Assignment on Contracts and Tendering in Civil
Engineering
1) What is a Contract?
A contract is a legally binding agreement between two or more parties that creates enforceable
obligations under the law. In Civil Engineering & Construction, a contract is an agreement between
the client/owner and the contractor (sometimes including consultants, subcontractors, suppliers) for
carrying out construction work or services under defined terms, conditions, and payment.
Definition (Indian Contract Act, 1872): “An agreement enforceable by law is a contract.”
Essential Requirements of a Valid Contract
1 Offer and Acceptance: One party makes an offer (e.g., to build a road for ■10 crores) and the
other party accepts.
2 Lawful Consideration: Value exchanged must be lawful (usually money for work/services).
3 Intention to Create Legal Relationship: Both parties must intend that the agreement will be
legally binding.
4 Capacity of Parties: Parties must be competent (above 18 years, sound mind, not disqualified
by law).
5 Free Consent: Consent must not be obtained by coercion, fraud, misrepresentation, undue
influence, or mistake.
6 Lawful Object: The purpose of the contract must be legal.
7 Possibility of Performance: Work defined must be capable of being carried out.
8 Certainty and Clarity: All terms must be clearly written and unambiguous.
2) Types of Contracts in Civil Engineering
A) Based on Payment Method
Lump Sum Contract: Contractor agrees to complete work for a fixed price.
✓ Advantage: Easy to manage for client, cost certainty.
✗ Disadvantage: Risk of loss to contractor if costs increase.
Item Rate / Unit Price Contract: Contractor paid based on quantity × rate.
✓ Advantage: Fair payment for actual work done.
✗ Disadvantage: Cost may exceed estimates if quantities increase.
Cost Plus Contract: Contractor is paid actual cost + agreed profit.
✓ Advantage: Ensures contractor does not suffer loss.
✗ Disadvantage: No cost certainty for owner; risk of inflated cost.
Turnkey Contract: Contractor designs, executes, and hands over ready facility.
✓ Advantage: Owner gets ready-to-use facility.
✗ Disadvantage: Less control of owner during construction.
Percentage Rate Contract: Contractor quotes % above/below standard rates.
✓ Advantage: Transparent, reduces disputes.
✗ Disadvantage: Dependent on accuracy of schedule of rates.
B) Based on Execution Scope
• Engineering, Procurement & Construction (EPC) – Contractor takes full responsibility.
• Design & Build Contract – Contractor does both design + construction.
• Subcontracts – Part of the work is given to another contractor.
3) Terminology of Contract
• Client/Employer/Owner: Person/agency for whom the project is executed.
• Contractor: Person/company who undertakes the work.
• Consultant/Engineer: Supervises, designs, and checks quality of work.
• Subcontractor: Hired by the main contractor for specialized work.
• Bill of Quantities (BOQ): Statement of items, quantities, and rates.
• Earnest Money Deposit (EMD): Deposit by bidders to show seriousness.
• Performance Security: Guarantee to ensure contractor performs.
• Liquidated Damages: Penalty for delay in completion.
• Mobilization Advance: Advance money to start work.
• Retention Money: Portion withheld to ensure defect-free completion.
• Defects Liability Period (DLP): Time after completion for defect rectification.
4) Tender and Tendering Procedure
A tender is an invitation by the owner/client to contractors to submit offers (bids) for executing
construction work under specified terms.
Tender Documents (Contents)
• Notice Inviting Tender (NIT)
• Instructions to Bidders
• General Conditions of Contract (GCC)
• Special Conditions of Contract (SCC)
• Technical Specifications
• Drawings & Designs
• Bill of Quantities (BOQ)
• Forms of Bid, Bid Security, EMD, Performance Security
Tendering / Bidding Procedure
1 Notice Inviting Tender (NIT): Owner advertises project with details.
2 Issue of Tender Documents: Interested contractors purchase documents.
3 Pre-Bid Meeting: Clarifications given to bidders.
4 Submission of Tender: Contractors submit technical + financial bids.
5 Opening of Tender: Owner opens bids in presence of contractors.
6 Evaluation of Bids: Technical and financial evaluation.
7 Award of Contract: Letter of Acceptance (LOA) issued to successful bidder.
8 Agreement & Performance Security: Contractor signs agreement and submits security.
9 Commencement of Work.
