CONTRACTS, SPECIFICATION
LAWS AND ETHICS
IN CIVIL ENGINEERING
What is Contract?
Contract is a kind of document that make a binding obligation
between two or more parties.
Contract documents usually take the form of an agreement,
some general conditions, drawing, specification, all sufficient
to show the extent and nature of the contract they represent.
Classification of Contract
1. As to Origin
o Express Contract
It is a bilateral or multilateral contract in which the promise and assent of each
party are expressed in speech or the writing.
o Implied Contract
It is a unilateral contract where either the act of acceptance or both the act of
acceptance and the promise are inferred as a matter of fact from the conduct or
acts of the parties.
o Quasi Contract
A contract but a legal obligation which is similar to a contract and which is created
by implication of law.
2. As to Participant
o Two-Party Contract
It is the common type in which only two parties are involved.
o Joint Contract
It is one in which two or more parties merge to a greater or less extent their
interest to enter into a contract with another party or parties.
o Several Contract
It is one in which two or more persons enter into a contract as promisors or
promises but keep their liability more or less separate.
2. As to Participant
o Join and Several Contract
It is a contract with each promisor and a joint contract with all, so that parties
having a joint and several obligation are bound jointly as one party, and also
severally as separate parties at the same time.
o Third-Party Beneficiary Contract
It is one in which two parties enter into a contract for the protection of the interest
of a third person who is not a part to the contract.
3. As to Obligation Status
o Bilateral Contract
It is one in which one party agrees to perform or refrain from performing some
certain acts in return for which the other party agrees to perform or refrain from
performing certain acts.
o Unilateral Contract
It is one in which there is a promise by one party to perform certain acts provided
the other party does certain things.
4. As to Form
o Contract under Seal
It is a formal contract which does not require any consideration and has
the seal of the signer attached.
o Contract of Record
It is one which has been declared and adjudicated by a court having jurisdiction, or
which is entered of record in obedience to, or in carrying out, the judgments of a
court.
o Simple or Parole Contract
It is one which is less formal that a sealed contract and It may or may not be in
some special form and may in some cases be written and in others may be oral.
5. As to Legal Status
o Valid Contract
Is one which is in full force and enforceable by court action.
o Void Contract
Is one which has no status at law and is therefore not enforceable by court action.
o Voidable Contract
Is one which is binding on one party but may be either binding or nonbinding on the
other party at his option.
o Unenforceable Contract
Is one which is valid in all respects except that it is unenforceable through court
action.
Essential Elements of Contract
o There must be two or more competent contracting parties.
o There must be a mutual agreement on the part of all parties to the contract to
assume new obligation which each party understands and which are possible for the
parties to perform.
o There must be a valuable consideration for each of the parties to the contract and
the consideration must be reasonably equal in value.
o The obligation which the parties to the contract undertake muse be for legal acts
which are not contrary to sound public policy.
o The contract must be set forth according to the form and executed in the manner
prescribed by law.
Types of Construction
Contract
Lump Sum or Fixed Price Contract
Lump sum or Fixed price contract can be use when
the contractor agrees to perform the work specified
and described in the contract for a fixed price.
Lump Sum or Fixed Price Contract
The price of a fixed contract can only be changed upon the execution
of a change order, under which the owner and the contractor either
1. Agree for the contractor to perform additional work that falls
outside the scope of the original work for an agreed upon extra
compensation.
2. Agree to remove certain work from the original scope of work and
reduce the price of the contract in proportion to the work that the
contractor no longer has to perform
Pros and Cons of Lump Sum or Fixed Price Contract
Pros Cons
× Changes difficulty and costly
Lower financial risk to Employer
× Need to substantially complete
Higher financial risk to Contractor
design prior to bidding
Minimum Owner supervision
× Contractor inclined to choose
related to quality and schedule
lowest Methods / materials to
Contractor has higher incentive to
comply with specification
achieve earlier completion and
× Hard to build relationship. Each
better performance
project is unique.
Contractor selection is relatively
× Bidding expensive and length
easy
× Contactor may include high
contingency within each schedule
of rate item
Measurement Contract
Measurement Contract can be used in situations where
the design can be described in reasonable detail but the
amount cannot.
Measurement contracts can allow an early start on site,
before design is complete, and they can allow changes to
be made to the works relatively easily. However, there is
inevitably some risk for the client as the cost of the works
is not known.
Turnkey Contract
Turnkey Contract can be used in situations when a project
is deliver in a complete state rather than contracting with an
owner to develop a project in stages.
The builder or developer is separate from the final owner or
operator, and the project is turned over only once it is fully
operational. In effect, the developer is finishing the project
and “turning the key” over to the new owner.
Difference of Turnkey Contract and Lump Sum Contract
Turnkey Contract Lump Sum Contract
The owner is generally left out of the
The owner agrees to pay the developer
building process entirely as the
to complete a project that is built to the
developer handles all decisions and
owner’s specifications
problems related to construction.
Design and Build
Design and Build can be used in situations when the
contractor prepares the design to satisfy the
owner’s requirements and then constructs that
design.
Design and Build
Design and build projects can vary depending on the extent of
the contractor’s design responsibility and how much initial
design is included in the employer’s requirements.
Nevertheless, the level of design responsibility and input from
the contractor is much greater on design and build projects
than a traditional contract with a contractor’s designed portion.
Design and Build
Employer Contractor
The contractor can carry out the
The employer has control over any design in a number of ways. Often
design elements of the project that are they will appoint their own consultants
included in their requirements, but or use their own in-house team. It is
once the contract is let responsibility also common practice for the
over design passes to the contractor, contractor to take on the employer’s
so the employer has no direct control consultants and continue to use them
over the contractor’s detailed design. to complete the detailed design under
what is known as a novation
agreement.
Pros and Cons of Design and Build
Pros Cons
× Client may find it hard to prepare
Single point of responsibility a sufficiently comprehensive brief
for design and construction × Client has to commit to a concept
Earlier Commencement on design early
× Variation from the original brief
site
can be difficult to arrange and
Early price certainty expensive
Benefit of contract’s × Harder to compare tenders and
experience harnessed during determine if they offer value for
design. money
× Ease of fabrication may be
prioritized above aesthetic quality
Cost Plus Contract
Cost Plus Contracts can be used in situations when the
owner agrees to pay the complete cost of the materials and
labor needed to build the project along with a fee for the
contractor’s overhead and profit.
Cost Plus Contract
Under this arrangement, complete records of all time and
materials spent by the contractor on the work must be
maintained. Cost Plus Contracts must contain specific
information about certain pre-negotiated amount (some
percentage of the material and labor cost) covering
contractor’s overhead and profit.
Variation for Cost Plus Contract
o Cost Plus Fixed Percentage Contract
Compensation is based on a percentage of the cost.
o Cost Plus Fixed Fee Contract
Compensation is based on a fixed sum independent the final project cost.
o Cost Plus Fixed Fee with Guaranteed Maximum Price Contract
The total project cost will not exceed an agreed upper limit.;
o Cost Plus Fixed Fee with Bonus Contract
A bonus is given if the project is finished below budget, ahead of schedule.
Variation for Cost Plus Contract
o Cost Plus Fixed Fee with Guaranteed Maximum Price Contract and Bonus Contract
The total project cost will not exceed an agreed upper limit and a bonus is given if
the project is finished below budget, ahead of schedule.
o Cost Plus Fixed Fee with arrangement for sharing any cost savings contract
Any cost savings are shared with the buyer and the contractor.
Pros and Cons of Cost Plus Contract
Pros Cons
× Uncertainty for project owners as
the final cost cannot always be
easily determined
Contractor won’t be able to
× Requires additional resources to
reduce workmanship
reproduce and justify all related
Can focus on quality instead of
costs.
cost
× Might lead to disputes when trying
Could cover all related expense
to recover construction-related
Contractor’s risk is minimized
expenses.
× Can lead to projects running
longer than expected.
Unit Price Contract
Unit Price Contracts are based on anticipated quantities of
items which are counted in the project in addition to their
unit prices.
These type of contracts are suitable only for construction
and supplier projects which involve accurate identification
of different types of items, but not their numbers, in the
contract documents.
Pros and Cons of Unit Price Contract
Pros Cons
× Final cost not known form
Easy for contract selection.
the beginning.
Early start is possible.
× Staff needed to measure the
Saves the heavy cost of
finished quantities and
preparing many bills of
report on the units not
quantities by the
completed.
contractors.
× Unit price sometime tend to
Fair basis for competition.
draw unbalanced bid.
Lower risk for contractor.
Time and Material Contracts
Time and Material Contracts involve both parties
agreeing on predetermined unit rates for labor and
materials, and there is no preset price for
construction.
Main items included in a Time and
Material Contract
o Labor Rates
o The amount that will be charged for the workforce, which may also include
insurance, taxes, and so on
o Maximum Labor Hours
o T&M contracts can set a maximum number of labor hours, using a clause similar
to a not-to-exceed condition.
o Material Markup
o It is usual for the client to be charged the retail price for materials and for
a mark-up to be added by the contractor if they have a pre-agreed
wholesale price with the supplier.
o Not-to-Exceed
o T&M contract includes a cap that represents the maximum amount that can be
charged by the contractor.
Pros and Cons of Time and Material Contract
Pros Cons
It provides the client with cost × It can prove more risky for the
transparency and allows them to client to proceed without a clear
verify invoices and timesheet to understanding of the final cost
ensure the cost are correct. × It can increase the likelihood of
It allows for greater flexibility in disputes arising.
the extent of the work required. × Errors or inaccurate estimates
It allows works to progress even can leave them with a low profit
when there is no definitive plan that may not be deemed
for how it will be completed. worthwhile
Item Rate Contract
Item Rate Contract can be used in situations if it requires to
quote rates for individual items of work on the basis of
schedule of quantities furnished by the client’s department.
Percentage Rate Contract
Percentage Rate Contract can be used in situations
if the client’s department draws up the schedule of
items according to the description of items
sanctioned in the estimate with quantities, rates,
units and amount shown therein.
Labor Contract
Labor Contract can be used in situations where the
contractor quotes rates for the item work exclusive
of the elements of materials which are supplied by
the client’s Department.
Piece-Work Agreement
Piece-Work Agreement can be used in situations
which only a rate is agreed upon without reference
to the total quantity of work to be done or the
quantity of work to be done within a given period.
Target Contract
Target Contract can be used in situations where the
contractor is paid on a cost-plus percentage work
performed under this contract.
In addition, he receives a percentage plus or minus on
savings or excess effected against either a prior agreed
estimate of total cost or a target value arrived at by
measuring the work on completion and valuing at prior
agreed rates.
Specification
What is Specification?
Specification describe the materials and
workmanship required for a development.
Purpose of Specification
o The cost of an unit quantity of work is governed by its specifications.
o Specification of a work is required to describe the quality and quantity of
different materials required for a construction work and is one of the
essential contract documents.
o This also specifies the workmanship and the method of doing the work.
Thus specification of a work serves as a guide to a supervising staff of a
contractor as well as to the owner to execute the work to their
satisfaction.
o A work is carried out according to its specification and the contractor is
paid for the same. Any change in specification changes the tendered rate.
Purpose of Specification
o As the rate of work is based on the specification, a contractor can
calculate the rates of various items of works in tender with his
procurement rates of materials and labor. Thus tender rate without
specification of works is baseless, incomplete and invalid.
o Specification is necessary to specify the equipment tools and plants to be
engaged for a work and thus enables to procure them beforehand.
o The necessity of specification is to verify and check the strength of
materials for a work involved in a project.
Types of Construction Specification
o Prescriptive Specification
o Prescriptive Specification conveys the requirements of a project
through a detailed explanation of the materials that the contract
must use.
o Performance Specification
o Performance Specification it specifies the operational
requirements of a component or installation.
o Proprietary Specification
o Proprietary Specification are used when you need to use a
single type of product for any kind of installation.
Laws of Civil Engineering
What is Philippines Legal System?
Philippines Legal System is a mixture of
customary usage, Roman (civil law) and
Anglo-American (common law) systems,
and Islamic law.
Branches of Philippines Legal System
o Legislative Branch
Legislative branch is authorized to make laws, alter, and repeal them
through the power vested in the Philippines Congress. This institution
divided into the Senate and the House of Representative
o Executive Branch
Executive branch carries out laws and it composed of the President and
the Vice President.
o Judicial Branch
Judicial branch evaluates laws and I hold the power to settle
controversies involving rights that are legally demandable and
enforceable
Laws in Civil Engineering
o Construction Regulatory
o Republic Act No. 4566
AN ACT CREATING THE PHILIPPINE LICENSING BOARD FOR
CONTRACTORS, PRESCRIBING IT’S POWER, DUTIES AND FUNCTIONS,
PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES.
o Presidential Decree 1746
CREATING THE CONSTRUCTION INDUSTRY AUTHORITY OF THE
PHILIPPINES (CIAP)
Laws in Civil Engineering
o Construction Regulatory
o Presidential Decree No. 3367
DEVELOPING AND REGULATING THE OVERSEAS CONSTRUCTION
INDUSTRY, PROVIDING INCENTIVES THEREFORE, AND FOR OTHER
PURPOSES
o Republic Act No. 9184
GOVERNMENT PROCUREMENT REFORM ACT – AN ACT PROVIDING FOR
THE MODERNIZATION, STANDARIZATION AND REGULATION OF THE
PRECUREMENT ACTIVITIES OF THE GOVERNMENT
Laws in Civil Engineering
o Design and Construction Code
o Presidential Decree No. 1096
NATIONAL BUILDING CODE OF THE PHILIPPINES (NBCP)
o Presidential Decree No. 1185
FIRE CODE OF THE PHILIPPINES
o Presidential Decree No. 856
CODE ON SANITATION OF THE PHILIPPINES
Laws in Civil Engineering
o Design and Construction Code
o Batas Pambansa 344
ACCESSIBILITY LAW: Implementing Rules and Regulations – An Act to enhance
the mobility of Disabled Person by requiring certain buildings, Institution,
Establishments and Public Utilities to install facilities and other devices.
Republic Act No. 544
An Act to Regulate the Practice of Civil Engineering in the Philippines
Article 1 - Section 2A
The practice of civil engineering within the meaning and intent of this Act shall embrace services
in the form of consultation, design, preparation of plans, specifications, estimates, erection,
installation and supervision of the construction of streets, bridges, highways, railroads, airports
and hangars, port works, canals, river and shore improvements, lighthouses, and dry docks;
buildings, fixed structures for irrigation, flood protection, drainage, water supply and sewerage
works; demolition of permanent structures; and tunnels. The enumeration of any work in this
section shall not be construed as excluding any other work requiring civil engineering knowledge
and application.
Article 1 – Section 2B
The term “civil engineer” as used in this act shall mean a person duly registered with the Board
for Civil Engineers in the manner as hereinafter provided.
