Monday, June 30, 2014



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 agreement.

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.


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 where in 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 wriiten 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 finalised. 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 amount 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:

The general conditions in a building contract are
  • Description of the work to be executed.
  •  Estimated quantities and rates payable.
  •  Payment of earnest money and method of payment of running bills.
  • Time allowed for completion of the work.
  •  Provision for extension of time.
  •  Issuing interim and final certificate by the Architect.
  •  Submission of the interim bills by the contractor and their payment.
  •  Materials to be supplied by the owner.
  •  Alterations, additions and omissions to be made if repaired according to the orders of the Engineer-in-charge.
  • Action and compensation payable in case of bad work.
  •  Inspection of work.
  •  Responsibility of the contractor for the acts done personally or through the agents authorized to undertake such acts.
  • Payment of damages or penalty in case of failure of the contractor to commence or to carry out the work according to the contract.
  • Liability of the contractor for compensation for delay in execution or completion of work.
  •  Forfeiture of earnest money or security deposit.
  •  Responsibility of the contractor to supply ladders, scaffoldings and other material required for construction.
  •  Contractor's responsibility to remove condemned work or materials.
  •  Giving of notices and payment of fees to local authorities.
  •  Contractor's liability to pay statutory wages to workers.
  • Liability of the contractor to provide lights, fences and other precautions at the work site.
  •  Liability of the contractor in case of breach of any of the terms and conditions envisaged in the contract, including payment of labour charges.
  • Who has to bear the expenses incurred for supply of Electricity, water supply required for execution of the work.
  • Adjudication of disputes pertaining to the contract either by referring to an Arbitrator or otherwise.
  • Liability of the contractor for workmen compensation in case of injury or death during the course of employment. 
  • Role of an Architect 
  • In a building contract the Architect has a key role to play since the entire object of the contract to construct the building depends upon amount of commitment and diligence involved. Architect has certainduties such as:
  •  To inspect the site of the proposed building and to advise the owner about its suitability.
  •  To prepare plans, drawings, specifications and estimates. 
  • Get the plans sanctioned by the local authorities.
  •  Prepare tender or contract documents with all necessary conditions. 
  • After acceptance of the tender and contract entered into, to supervise the work of the contract.
  •  Bill Certification. 
  • 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 unecessary dispute and succesful completion of the project.

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