Contract: A contract is an agreement between two or more persons, individuals, business, organisations, or government agencies, to do or to refrain from doing

a particular thing in exchange for something of value. Contract is an agreement enforceable by law Types of contracts Item rate contract: It is also known as unit price contract or schedule contract. In these Contracts, payment for work done is made on the basis of the quantities of work actually executed and measured, materials supplied and used by the contractor on the project, each such quantity being multiplied by the contractors corresponding unit rate given in his tender for that unit. In this type of contract, reasonable variations in the tendered quantities of the works do not make any substantial difference to the contractor as he gets payments for the actual work as rates specified in the tender Lump sum Contracts As the name implies, in this type of contract, the contractor agrees to do a certain job for a fixed remuneration. For getting this compensation, he is to fulfill all his obligations under the contract, even though the actual cost incurred by him may be higher or lower than the sum agreed to. The payment could, however, be released periodically as the work progresses rather than a single settlement after acceptance of the work. From contractors point of view, a lump sum contract may be preferable as whatever a contractor can gain by excellent planning and efficient management . Where bills of quantities (BOQ) form a part of the contract, the bills constitute the exact measure of work undertaken by the builder for the contract price. The bills usually serve as the basis for evaluation of variations and also serve as a common basis for comparison and analysis of competing tenders Percentage Rate contract: In this form of contract the department prepares schedule of items, with quantities, rates, and unit and amount shown therein. The contractors are required to offer to carry out the work at par with the rates shown in the schedule or percentage above or below the rates indicated in the schedule of items of work. Cost Plus Percentage Contracts This envisages a contract where the client/owner agrees to pay the contractor his actual costs for constructing a facility plus a agreed percentage to wards his overheads and profit. The COST includes the cost of all material, labour, Machinery/equipment, T & P, etc. When there is an emergency or any other condition that requires constructing a facility in a hurry without time to develop plans for it, neither the employer nor the contractor is sure about the cost of construction, a cost plus percentage contract is generally used. There is no incentive to contractor to perform the contract in efficient manner, at the same time, there is no risk involved. Since profits of the contractor are linked with cost of materials, labour and

equipment, a high cost gives the contractor a higher amount of profit. This results in waste, inefficiency and extravagance by contractor. A cost plus percentage contract may also be very useful in situations where uncertainty exists about scope of work but which are not emergencies Cost Plus Fixed Fee Contracts In the cost plus fixed fee contract, the contractor is reimbursed the actual cost incurred by him on materials and services and a fixed amount of money as his fee. It is an improved version of the Cost plus percentage contract, as in this type of contract; the profit of the contractor is not linked with the cost. The contractor receives only the stipulated sum for his part in overseeing and running the job, no matter what the cost of the project may be. The contractor will, therefore, try to complete the job as fast as possible so that his expenses are minimum. Maximum Price Contracts This is employed when the availability of raw material and labour is uncertain and market conditions are fluctuating. In this, the maximum price of the work is fixed after taking into account the actual cost of construction and reasonable profit of the contractor. The contractor gets his profit of the cost of the work below the maximum limit fixed under the contract. More the cost of labour and materials less is the profit of the contractor. If the cost exceeds the maximum, the contractor suffers a loss. The contractor has, therefore, to strive to keep the cost low through better planning and efficient execution Incentive Contracts This is an improved version of the guaranteed maximum contract. In this type of contract, the target price of the work/finished product is fixed somewhat below the maximum price. The contractor is allowed a certain percentage of savings between the maximum price and the target price. This works as his incentive. This type of contract has very often been recommended in cases where the price is to be determined. Turnkey- Design and Build- EPC Contracts Some organizations specialize in designing and constructing projects. Employer signs an agreement with such organizations for planning, design and construction of the project. This is called a turnkey type of contract. The work can be greatly expedited under such contracts as extensive plans and specifications need not be prepared by the employer. Further, there is no division of responsibility. These contracts may also be called Design & Build or Engineering, Procurement and Construction ( EPC ) contracts BOT contracts Build, Operate and Transfer or Concessionaire contracts. The Constructor undertakes to design, finance, construct, operate and maintain the works for a concession period in consideration of the exercise and/or enjoy the rights, powers, benefits privileges, authorities and entitlements including the amount receivable from the collection of charges levied on the beneficiaries who use the work and in some cases annuity payment each year. For example, in the case of road or bridge users for the concession period.

Procurement of Plant and Machinery This will be basically Item Rate contract with list of Plant and Machinery substituting BOQ. The payment schedule is simple Advance, on inspection/ type testing, on delivery, after testing and after Defect liability period. There is no need for periodical measurement & payment. This needed for purchase of P & M like AC plants, Machine Tools, Construction Equipment, Chemical plants DG sets and so on One important aspects is that, unlike construction contracts, there is no Substantial completion.

Some Important terms in Indian contract act: Voidable contract : An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or other is a voidable contract. All voidable contracts are those, which are induced by coercion, undue influence, fraud, or misrepresentation, chooses to avoid contract within a reasonable time. Void Contract: A contract which ceases to be enforceable by law becomes a void contract. Essential elements of a valid contract: Different sections of the Indian contract act lay down the essential elements of the contract. They are as under. Proposal and acceptance Consideration Lawful consideration and lawful object Parties to the party should be competent Free consent An agreement must not be expressly declared to be void. Writing and registration if so required by law Legal relationship Certainty Possibility of performance Enforceability by law

Contingent Contract A contingent contract is a contract to do or not to do something, if some event, to such contract, does or does not happen.