work, flood control and
road construction.
TYPES OF CONTRACT
Schedule of rates contract : Variation

Cost plus contract

• Payment based on work carried out plus fee
which includes profit etc. Advantages:
• Used when : There is no risk of loss arising from
It is not possible to estimate its cost with changing prices, wrong estimates
reasonable accuracy due to unstable prices at the and underestimated quotation.
time.
There is an emergency and no time to Disadvantage:
negotiate a contract price and work is more profit earned is usually low
important than its cost.
DISCHARGE OF CONTRACT
Discharge of contract
• Discharge is the full performance of all duties.

• Discharged when rights and obligations created by it comes to an end.

• Contracting parties no more have any responsibility or liability to each

other.
MODES OF DISCHARGE OF CONTRACT
• Discharge by performance

• When Promised Performance becomes Impossible

• Mutual Agreement

• Lapse of Time

• Operation of Law –excuse by law

• Breach of Contract
DISCHARGE BY PERFORMANCE
• This is obvious mode of discharge of contract.
• Parties have done whatever was  considered under the contract .

Types of Performance :

• Complete Performance: exactly as agreed

• Substantial Performance: provides essential benefits 

• Performance to the Satisfaction of a Third Party. 

• Material Breach: nonperformance of a contractual duty
Discharge by impossibility of performance

• Contract party’s performance may be become impossible  to fulfil through no 
fault of his own.

• Law feels it would be unfair to hold the person responsible to contractual 
obligation that could not possibly be met.
DISCHARGE BY AGREEMENT –Through mutual agreement
• Discharge by Rescission –legally terminated by mutual agreement, by law
or court action, or by one party for a reasonable cause.

• Discharge by Novation ‐substitute a third party for one of original parties,

eg:payments or performance cannot be made under terms of original
agreement.

• Discharge by Substituted Agreement: compromise, or settlement

agreement, that arises out of a genuine dispute .

• Discharge by Accord and Satisfaction :parties must agree to accept

performance that is different from the performance originally promised.
DISCHARGE BY OPERATION OF LAW 
• Alteration of the Contract
• Bankruptcy /Insolvency
• Impossibility
• Impracticability of Performance
• Death of any of the parties 
• Confusion/ Merger of rights 
• Unauthorized material alteration
• Performance becomes illegal.
DISCHARGE BY BREACH OF CONTRACT
• Failure of party to perform his obligations‐ without lawful excuses,
person is said to have committed a breach of contract.

• 2 types:

Actual breach of contract‐ fails or refuses to perform upon due date of

performance.

Anticipatory breach of contract‐ declares intention to not perform before

due date of performance.
CONTRACT DOCUMENT
Includes :
• Copy of Tender Notice
• Copy of work order
• Letter of offer by contractor
• IIA form of contract
Contract document Preamble
Articles of agreement
 Conditions of contract 
Appendix
• Specifications 
• Bill of quantities
• Contract drawings
Contract document

• PREAMBLE:
First page of IIA form of contract is known as the preamble
It said about the 5 elements involved in contract like owner, contractor, nature
of work, site of work, & architect.
Contract document
• Essential requirement of preamble :

Adhesive stamps fixed on the first page .

Date : when the contractor has been entered into and note the date of tender.
Name of the owner and contractor plus addresses, if a firm or company is
involved in the contract the names of the partners with the addresses should be
given.
The nature of the work should be indicated along with location of the site.
The name of architect with addresses should be given.
The contract drawings should be numbered and these drawings along with the
bill of quantities should be signed by both the parties.
The amount deposited by the contractor should be shown and with whom
deposited should be indicated.
Contract document
• AGREEMENT

First clause : Contractors obligations to carry out & complete the work subject to
the conditions as shown on the contract drawings described and referred to in
the contract bills.

Second clause : Owners obligations to pay to the contractor specified sum which
is called contract sum which will become payable at various stages and in the
manner specified in the said conditions.

Third clause : meaning of the term Architect.

Fourth clause : makes the conditions numbering 1‐58 along with appendix .

Contract document

•SPECIFICATIONS
Portion of the Contract Documents consisting of written requirements :
Materials
Equipment
Systems
Standards 
Workmanship for Work
Performance of related services
Contract document
• BILL OF QUANTITIES

An itemized list of materials, parts, and labor (with their costs) required to
construct, maintain, or repair a specific structure.

• Schedule of quantities

A Schedule of Quantities comprises of a collection of Materials, Labour,

Activities and Durations .
Contract drawing

Are a part of Contract Documents .

Provide all information required for construction in writing and drawing
form.
Shall include Proposal Drawings .
Drawn to scale and comprise site location, position on site, means to
access the site, floor plans, elevations, sections and detail drawings.
Issued to contractors during construction
Contract drawing

Has legal significance and form part of agreement between

employer and contractor .
Clear idea about arrangement of components, dimensions , detailing etc.
Avoid ambiguity and confusion.
Delays and misunderstandings can be minimised by
properly coordinating the drawings.
CONTRACT SUM & BILL
CONTRACT SUM
• Price agreed with contractor and entered into the contract.
• Should be calculated and checked very carefully.
• Contract sum does not constitute a 'fixed price’.
• Contracts generally allow for contract sum to be adjusted.eg: fluctuations,
variations etc.
• Adjustment should be taken into account in interim certificates.
• Preparing final account for final payment to contractor ‐adjustments
to contract sum at end of defects liability period‐ amount of final
payment is set out in final certificate .
CONTRACT BILL
• Contractors paid based on bills prepared for work done at various stages.
• Billing sincerely carried out by engineers.
• All measurements should be recorded on measurement sheets with required self‐
explanatory sketches & notes.

• 3 TYPES

ADVANCE BILLS
RUNNING ACCOUNT BILL
FINAL BILL
ADVANCE BILLS

• If mentioned in contract, after receipt of material supplied by contractor

‐ advance Bill may be prepared by engineer.
• To facilitate the contractor or to give an interim relief due to some
uncertainties
• If some discrepancies are observed or some disputes arise then to avoid
further delay ‐ payment released as an advance payment.
• Prepared considering expected work to be completed within a scheduled
time.
RUNNING ACCOUNT BILL
• If mentioned in the contract, contractors are paid monthly basis or in
different stages for work done during that period.
• Quantities or work done during that period is to be measured & paid.

Record to be maintained at site

• Copies of all agreements with contractor / work

• Copies of bills shall be maintained in separates files at site
• Contractors file and payment status shall be updated
• Quantities of work done as per drawing & as actual as per site execution.
FINAL BILL

• After satisfactory completion of work by contractor; final bill may be

prepared.
• Recommended consumptions of materials shall be crosschecked at the time
of final bill.
• Various amount debit able against penalties, material supplied by company,
water & electricity charges, if any, shall be taken into account.
• Final bill paid only after defect liability period.
Duties &Liabilities of Contractor
DUTIES &LIABILITIES OF CONTRACTOR
• Thorough review of many processes related to building of structures.
• Planning how project will be carried out .
• Developing and coordinating of activities .
• Building contractor ‐research regarding relevant regulations and laws akin to
the construction process.
• Completing project based on laws, rules and regulations in relation with
construction.
• Acquire licenses and permits ‐building project can begin.
• Prepare timeline from start to end
• Establish a budget for the construction project.
• Follow the budget
DUTIES &LIABILITIES OF CONTRACTOR
• Based on budget, obtain materials , hire workers and finish the construction in
a cost‐efficient manner.
• Take care of payroll
• Obtaining materials for project.
• Maintain contacts with material suppliers.
• Reviewing progress and implementing any changes along the way.
• Supervise construction and ensures necessary measures ‐completed finished
product.
• Supervising employees.
• Deals with all emergencies and surprises which relate to project and occur on‐
site and sometimes off‐site as well.
WHAT TRAITS MAKE A GOOD BUILDING CONTRACTOR? 

• Decisiveness
• Experience
• Honesty
• Good leader
• Resolve issues in a quick and 
speedy fashion
Duties and liabilities of architect under the Architect
ARCHITECTS RESPONSIBILITIES
• He is responsible to the following
His client
His Profession
His Own organization
His Design team
To the society at large
ARCHITECTS RESPONSIBILITIES
• Advisory: giving competent and appropriate advice to client. ( time schedule,
cost, materials etc)
• Planning , designing , coordinating design and supervising works executed
under a building contract.
• Provide all detailed drawings to client and contractor.
• Architect cannot change drawings without client’s consent.
• Legal: advising about laws and rules governing buildings
• Service: providing requisite data for construction.
Service rendered as per councils conditions of engagement and scale of
charges between the client and the architect.
• Maintenance of records: is required to maintain all important records.
• Inform progress of work to client
ARCHITECTS RESPONSIBILITIES

• Employment of consultants ‐architects discretion in agreement with the

client.
• Nominate specialist sub contractors for the design and execution of any part
of work.
• Frequent supervision ‐clerk of works ‐approved by the architect.
• Staff: creating right conditions for effective working.
• Authorize material changes in design ‐client informed without delay.
• Resolving conflict between client and contractor‐ as arbitrator
WHAT TRAITS MAKE A GOOD BUILDING ARCHITECT? 

• Decisiveness
• Experience
• Creativity 
• Quality service provider
• Competence: shall possess the required knowledge and skills for discharging  
his professional duties.
• Legal knowledge
• Adaptability 
• Honesty
• Good leader
WHAT TRAITS MAKE A GOOD BUILDING ARCHITECT? 

• Resolve issues in a quick and speedy fashion
• Professional conduct: an architect is bound by councils “architects
regulations 1989”violation of these regulations will constitute professional
misconduct.
• Duty of care: shall bring to his task a reasonable degree of care.
• Ability to advise on cost
• No Negligence
• Resolving problems
Duties and liabilities of employer under the contract
Duties and liabilities of employer

• Provide detailed requirements

• Provide property lease /ownership documents
• Provide: site plan to scale, shows contours , boundaries, existing roads and
paths, existing physical features, trees and existing structures, existing
services and utility lines
• Arrangement for survey
• Reports on soil conditions
Duties and liabilities of employer

• Schedule of rates
• Pay fees , levies , security deposits and expenses for statutory sanction.
• Follow architect instructions and no change in drawings without Architect’s
consent.
• Honour architect’s bill within one month of submission
• Appoint construction manager in case of large or complex projects as per
architect’s advice
ADMINISTRATION OF CONTRACTS
Management of contract between client and building contractor
Contract administration phase
• Construction
• Procurement
• Subcontracting
• Installation
• Engineering
• Commissioning
• Handovers
• Rectification
• Final financial close of project
Contract administrator 
• Manage contract between client and building contractor .

• Employer’s agent

• Manage, negotiate, support and execute contract process.

• Manage from contract award stage to contract closeout or

termination.

• Contract administrator may be from a number of professions, including

project managers, engineers, architects, building surveyors and
quantity surveyors.
Skills for Contract Administrator
• Knowledge and skills to apply all contractual obligations and provisions.

• To make decisions in a fair, impartial and independent manner.

• Ability to work with different personnel within an organisation.

• A working knowledge and experience in the construction industry and all

other related trades.

• Ability to resolve disputes.

• Coordination
Contract Administrator ‐Duties and Responsibilities
• Keep a record of building contract and work involved.

• Familiar with Contract Terms and Conditions and statement of work.

• Develop a contract administration plan based on complexity of contract.

• Create a checklist of all aspects of contract to monitor .

• Coordinate actions with internal procurement and legal teams if

needed.

• Report status of current contract processes to management.

Checklist
• Overall contract dates (start and end dates and identify options to renew if 
part of the contract)
• Milestones with due dates
• Delivery dates for equipment
• Installations, implementations
• All costs including expenses and travel if allowed
• Invoice due dates
• Payment due dates
• All supplier responsibilities/promises/deliverables listed in contract or SOW
Contract Administrator ‐Duties and Responsibilities
• Resolve any conflicts and disputes related to the contract.

• Follow up to ensure that all contractual agreements and payments are

actioned.

• Analyse potential risks that contract changes may pose to the

organisation.

• Document contract changes.

• Conduct internal and external pre‐performance conferences.

DETERMINATION OF CONTRACTS
Determination of contracts

• Termination / ending of contract .

• Due to breach of contract by other party.
• Parties has ceased to perform their obligations under the contract.
• Termination ‐ Notice has to be given to other party within a
reasonable time
• Termination of contract ‐ releases both parties from their obligation .
• Upon termination either party may claim restitution.
Determination of contracts‐PROCEDURES
• STEP 1: Notice stating facts of default

• STEP 2: 

Upon notice , the defaulter can : dispute the notice / admit the
contents and cure the default/ Ignore the notice and continue with
default.
Defaulter has 14 days to rectify default

• STEP 3: If ignored , actual notice of termination within 10days after 14 
days
Determination of contracts‐PROCEDURES
• STEP 4:
Contractor must vacate the site and return possession within 14 days from
notice of termination.

• STEP 5:
Architect / quantity surveyor give written notice within 28 days of
determination, stating the date of inspection on site to jointly record extent of
work done and materials delivered.

STEP 6:
Architect / Quantity surveyor to submit final account to contractor/ client
within 6 months from completion of remaining works.
Determination of contracts‐PROCEDURES
• STEP 7:

Any disputes from employer / contractor must be raised within 3 months

from receipt of final account.

• STEP 8 :

If any disputes over final account ‐ must submit their disagreement to
Architect / quantity surveyor.
Architect / quantity surveyor will amend or not and notify the parties.
Either party has 3 months to refer disagreement to arbitration.
If not, Architect / quantity surveyor will conclude as agreed by parties.
Determination of contracts

• DETERMINATION BY CONTRACTOR

• DETERMINATION BY OWNER
TYPES
• PREMATURE DETERMINATION‐ main cause 
frustration due to illegal / impossible situations 
Determination by contractor
• He can terminate on following ground:

Owner fails to honor certificate of payment even after notice ( 7 days notice) of
payment is served to him.
Owner obstructs issuing of certificates of payment
Work suspended for a long period due to litigation, civil commotion, damage
due to fire etc.

• Contractor may remove his plants, equipments etc and dismantle temporary
construction

• Owner pay for any loss and damage suffered by contractor.

Determination by owner
• He can terminate on following ground:

Contractor suspends work without notice.

Fails to carry out architect’s instructions.
Fails to rectify defective work.
If contractor is declared insolvent.

• (Refer procedures)

• A list of defective work is prepared.

• An inventory of contractor's equipments ,tools etc. in presence of witnesses.
• Owner can employ another agency to complete the work at the contractor’s
cost.
CERTIFICATES OF PAYMENT
CERTIFICATES OF PAYMENT
• Certificates issued regularly or after a particular completion stage of project.

• Aim: To keep an account of work completed.

• Documents verified by construction project owners, architects or engineers and is approved by the
contractor.

• Architect will issue certificate against running bills submitted by contractor.

• Owner will honor the certificate within stipulated time, normally 2 weeks.

• Final measurement ‐ completed within 3‐6 months.

• Contractor shall submit all accounts rate analysis, the guarantees etc. before final certificate of
payment is issued by architect.

• No corrections will be made in final certificate unless there are arithmetic errors.
CERTIFICATES OF PAYMENT

• INTERIM CERTIFICATE
• PENALTIMATE CERTIFICATE
• PRACTICAL COMPLETION CERTIFICATE
• NON COMPLETION CERTIFICATE
• FINAL CERTIFICATE
INTERIM CERTIFICATE
• Mechanism for client to make payments to contractor before works are complete.

• Payment agreement in advance by client to contractor.

• Is issued from time to time as specified in the appendix‐ progress of work

• These certificates are simple statements/facts which show the approximate value
of the work done or contract prize of material delivered on site.

• It shows the amount to be retained by owner to retention fund.

• These certificates shows owner is quiet safe.

INTERIM CERTIFICATE

• These are issued based on:

Conditions of contract
Stages of the payment
Value of materials and goods applied
 Maximum limit of retention fund.
INTERIM CERTIFICATE
• Not final certificate

• Does not guarantee ‐works executed are proper.

• Payments ‐ under these certificates ‐provisional ‐subject to adjustments and

readjustments at end of the contract.

• Revised by subsequent certificate.

• IC does not make the unauthorized extra as authorized ones.

PENALTIMATE CERTIFICATE
• Main purpose is to collect necessary fee from contractor ‐payments to
subcontractors .

PRACTICAL COMPLETION CERTIFICATE
• Certificate issued after substantial completion of project as stated in 
the contract. 
• Documents to be submitted.

NON COMPLETION CERTIFICATE
• Certificate issued when contractor delays delivery of project on due date and 
project is not completed.
FINAL CERTIFICATE
• Is issued at the end of defect liability period.

• Issue schedule of defects not later than 14 days from end of defect liability
period.

• Final certificate can be issued after the contractor has made good the defects.

• Contractor should submit all documents pertaining to all measurements and

valuations either before or within a reasonable time from issue of virtual
completion .

• Delay will be at the cost of contractor.

VIRTUAL COMPLETION
• Stage of completion of building when the architect certifies in writing that the
same is complete and ready for occupation by the owner.

• When the works are practically complete the architect will issue a certificate to
that effect called the virtual completion certificate.

• The building is said to be complete:

The contractor gives a notice to that effect.

When a drainage completion certificate has been obtain.
VIRTUAL COMPLETION
The architect applies for occupation certificate to the local authority.

When the local authority grants the occupational certificate.

When  water connection has been obtained.

The architect applies for completion certificate.

When the local authority grants completion certificate.
Thank u……

Prepared by
Abitha S Thampi
Associate Professor
BJI