CONTRACT DOCUMENTS QUESTION: How is a contract by the exchange

of letters accomplished?
QUESTION: Under what conditions should the
agreements and details of business 1. A letter is written asking for the price
transactions be reduced to writing, and under quotation.
what conditions is this not necessary? 2. A return letter quotes the price.
3. A third letter accepts the quotation.
 It should be made in writing in order
that a record of the transactions be SAMPLE CONTRACT CONSIDERATIONS
made both as a memorandum for the
information of the parties themselves 1. SCOPE OF THE WORK
or for their administrators in case of 2. TIME OF COMPLETION
death. 3. THE CONTRACT SUM
 It is also desirable whenever the 4. PROGRESS PAYMENTS
agreement is of importance or where it 5. FINAL PAYMENT
is all complicated by general or 6. SETTLEMENT OF DISPUTES
technical specification of any kind that
may possibly be misunderstood, ARRANGEMENT OF CONTRACT DOCUMENTS
overlooked, or forgotten before its
execution or where other grounds of 1. Advertisement, or request for bids
dispute may arise. 2. Instruction to bidders
 It is not always essential to prepare 3. Proposal
elaborate contracts. Brief contracts with 4. General conditions
little or no detail are warranted for 5. Agreement
circumstances under which competition 6. Performance bond
is limited to contractors known to be 7. General specification
responsible and experienced and whose 8. Detailed specification
material, work, or machinery can be
accepted on known merit with few ADVERTISEMENT – The purpose of this is to
questions as to details. induce interested and competent parties to
submit bids on the work being undertaken.
QUESTION: Where a contract is desired, it is
always necessary to have it in writing and in Information on Advertisement:
accord with some particular form?
1. The name of the individual or
 Yes, a written contract must specifically organization requesting bids.
cover all points which are necessary to 2. The location of the proposed work
meet legal requirements for a valid 3. When and where bids will be received
contract. In addition, there should be 4. When and where bids will be opened
included enough material to make 5. A general description of the work.
quite clear just what is required of 6. Any special of unusual requirements
each party to the contract. The
promises to be performed such as the
materials to be furnished and work to
be done. Payments to be made should
also be in the detail.
INSTRUCTION TO BIDDERS – This is to amplify
anything in the advertisement which has been
abbreviated because of the cost and space
limitations of advertising and to give any other
details which interested parties or should know
to prepare bids properly.
Items usually included in this are:
1. Description of work
2. Proposals
a. Proposal Considerations
b. Proposal forms
3. Bids
a. Delivery of bids
b. Withdrawal of bids
c. Bid on complete project or
complete division of project
d. Basis on which bids are requested
e. Bid guarantee
f. Bidders responsibility
g. Omissions and additions
h. Interpretation of contract
documents
i. Requirement for signing bids
4. Contract
a. Award of contract
b. When award effectual
c. Number of copies of documents
5. Bond
a. Instructions for executing bond
6. Time of completion
7. Standard specification
8. Engineers’ estimate of quantities
9. Contract documents
QUESTION: Why is a bid guarantee usually
required with each bid?
 A proposal normally is an offer that can
be withdrawn or cancelled at any time
before its formal acceptance. If each
bidder had the option of withdrawing
his bid at any time, opportunities for
the manipulation of the bids would be
great and would require rebidding of
the project. The owner is entitled to
have a protection against that situation
that can be obtained by bid guarantee.
QUESTION: From a legal point of view, what is
the most important unit of the contract
documents?
 The Agreement is the most important
unit of the contract documents.
QUESTION: Why should the agreement section
of a contract always be either drawn up or
checked by a competent lawyer?
 The Agreement is a highly technical
legal document and in all cases of more
than trivial importance.
QUESTION: Why is it important for the
agreement section of a contract to list either
directly or by reference all of the contract
documents?
 This section must be included which
defines exactly what work is covered by
the contract. This section may include a
list of all the documents and drawings
which are incorporated into the
contract or it may state “in accord with
plans and specifications prepared by”
with a listing of such plans and
specifications in some other section of
the contract documents.
QUESTION: From a legal point of view, why is
the amount of the contract price always stated
in the “Agreement”?
 Because consideration on the part of
both parties is essential to a valid
contract.
QUESTION: What are the business reasons for
the amount of the contract price and method
of payment always being stated in the
Agreement?

 Since payment of this sum may be in

one lump sum or may be in partial
payments.

QUESTION: Why does the agreement section of

a construction contract usually provide for the
signature of witnesses?

 It just needs to clearly indicate that the

agreement has been reviewed and
approved.

PERFORMANCE BOND – This is required so that

the owner may have additional protection if the
contractor should abandon the contract or for
any reason become unable to finish the work in
accordance with plans and specifications.

QUESTION: Why should an engineer or

architect, in general, not attempt the drafting
of the text of a performance bond?

 The performance bond must meet all of

the legal requirements imposed by the
law. These are legally highly technical.
Most engineers are reluctant to prepare
a performance bond form, preferring to
leave this as a function for legal
counsel.