What is Contract?

The meaning of "Contract"

As a  ICTAD/SBD/02 Sub Clauses 1.1.1 in General Provisions,

"Contract" means the Contract Agreement, the Letter of Acceptance (LOA), Memorandum of Understanding (MOU), the Form of Bid, these Condition, the Contract Data, the Specifications, the Drawings, the Bill of Quantities, the Schedules and further documents (if any) which are listed in the Contract Agreement or in the Letter of Acceptance.

With the "Letter of Intent" (LOI) it can not be a Contract, to be a Contract there are must have a Letter of Acceptance (LOA).

"Contract is an agreement with specific items between two or more persons or entities."

Generally, contract is governed by "Contract Law". Contract is not an isolated application to the particular work.

what is  construction contract

Why we need a contract?
> Contracts provide a description of responsibilities;
> Contract bind parties to their duties;
> Contract can establish a time frame;
> Contract can secure payments;
> Contract provide recourse when the relationship falter; 

The Parties to the Contract

There are mainly three parties who involved the contract, these parties also known as "C-3 parties". The FIDIC Conditions of Contract are based on the assumption that the Employer, the first party, who has decided to have certain works carried out for the implementation of a project, and is sponsoring the Works, has decided to select a suitably qualified Contractor, the second party, to execute the Works.

The Employer/ Client

The party that requires of desires the construction of the building he is known as Owner / Employer/ Client/ Customer.

Basically Customer maybe the project owner or the user client.

The "Project Owner" is the person who,

• Stands to win or lose the most in terms of the outcome of the project 
• Accepts full authority for the project 
• Accepts accountability for the performance of the project (and who wants to do the project) 
• Provides resources.

"User Client" is the person who will use and be benefitted from the project or the change brought about by the project.

Expectations of Customer/ Client

• Completion on Time
• Quality of work
• On Budget
• Safe
• Flexibility

The Contractor

The party who is prepared to do the actual construction he is known as the Contractor.

The obligation of the Contractor is to execute and complete the works, for which he has submitted his Tender, within the time specified in the Contract. In addition he has an obligation to remedy and defects which appear during the Defects Liability Period. (Defects Notification Period)

The contractor shall provide the plant, all Contractor's Personnel, Goods, consumables and other things and services, whether of a temporary or permanent nature, required in and for execution, completion and remedying of defects.

The Contractor is responsible for his own staff and work force and for taking out social and other insurances in respect of his personnel. He must comply with all applicable laws, by-laws and regulations and ensure that all those for whom he is responsible also comply.


The Engineer/ Consultant

The person who gives a consultation regarding the construction, Handling the documents and the major supervisions are called Consultant/ Engineer.

The Engineer is not a party to the Contract between the Employer and the Contractor but his terms of engagement are set out in an agreement between the Employer (Client) and the Engineer (Consultant). The Employer (Client) shall appoint the Engineer who shall carry out the duties assigned to him in the contract. The Engineer's staff shall include suitably qualified engineers and other professionals who are competent to carry out these duties.

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