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10111CE705 - CONTRACT LAWS, REGULATIONS

AND

PROJECT CASE STUDY

E-LEARNING MATERIAL

SUBMITTED BY,

S.SIVAKUMAR B.E.,M.E.,(Ph.D)

ASSISTANT PROFESSOR

DEPARTMENT OF CIVIL ENGINEERING

NPR COLLEGE OF ENGINEERING & TECHNOLOGY

www.vidyarthiplus.com

www.Vidyarthiplus.com

10111CE705 CONTRACT LAWS, REGULATIONS AND PROJECT CASE STUDY

L T P C 3 0 0 3

UNIT I CONSTRUCTION CONTRACTS 9

Indian Contracts Act – Elements of Contracts – Types of Contracts – Features – Suitability – Design of

Contract Documents – International Contract Document – Standard Contract Document – Law of Torts

UNIT II TENDERS 10

Prequalification – Bidding – Accepting – Evaluation of Tender from Technical, Contractual and

Commercial Points of View – Contract Formation and Interpretation – Potential Contractual Problems –

World Bank Procedures and Guidelines – Transparency in Tenders Act.

UNIT III ARBITRATION 8

Comparison of Actions and Laws – Agreements – Subject Matter – Violations – Appointment of

Arbitrators – Conditions of Arbitration – Powers and Duties of Arbitrator – Rules of Evidence –

Enforcement of Award – Costs – Study of a project from arbitration point of view (case study).

UNIT IV LEGAL REQUIREMENTS 9

Insurance and Bonding – Laws Governing Sale, Purchase and Use of Urban and Rural Land – Land

Revenue Codes – Tax Laws – Income Tax, Sales Tax, Excise and Custom Duties and their Influence on

Construction Costs – Legal Requirements for Planning – Property Law – Agency Law – Local

Government Laws for Approval – Statutory Regulations

UNIT V LABOUR REGULATIONS 9

Social Security – Welfare Legislation – Laws relating to Wages, Bonus and Industrial Disputes, Labour

Administration– Insurance and Safety Regulations – Workmen‟s Compensation Act – Indian Factory Act

– Tamil Nadu Factory Act – Child Labour Act - Other Labour Laws

TOTAL: 45 PERIODS

REFERENCES

1. Gajaria G.T., Laws Relating to Building and Engineering Contracts in India, M.M.Tripathi Private

Ltd., Bombay, 1982

2. Tamilnadu PWD Code, 1986

3. Jimmie Hinze, Construction Contracts, Second Edition, McGraw Hill, 2001



4. Joseph T. Bockrath, Contracts and the Legal Environment for Engineers and Architects, Sixth Edition,

McGraw Hill, 2000.

UNIT-I – CONSTRUCTION CONTRACTS

NATURE OF CONTRACT

INTRODUCTION

We enter into contracts day after day. Taking a seat in a bus amounts to entering into a contract. When

you put a coin in the slot of a weighing machine, you have entered into a contract. You go to a restaurant

and take snacks, you have entered into a contract. In such cases, we do not even realise that we are

making a contract. In the case of people engaged in trade, commerce and industry, they carry on business

by entering into contracts. The law relating to contracts is to be found in the Indian Contract Act,

1872.The law of contracts differs from other branches of law in a very important respect. It does not lay

down so many precise rights and duties which the law will protect and enforce ;it contains rather a

number of limiting principles, subject to which the parties may create rights and duties for themselves,

and the law will uphold those rights and duties. Thus, we

can say that the parties to a contract, in a sense make the law for themselves. So long as they do not

transgress some legal prohibition, they can frame any rules they like in regard to the subject matter of

their contract and the law will give effect to their contract.

WHAT IS A CONTRACT?

Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law.

Section 2(e) defines agreement as ―every promise and every set of promises forming consideration for

each other.‖ Section 2(b) defines promise in these words: ―When the person to whom the proposal is

made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted, becomes

a promise.‖From the above definition of promise, it is obvious that an agreement is an accepted

proposal. The two elements of an agreement are:

(i) offer or a proposal; and

(ii) an acceptance of that offer or proposal.

What agreements are contracts? All agreements are not studied under the Indian Contract Act, as some

of them are not contracts. Only those agreements which are enforceable at law are contracts. The



Contract Act is the law of those agreements which create obligations, and in case of a breach of a promise

by one party to the agreement, the other has a legal remedy. Thus, a contract consists of two elements:

(i) an agreement; and

(ii) legal obligation, i.e., it should be enforceable at law.

However, there are some agreements which are not enforceable in a law court. Such

agreements do not give rise to contractual obligations and are not contracts.

Examples

(1) A invites B for dinner in a restaurant. B accepts the invitation. On the appointed

day, B goes to the restaurant. To his utter surprise A is not there. Or A is there but refuses to entertain B.

B has no remedy against A. In case A is present in the restaurant but B fails to turn-up, then A has no

remedy against B.

(2) A gives a promise to his son to give him a pocket allowance of Rupees one hundred every month. In

case A fails or refuses to give his son the promised amount, his son has no remedy against A. In the

above examples promises are not enforceable at law as there was no intention to create legal obligations.

Such agreements are social agreements which do not give rise to legal consequences. This shows that an

agreement is a broader term than a contract. And ,therefore, a contract is an agreement but an agreement

is not necessarily a contract.

What obligations are contractual in nature? We have seen above that the law of contracts is not the whole

law of agreements. Similarly, all legal obligations are not contractual in nature. A legal obligation having

its source in an agreement only will give rise to a contract.

Example

A agrees to sell his motor bicycle to B for Rs. 5,000. The agreement gives rise to a legal obligation on the

part of A to deliver the motor bicycle to B and on the part of B to pay Rs. 5,000 to A. The agreement is a

contract. If A does not deliver the motor bicycle, then B can go to a court of law and file a suit against A

for non-performance of the

promise on the part of A. On the other hand, if A has already given the delivery of the motor bicycle and

B refuses to make the payment of price, A can go to the court of law and file a suit against B for non-

performance of promise. Similarly, agreements to do an unlawful, immoral or illegal act, for example,

smuggling or murdering a person, cannot be enforceable at law. Besides, certain agreements have been

specifically declared void or unenforceable under the Indian Contract Act. For instance, an agreement to

bet (Wagering agreement) (S. 30), an agreement in restraint of trade (S. 27),an agreement to do an



impossible act (S. 56). An obligation which does not have its origin in an agreement does not give rise to

a contract. Some of such obligations are

1. Torts or civil wrongs;

2. Quasi-contract;

3. Judgements of courts, i.e., Contracts of Records;

4. Relationship between husband and wife, trustee and beneficiary, i.e., status obligations. These

obligations are not contractual in nature, but are enforceable in a court of law. Thus, Salmond has rightly

observed: ―The law of Contracts is not the whole law of agreements nor is it the whole law of

obligations. It is the law of those agreements which create obligations, and those obligations which have,

their source in agreements.‖

Law of Contracts creates rights in personam as distinguished from rights in rem. Rights in rem are

generally in regard to some property as for instance to recover land in an actionof ejectment. Such rights

are available against the whole world. Rights in personam are against or in respect of a specific person

and not against the world at large.

Examples

(1) A owns a plot of land. He has a right to have quiet possession and enjoyment of the same. In other

words every member of the public is under obligation not to disturb his quiet possession and enjoyment.

This right of A against the whole world

is known as right in rem.

(2) A is indebted to B for Rs. 100. It is the right of B to recover the amount from A.This right of B

against A is known as right in personam. It may be noted that noone else (except B) has a right to recover

the amount from A.The law of contracts is concerned with rights in personam only and not with rights in

rem.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

We have seen above that the two elements of a contract are: (1) an agreement; (2) legal obligation.

Section 10 of the Act provides for some more elements which are essential in order to constitute a valid

contract. It reads as follows:―All agreements are contracts if they are made by free consent of parties,

competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly

declared to be void.‖Thus, the essential elements of a valid contract can be summed up as follows

1. Agreement.

2. Intention to create legal relationship.

3. Free and genuine consent.

4. Parties competent to contract.



5. Lawful consideration.

6. Lawful object.

7. Agreements not declared void or illegal.

8. Certainty of meaning.

9. Possibility of performance.

10. Necessary Legal Formalities.

These essential elements are explained briefly.

1. Agreement

As already mentioned, to constitute a contract there must be an agreement. An agreement the offeror, the

party to whom the offer is made is known as the offeree. Thus, there are essentially to be two parties to

an agreement. They both must be thinking of the same thing in the same sense. In other words, there must

be consensus-ad-idem. Thus, where ‗A‘ who owns 2 cars x and y wishes to sell car ‗x‘ for Rs. 30,000.

‗B‘, an acquaintance of ‗A‘ does not know that ‗A‘ owns car ‘x’ also. He thinks that ‗A‘ owns only car‘y’

and is offering to sell the same for the stated price. He gives his acceptance to buy the same. There is no

contract because the contracting parties have not agreed on the same thing at the same time, ‗A‘ offering

to sell his car ‗x‘ and ‗B‘ agreeing to buy car ‘y’. There is no consensus-ad-idem.

2. Intention to create legal relationship

As already mentioned there should be an intention on the part of the parties to the agreement to create a

legal relationship. An agreement of a purely social or domestic nature is not a contract.

Example

A husband agreed to pay £30 to his wife every month while he was abroad. As he failed to pay the

promised amount, his wife sued him for the recovery of the amount.Held: She could not recover as it was

a social agreement and the parties did not intend to create any legal relations [Balfour v. Balfour (1919)2

K.B.571].However, even in the case of agreements of purely social or domestic nature, there may be

intention of the parties to create legal obligations. In that case, the social agreement is intended to have

legal consequences and, therefore, becomes a contract. Whether or not such an agreement is intended to

have legal consequences will be determined with reference to the facts of the case. In commercial and

business agreements the law will presume that the parties entering into agreement intend those

agreements to have legal consequences. However, this presumption may be negatived by express terms to

the contrary. Similarly, in the case of agreements of purely domestic and social nature, the presumption is

that they do not give rise to legal consequences. However, this presumption is rebuttable by giving

evidence to the contrary, i.e., by showing that the intention of the parties was to create legal obligations.

Examples



(1) There was an agreement between Rose Company and Crompton Company, where of the former were

appointed selling agents in North America for the latter. One of the clauses included in the agreement

was: ―This arrangement is not... a formal or legal agreement and shall not be subject to legal jurisdiction

in the law courts‖.Held that: This agreement was not a legally binding contract as the parties intended not

to have legal consequences [Rose and Frank Co. v. J.R. Crompton and Bros.Ltd. (1925) A.C. 445].

(2) An agreement contained a clause that it ―shall not give rise to any legal relationships, or be legally

enforceable, but binding in honour only‖.

Held: The agreement did not give rise to legal relations and, therefore, was not a contract. [Jones v.

Vernon’s Pools Ltd. (1938) 2 All E.R. 626].

(3) An aged couple (C and his wife) held out a promise by correspondence to their niece and her husband

(Mrs. and Mr. P.) that C would leave them a portion of his estate in his will, if Mrs. and Mr. P would sell

their cottage and come to live with the aged couple and to share the household and other expenses. The

young couple sold their cottage and started living with the aged couple. But the two couples subsequently

quaralled and the aged couple repudiated the agreement by requiring the young couple to stay somewhere

else. The young couple filed a suit against the aged couple for the breach of promise.

Held: That there was intention to create legal relations and the young couple couldrecover damages

[Parker v. Clark (1960) 1 W.L.R. 286].

3. Free and genuine consent

The consent of the parties to the agreement must be free and genuine. The consent of the parties should

not be obtained by misrepresentation, fraud, undue influence, coercion or mistake. If the consent is

obtained by any of these flaws, then the contract is not valid.

4. Parties competent to contract

The parties to a contract should be competent to enter into a contract. According to Section 11, every

person is competent to contract if he (i) is of the age of majority, (ii) is of sound mind, and (iii) is not

disqualified from contracting by any law to which he is subject. Thus, there may be a flaw in capacity of

parties to the contract. The flaw in capacity may be due to minority, lunacy, idiocy, drunkenness or

status. If a party to a contract suffers from any of these flaws, the contract is unenforceable except in

certain exceptional circumstances.

5. Lawful consideration



The agreement must be supported by consideration on both sides. Each party to the agreement must give

or promise something and receive something or a promise in return. Consideration is the price for which

the promise of the other is sought. However, this price need not be in terms of money. In case thepromise

is not supported by consideration, the promise will be nudum pactum (a bare promise) and is not

enforceable at law.Moreover, the consideration must be real and lawful.

6. Lawful object

The object of the agreement must be lawful and not one which the law disapproves.

7. Agreements not declared illegal or void

There are certain agreements which have been expressly declared illegal or void by the law. In such

cases, even if the agreement possesses all the elements of a valid agreement, the agreement will not be

enforceable at law.

8. Certainty of meaning

The meaning of the agreement must be certain or capable of being made certain otherwise the agreement

will not be enforceable at law. For instance, A agrees to sell 10 metres of cloth. There is nothing

whatever to show what type of cloth was intended. The agreement is not enforceable for want of certainty

of meaning. If, on the other hand, the special description of the cloth is expressly stated, say Terrycot (80

: 20), the agreement would be enforceable as there is no uncertainly as to its meaning.

However, an agreement to agree is not a concluded contract [Punit Beriwala v. SuvaSanyal AIR 1998

Cal. 44].

9. Possibility of performance

The terms of the agreement should be capable of performance. An agreement to do an act impossible in

itself cannot be enforced. For instance, A agrees with B to discover treasure by magic. The agreement

cannot be enforced.

10. Necessary legal formalities

A contract may be oral or in writing. If, however, a particular type of contract is required by law to be in

writing, it must comply with the necessary formalities as to writing, registration and attestation, if

necessary. If these legal formalities are not carried out, then the contract is not enforceable at law.

CLASSIFICATION OF CONTRACTS

Contracts may be classified in terms of their (1) validity or enforceability, (2) mode of formation, or (3)

performance.

1. Classification according to validity or enforceability



Contracts may be classified according to their validity as (i) valid, (ii) voidable, (iii) void contracts or

agreements, (iv) illegal, or (v) unenforceable.A contract to constitute a valid contract must have all the

essential elements discussed

earlier. If one or more of these elements is/are missing, the contract is voidable, void, illegal or

unenforceable.

As per Section 2 (i) a voidable contract is one which may be repudiated at the will of one of the parties,

but until it is so repudiated it remains valid and binding. It is affected by a flaw (e.g., simple

misrepresentation, fraud, coercion, undue influence), and the presence of anyone of these defects enables

the party aggrieved to take steps to repudiate the contract.

It shows that the consent of the party who has the discretion to repudiate it was not free.

Example

A, a man enfeebled by disease or age, is induced by B‘s influence over him as his medical attendant to

agree to pay B an unreasonable sum for his professional services. B employs undue influence. A‘s

consent is not free; he can take steps to set the contract aside. An agreement which is not enforceable by

either of the parties to it is void [Section 2(i)].

Such an agreement is without any legal effect ab initio (from the very beginning). Under the law, an

agreement with a minor is void (Section 11).*A contract which ceases to be enforceable by law becomes

void when it ceases to been forceable [Section 2(i)].

Examples

(1) A and B contract to marry each other. Before the lime fixed for the marriage, A goes mad. The

contract becomes void.

(2) A contracts to take indigo for B to a foreign port. A‘s government afterwards declares war against the

country in which the port is situated. The contract becomes void when war is declared.

In the above two examples, the contracts were valid at the time of formation. They became void

afterwards. In example (1) the contract became void by subsequent impossibility. In example (2) the

contract became void by subsequent illegality.*

It is misnomer to use ‗a void contract‘ as originally entered into. In fact, in that case there is no contract

at all. It may be called a void agreement. However, a contract originally valid may become void later. An

illegal agreement is one the consideration or object of which (1) is forbidden by law; or (2) defeats the

provisions of any law; or (3) is fraudulent; or (4) involves or implies injury to the person or property of

another; or (5) the court regards it as immoral, or opposed to public policy.

Examples



(1) A, B and C enter into an agreement for the division among them of gains acquired or to be acquired,

by them by fraud. The agreement is illegal.

(2) A promises to obtain for B an employment in the public service, and B promises to pay Rs. 1,000 to

A. The agreement is illegal.Every agreement of which the object or consideration is unlawful is not only

void as between immediate parties but also taints the collateral transactions with illegality. In Bombay,

the wagering agreements have been declared unlawful by statute.

Example

A bets with B in Bombay and loses; makes a request to C for a loan, who pays B in settlement of A‘s

losses. C cannot recover from A because this is money paid ―under‖ or ―in respect of a wagering

transaction which is illegal in Bombay.

An unenforceable contract is neither void nor voidable, but it cannot be enforced in the court because it

lacks some item of evidence such as writing, registration or stamping. For instance, an agreement which

is required to be stamped will be unenforceable if the same is not stamped at all or is under-stamped. In

such a case, if the stamp is required merely for

revenue purposes, as in the case of a receipt for payment of cash, the required stamp may be affixed on

payment of penalty and the defect is then cured and the contract becomes enforceable. If, however, the

technical defect cannot be cured the contract remains unenforceable, e.g., in the case of an unstamped bill

of exchange or promissory note.

Contracts which must be in writing. The following must be in writing, a requirement laid down by statute

in each case:

(a) A negotiable instrument, such as a bill of exchange, cheque, promissory note (The Negotiable

Instruments Act, 1881).

(b) A Memorandum and Articles of Association of a company, an application for shares in a company; an

application for transfer of shares in a company (The Companies Act, 1956).

(c) A promise to pay a time-barred debt (Section 25 of the Indian Contract Act, 1872).

(d) A lease, gift, sale or mortgage of immovable property (The Transfer of Property

Act, 1882).

Some of the contracts and documents evidencing contracts are, in addition to be in

writing, required to be registered also. These are:

1. Documents coming within the purview of Section 17 of the Registration Act, 1908.

2. Transfer of immovable property under the Transfer of Property Act, 1882.

3. Contracts without consideration but made on account of natural love and affection between parties

standing in a near relation to each other (Section 25, The Indian Contract Act, 1872).



4. Memorandum of Association, and Articles of Association of a Company, Mortgages and Charges (The

Companies Act, 1956).

2. Classification according to mode of formation

There are different modes of formation of a contract. The terms of a contract may be stated in words

(written or spoken). This is an express contract. Also the terms of a contract may be inferred from the

conduct of the parties or from the circumstances of the case. This is an implied contract (Section 9).

Example

If A enters into a bus for going to his destination and takes a seat, the law will imply a contract from the

very nature of the circumstances, and the commuter will be obliged to pay for the journey. We have seen

that the essence of a valid contract is that it is based on agreement of the parties. Sometimes, however,

obligations are created by law (regardless of agreement) whereby an obligation is imposed on a party and

an action is allowed to be brought by another party. These obligations are known as quasi-contracts. The

Indian Contract Act, 1872 (Chapter V Sections 68–72) describes them as ―certain relations resembling

those created by contract‖.

Examples

(1) A supplies B, a minor, with necessaries suitable to his condition in life. A is entitled to be reimbursed

from B‘s property.

(2) A supplies the wife and children of B, a minor, with necessaries suitable to their condition in life. A is

entitled to be reimbursed from B‘s property.

(3) A, a tradesman, leaves goods at B‘s house by mistake. B treats the goods as his own. B is bound to

pay A for them. In all the above cases, the law implies a contract and a person who has got benefit is

under an obligation to reimburse the other.

3. Classification according to performance

Another method of classifying contracts is in terms of the extent to which they have been performed.

Accordingly, contracts are: (1) executed, and (2) executory or (1) unilateral, and (2) bilateral.

An executed contract is one wholly performed. Nothing remains to be done in terms of the contract.

Example

A contracts to buy a bicycle from B for cash. A pays cash. B delivers the bicycle. An executory contract

is one which is wholly unperformed, or in which there remains something further to be done.

Example

On June 1, A agrees to buy a bicycle from B. The contract is to be performed on June 15. The executory

contract becomes an executed one when completely performed. For instance, in the above example, if

both A and B perform their obligations on June 15, the contract becomes executed. However, if in terms



of the contract performance of promise by one party is to precede performance by another party then the

contract is still executory, though it has been performed by one party.

Example

On June 1, A agrees to buy a bicycle from B. B has to deliver the bicycle on June 15 and A has to pay

price on July 1. B delivers the bicycle on June 15. The contract executory as something remains to be

done in terms of the contract.

A Unilateral Contract is one wherein at the time the contract is concluded there is an obligation to

perform on the part of one party only.

Example

A makes payment for bus fare for his journey from Bombay to Pune. He has performed his promise. It is

now for the transport company to perform the promise. A Bilateral Contract is one wherein there is an

obligation on the part of both to do or to refrain from doing a particular thing. In this sense, Bilateral

contracts are similar to executory contracts.

An important corollary can be deduced from the distinction between Executed and Executory Contracts

and between Unilateral and Bilateral contracts. It is that a contract is a contract from the time it is made

and not from the time its performance is due. The performance of the contract can be made at the time

when the contract is made or it can be postponed also. See examples above under Executory Contract.

CLASSIFICATION/TYPES OF CONTRACTS

1. From the point of view of enforceability

(a) Valid contracts

(b) Voidable contracts

(c) Void contracts or agreements

(d) Illegal agreements

(e) Unenforceable Agreements (Certain contracts must be in writing)

2. According to Mode of Formation

(a) Express contract

(b) Implied contract

(c) Quasi-contracts

3. According to Performance

(a) Executed

(b) Executory



(c) Uni-lateral

(d) Bi-lateral

Classification of Contracts in the English Law

In English Law, contracts are classified into (a) Formal Contracts and (b) Simple Contracts. Formal

contracts are those whose validity or legal force is based upon form alone. Formal Contracts can be either

(a) contracts of record or (b) contracts under seal or by (deed or speciality contracts. No consideration is

necessary in the case of Formal Contracts. Such contracts do not find any place under Indian Law as

consideration is necessary under Section 25 (of course there are some exceptions to the principle that a

contract without consideration is void).

Contracts of Record are not contracts in the real sense as the consensus-ad-idem is lacking. They are only

obligations imposed by the court upon a party to do or refrain from doing something. A Contract of

Record is either (i) a judgement of a court or (ii) recognizance. An obligation imposed by the judgement

of a court and entered upon its records is often called a Contract of Record.

Example

A is indebted to B for Rs. 500 under a contract, A fails to pay. B sues A and gets a judgement in his

favour. The previous right of B to obtain Rs. 500 from A is replaced by the judgement in his favour and

execution may be levied upon A to enforce payment, if need be. A Recognizance is a written

acknowledgement to the crown by a criminal that on default by him to appear in the court or to keep

peace or to be of good conduct, he is bound to pay to the crown a certain sum of money. This is also an

obligation imposed upon him by the court.

A contract with the following characteristics is known as a contract under seal or by deed or a contract

of speciality; (i) It is in writing, (ii) It is signed, (iii) It is sealed, and (iv) It is delivered by the parties to

the contract. These contracts are used in English Law for various transactions such as conveyances of

land, a lease of property for more than three years, contracts made by corporations, contracts made

without consideration. Under the Indian Contract Act also, a speciality contract is recognised if the

following conditions are satisfied: (1) the contract must be in writing (2) it must be registered according

to the law of registration of documents, (3) it must be between parties standing in near relation to each

other, and (4) it should proceed out of natural love and affection between the parties (Section 25 of the

Indian Contract Act, 1872). All contracts other than the formal contracts are called simple or parol

contracts. They may be made: (i) orally, (ii) in writing, or (iii) implied by conduct.

1.3 OFFER AND ACCEPTANCE

[Sections 3–9 of the Indian Contract Act, 1872]



OFFER/PROPOSAL

A proposal is defined as ―when one person signifies to another his willingness to do or to abstain from

doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to

make a proposal.‖ [Section 2 (a)]. An offer is synonymous with proposal. The offeror or proposer

expresses his willingness ―to do‖ or ―not to do‖ (i.e., abstain from doing) something with a view to obtain

acceptance of the other party to such act or abstinence. Thus, there may be ―positive‖ or ―negative‖ acts

which the proposer is willing to do.

Examples

(1) A offers to sell his book to B. A is making an offer to do something, i.e., to sell his book. It is a

positive act on the part of the proposer.

(2) A offers not to file a suit against B, if the latter pays A the amount of Rs. 200 outstanding. Here the

act of A is a negative one, i.e., he is offering to abstain from filing a suit.

HOW AN OFFER IS MADE?

An offer can be made by (a) any act or (b) omission of the party proposing by which he intends to

communicate such proposal or which has the effect of communicating it to the other (Section 3). An offer

can be made by an act in the following ways: (a) by words (whether written or oral). The written offer

can be made by letters, telegrams, telex messages, advertisements, etc. The oral offer can be made either

in person or over telephone.

(b) by conduct. The offer may be made by positive acts or signs so that the person acting or making signs

means to say or convey. However silence of a party can in no case amount to offer by conduct.

An offer can also be made by a party by omission (to do something). This includes such conduct or

forbearance on one‘s part that the other person takes it as his willingness or assent. An offer implied from

the conduct of the parties or from the circumstances of the caseis known as implied offer.

Examples

(1) A proposes, by letter, to sell a house to B at a certain price. This is an offer by an act by written words

(i.e., letter). This is also an express offer.

(2) A proposes, over telephone, to sell a house to B at a certain price. This is an offer by act (by oral

words). This is an express offer.

(3) A owns a motor boat for taking people from Bombay to Goa. The boat is in the waters at the Gateway

of India. This is an offer by conduct to take passengers from Bombay to Goa. He need not speak or call

the passengers. The very fact that his motor boat is in the waters near Gateway of India signifies his

willingness to do an act with a view to obtaining the assent of the other. This is an example of an implied

offer.



(4) A offers not to file a suit against B, if the latter pays A the amount of Rs. 200 outstanding. This is an

offer by abstinence or omission to do something.

Specific and General Offer

An offer can be made either:

1. to a definite person or a group of persons, or

2. to the public at large.

The first mode of making offer is known as specific offer and the second is known as a general offer. In

case of the specific offer, it may be accepted by that person or group of persons to whom the same has

been made. The general offer may be accepted by any one by complying with the terms of the offer.

The celebrated case of Carlill v. Carbolic Smoke Ball Co., (1813) 1 Q.B. 256 is an excellent example of

a general offer and is explained below.

Examples

(1) A offers to sell his house to B at a certain price. The offer has been made to a definite person, i.e., B.

It is only B who can accept it [Boulton v. Jones (1857) 2H. and N. 564].*

(2) In Carbolic Smoke Ball Co.’s case (supra), the patent-medicine company advertised that it would

give a reward of £100 to anyone who contracted influenza after using the smoke balls of the company for

a certain period according to the printed directions. Mrs. Carlill purchased the advertised smoke ball and

contracted influenza in spite of using the smoke ball according to the printed instructions. She claimed

the reward of £100. The claim was resisted by the company on the ground that offer was not made to her

and that in any case she had not communicated her acceptance of the offer. She filed a suit for the

recovery of the reward.

Held: She could recover the reward as she had accepted the offer by complying with the terms of the

offer. The general offer creates for the offeror liability in favour of any person who happens to fulfil the

conditions of the offer. It is not at all necessary for the offeree to be known to the offeror at the time

when the offer is made. He may be a stranger, but by complying with the conditions of the offer, he is

deemed to have accepted the offer.

Essential requirements of a valid offer

An offer must have certain essentials in order to constitute it a valid offer. These are:

1. The offer must be made with a view to obtain acceptance [Section 2(a)].

2. The offer must be made with the intention of creating legal relations. [Balfour v. Balfour (1919) 2 K.B.

571.]**



3. The terms of offer must be definite, unambiguous and certain or capable of being made certain

(Section 29). The terms of the offer must not be loose, vague or ambiguous.

Examples

(1) A offers to sell to B ―a hundred quintals of oil‖. There is nothing whatever to show what kind of oil

was intended. The offer is not capable of being accepted for want of certainty.

(2) A who is a dealer in coconut oil only, offers to sell to B ―one hundred quintals of oil‖. The nature of

A‘s trade affords an indication of the meaning of the words, and there is a valid offer.

4. An offer must be distinguished from (a) a mere declaration of intention or (b) an invitation to offer or

to treat.

Offer vis-a-vis declaration of intention to offer

A person may make a statement without any intention of creating a binding obligation.It may amount to a

mere declaration of intention and not to a proposal.

Examples

(1) An auctioneer, N advertised that a sale of office furniture would take place at a particular place. H

travelled down about 100 Km to attend the sale but found the furniture was withdrawn from the sale. H

sued the auctioneer for his loss of time and expenses.

Held: N was not liable [Harris v. Lickerson. (1875) L.R.S. Q.B. 286.].

(2) A father wrote to his would-be son-in-law that his daughter would have a share ofwhat he would

leave at the time of his death. At the time of death, the son-in-law staked his claim in the property left by

the deceased.

Held: The son-in-law‘s claim must fail as there was no offer from his father-in-law creating a binding

obligation. It was just a declaration of intention and nothingmore [Re Ficus (1900) 1. Ch. 331.].

Offer vis-a-vis invitation to offer

An offer must be distinguished from invitation to offer. A prospectus issued by a college for admission to

various courses is not an offer. It is only an invitation to offer. A prospective student by filling up an

application form attached to the prospectus is making the offer. An auctioneer, at the time of auction,

invites offers from the would-be-bidders. He is not making a proposal. A display of goods with a price on

them in a shop window is construed an invitation to offer and not an offer to sell.

Example

In a departmental store, there is a self-service. The customers picking up articles and take them to the

cashier‘s desk to pay. The customers action in picking up particular goods is an offer to buy. As soon as



the cashier accepts the payment a contract is entered into [Pharmaceutical Society of Great Britain v.

Boots Cash Chemists (Southern) Ltd. (1953) 1 Q.B. 401]. Likewise, prospectus issued by a company for

subscription of its shares by the members of the public, the price lists, catalogues and quotations are mere

invitations to offer. On the basis of the above, we may say that an offer is the final expression of

willingness by the offeror to be bound by his offer should the other party choose to accept it. Where a

party, without expressing his final willingness, proposes certain terms on which he is willing to negotiate,

he does not make an offer, he only invites the other party to make an offer on those terms. This is perhaps

the basic distinction between an offer and an invitation to offer. In Harvey v. Facie, the plaintiffs

(Harvey) telegraphed to the defendants (Facie), writing: ―Will you sell us Bumper Hall Pen?* Telegraph

lowest cash price.‖ The defendants replied also by a telegram, ―Lowest price for Bumper Hall Pen £900‖.

The plaintiffs immediately sent their last telegram stating: ―We agree to buy Bumper Hall Pen for £900

asked by you‖. The defendants refused to sell the plot of land (Bumper Hall Pen) at that price. The

plaintiffs contention that by quoting their minimum price in response to the inquiry, the defendants

had made an offer to sell at that price, was turned down by the Judicial Committee. Their Lordship

pointed out that in their first telegram, the plaintiffs had asked two questions, first as to the willingness to

sell and second, as to the lowest price. They reserved their answer as to the willingness to sell. Thus, they

had made no offer. The last telegram of the plaintiffs was an offer to buy, but that was never accepted by

the defendants.

5. The offer must be communicated to the offeree. An offer must be communicated to the offeree

before it can be accepted. This is true of specific as well as general offer.

Example

G sent S, his servant, to trace his missing nephew. Subsequently, G announced a reward for information

relating to the boy. S, traced the boy in ignorance of the announcement regarding reward and informed G.

Later, when S came to know of the reward, he claimed it. Held, he was not entitled to the reward on the

ground that he could not accept the offer unless he had knowledge of it [Lalman Shukla v. Gauri Dutt, II,

A.L.J. 489].

6. The offer must not contain a term the non-compliance of which may be assumed to amount to

acceptance. Thus, the offeror cannot say that if the offeree does not accept the offer within two days, the

offer would be deemed to have been accepted.

Example

A tells B ‗I offer to sell my dog to you for Rs. 45. If you do not send in your reply, I shall assume that

you have accepted my offer‘. The offer is not a valid one.



7. A tender is an offer as it is in response to an invitation to offer. Tenders commonly arise where, for

example, a hospital invites offers to supply eatables or medicines. The persons filling up the tenders are

giving offers. However, a tender may be either:

(a) specific or definite; where the offer is to supply a definite quantity of goods, or

(b) standing; where the offer is to supply goods periodically or in accordance with the requirements of the

offeree. In the case of a definite tender, the suppliers submit their offers for the supply of specified goods

and services. The offeree may accept any tender (generally the lowest one). This will result in a contract.

Example

A invites tenders for the supply of 10 quintals of sugar. B, C, and D submit their tenders. B‘s tender is

accepted. The contract is formed immediately the tender is accepted. In the case of standing offers, the

offeror gives an open offer whereby he offers to supply goods or services as required by the offeree. A

separate acceptance is made each time an order is placed. Thus, there are as many contracts as are the

acts of acceptance.

Example

The G.N. Railway Co. invited tenders for the supply of stores. W made a tender and the terms of the

tender were as follows: ―To supply the company for 12 months with such quantities of specified articles

as the company may order from time to time. The company accepted the tender and placed the orders. W

executed the orders as placed from time to time but later refused to execute a particular order.

Held: W was bound to supply goods within the terms of the tender [Great Northern Railway v. Witham

(1873) L.R. 9 C.P. 16]. The Supreme Court of India in this regard has observed: As soon as an order was

placed a contract arose and until then there was no contract. Also each separate order and acceptance

constituted a different and distinct contract [Chatturbhuj Vithaldas v. Moreshover Parashram AIR 1954

SC 326]. It is to be noted that if the offeree gives no order or fails to order the full quantity of goods set

out in a tender there is no breach of contract.

Revocation or Withdrawal of a tender. A tenderer can withdraw his tender before its final

acceptance by a work or supply order. This right of withdrawal shall not be affected even if

there is a clause in the tender restricting his right to withdraw. A tender will, however, be

irrevocable where the tenderer has, on some consideration, promised not to withdraw it or

where there is a statutory prohibition against withdrawal [The Secretary of State for India v. Bhaskar

Krishnaji Samani AIR 1925 Bom 485].



Special terms in a contract. The special terms, forming part of the offer, must be duly brought to the

notice of the offeree at the time the offer is made. If it is not done, then there is no valid offer and if offer

is accepted, and the contract is formed, the offeree is not bound by the special terms which were not

brought to his notice. The terms may be brought to his notice either:

(a) by drawing his attention to them specifically, or

(b) by inferring that a man of ordinary prudence could find them by exercising ordinary intelligence.

(a) the examples of the first case are where certain conditions are written on the back of a ticket for a

journey or deposit of luggage in a cloak room and the words. ―For conditions see back‖ are printed on the

face of it. In such a case, the person buying the ticket is bound by whatever conditions are written on the

back of the ticket whether he has read them or not.

Examples

(1) P, a passenger deposited a bag in the cloakroom at a Railway Station. The acknowledgement receipt

given to him bore, on the face of it, the words ―See back‖. One of the conditions printed on the back

limited the liability of the Railways for any package to £10. The bag was lost, and P claimed £24. 10s, its

value, pleading that he had not read the conditions on the back of the receipt.

Held : P was bound by the conditions printed on the back as the company gave reasonable notice on the

face of the receipt as to the conditions at the back of the document [Parker v. South Eastern Rly. Co.

(1877) 2 C.P.D. 416].

(2) A lady, L, the owner of a cafe, agreed to purchase a machine and signed the agreement without

reading its terms. There was an exemption clause excluding liability of the seller under certain

circumstances. The machine proved faulty and she purported to terminate the contract.

Held : That she could not do so, as the exemption clause protected the seller from the liability

[L’Estrange v. Grancob Ltd. (1934) 2 R.B. 394].

(3) T purchased a railway ticket, on the face of which the words: ―For conditions see back‖ were written.

One of the conditions excluded liability for injury, however caused. T was illiterate and could not read.

She was injured and sued for damages.

Held : That the railway company had properly communicated the conditions to her who had constructive

notice of the conditions whether she read them or not. The company was not bound to pay any damages

[Thompson v. LM. and L. Rly. (1930) 1 KB. 417].

(b) The same rule holds good even where the conditions forming part of the offer are printed in a

language not understood by the acceptor provided his attention has been drawn to them in a reasonable

manner. In such a situation, it is his duty to ask for the translation, of the conditions and if he does not do

so, he will be presumed to have a constructive notice of the terms of the conditions [Mackillingan



v. Campagine de Massangeres Maritimes (1897) 6 Cal. 227 J]. If conditions limiting or defining the

rights of the acceptor are not brought to his notice, then they will not become part of the offer and he is

not bound by them.Example

A passenger was travelling with luggage from Dublin to Whitehaven on a ticket, on the back of which

there was a term which exempted the shipping company from liability for the loss of luggage. He never

looked at the back of the ticket and there was nothing on the face of it to draw his attention to the terms

on its back. He lost his luggage and sued for damages.

Held : He was entitled to damages as he was not bound by something which was not communicated to

him [Henderson v. Stevenson (1875) 2 H.L.S.C. 470]. Also, if the conditions are contained in a document

which is delivered after the contract is complete, then the offeree is not bound by them. Such a document

is considered a noncontractual document as it is not supposed to contain the conditions of the contract.

For instance, if a tourist driving into Mussoorie, receives a ticket upon paying toll-tax, he might

reasonably assume that the object of the ticket was that by producing it he might be free from paying toll

at some other toll-tax barrier, and might put in his pocket without reading the

same. The ticket is just a receipt or a voucher.

Example

C hired a chair from the Municipal Council in order to sit on the beach. He paid the rent and received a

ticket from an attendant. On the back of the ticket, there was a clause exempting the Council ―for any

accident or damage arising from hire of chairs.‖ C sustained personal injuries as the chair broke down

while he was sitting therein. He sued for damages.

Held : That the Council was liable [Chapleton v. Barry U.D.C. (1940) 1 K.B. 532]. From the illustrations

given it may be concluded that whether the offeree will be bound by the special conditions or not will

depend on whether or not he had or could have had notice by exercising ordinary diligence.

Detailed observations with respect to printed conditions on a receipt were made by the Bombay High

Court in R.S. Deboo v. M. V. Hindlekar, AIR 1995 Bom. 68. These observations are:

1. Terms and conditions printed on the reverse of a receipt issued by the owner of the laundry or any

other bailee do not necessarily form part of the contract of bailment in the absence of the signature of the

bailor (customer) on the document relied upon. The onus is on the bailee to prove that the attention of the

bailor was drawn to the special conditions before contract was concluded and the bailor had consented to

them as contractual terms.

2. It cannot be just assumed that the printed conditions appearing on the reverse of the receipt

automatically become contractual terms or part of the contract of bailment.



3. In certain situations, the receipt cannot be considered as a contractual document as such, it is a mere

acknowledgement of entrustment of certain articles.

Cross Offers

Where two parties make identical offers to each other, in ignorance of each other‘s offer, the offers are

known as cross-offers and neither of the two can be called an acceptance of the other and, therefore, there

is no contract.

Example

H wrote to T offering to sell him 800 tons of iron at 69s. per ton. On the same day T wrote to H offering

to buy 800 tons at 69s. Their letters crossed in the post. T contended that there was a good contract.

Held: that there was no contract. [Tinn v. Hoffman & Co. (1873) 29 L.T. Exa. 271.].

Termination or Lapse of an Offer

An offer is made with a view to obtain assent thereto. As soon as the offer is accepted it becomes a

contract. But before it is accepted, it may lapse, or may be revoked. Also, the offeree may reject the offer.

In these cases, the offer will come to an end.

Essential Requirements of a Valid Offer

1. Must be made with a view to obtain acceptance.

2. Must be made with the intention of creating legal relations.

3. Terms of offer must be definite, unambigous and certain or capable of being made certain.

4. It must be distinguished from mere declaration of intention or an invitation to offer.

5. It must be communicated to the offeree.

6. The offer must not contain a term the non-compliance of which may be assumed to amount to

acceptance.

7. A tender is an offer as it is in response to an invitation to offer.

8. The Special terms, forming part of the offer, must be duly brought to the notice of the offeree at the

time the offer is made.

9. Two identical cross-offers do not make a contract

(1) The offer lapses after stipulated or reasonable time. [Section 6(2)] The offer must be accepted by

the offeree within the time mentioned in the offer and if no time is mentioned, then within a reasonable

time. The offer lapses after the time stipulated in the offer expires if by that time offer has not been



accepted. If no time is specified, then the offer lapses within a reasonable time. What is a reasonable time

is a question of fact and would depend upon the circumstances of each case.

Example

M offered to purchase shares in a company by writing a letter on June 8. The company allotted the shares

on 23rd November. M refused the shares.

Held : That the offer lapsed as it was not accepted within a reasonable time [Ramsgate Victoria Hotel Co.

v. Montefiore (1860) L.R.I. Ex. 109].

2. An offer lapses by the death or insanity of the offerer or the offeree before acceptance.

Section 6(4) provides that a proposal is revoked by the death or insanity of the proposer, if the fact of his

death or insanity comes to the knowledge of the acceptor before acceptance. Therefore, if the acceptance

is made in ignorance of the death, or insanity of offerer, there would be a valid contract. Similarly, in the

case of the death of offeree before acceptance, the offer is terminated.

3. An offer terminates when rejected by the offeree.

4. An offer terminates when revoked by the offerer before acceptance.

5. An offer terminates by not being accepted in the mode prescribed, or if no mode is prescribed, in some

usual and reasonable manner.

6. A conditional offer terminates when the condition is not accepted by the offeree.

Example

A proposes to B ―I can sell my house to you for Rs. 12,000 provided you lease out your land to me.‖ If B

refuses to lease out the land, the offer would be terminated.

7. Counter offer. An offer terminates by counter-offer by the offeree. When in place of accepting the

terms of an offer as they are, the offeree accepts the same subject to certain condition or qualification, he

is said to make a counter-offer. The following have been held to be counter-offers:

(i) Where an offer to purchase a house with a condition that possession shall be given on a particular day

was accepted varying the date for possession [Routledge v. Grant (1828) 130 E.R. 920].

(ii) An offer to buy a property was accepted upon a condition that the buyer signed an agreement which

contained special terms as to payment of deposit, making out title completion date, the agreement having

been returned unsigned by the buyer [Jones v. Daniel (1894) 2 Ch. 332].

(iii) An offer to sell rice was accepted with an endorsement on the sold and bought note that yellow and

wet grain will not be accepted [All Shain v. Moothia Chetty, 2 Bom L.R. 556].



(iv) Where an acceptance of a proposal for insurance was accepted in all its terms subject to the condition

that there shall be no assurance till the first premium was paid [Sir Mohamed Yusuf v. S. of S. for India 22

Bom. L.R. 872].

UNIT –II TENDERS

INTRODUCTION

All procurement (and planning) must conform to the three pillars of Integrity, Transparency and

Accountability. These apply to all activities before construction, the actual construction (especially if

consultants and contractors are to be used) and to the subsequent operation and maintenance of the

structure and any related infrastructure such as an irrigation scheme.

Procurement rules exist in most countries and for all international financing agencies and these

must be followed. These rules should encourage true and open competition in tendering and contract

award, open meetings and equitable and fair distribution of information, effective monitoring and

auditing of all processes and implementation activities.

As part of the preparation work, and before any tender is advertised, the procuring agency

requires a realistic estimate (based on a good quality design and costing process) of the cost of the

structure with a breakdown of significant cost items. To prepare such an estimate, an engineer (The

Engineer) should be selected and be appointed to not only carry out this preliminary work but continue

to supervize the contractor and ensure all works are carried out according to the design and to the

highest quality possible. This estimate must be kept strictly confidential and there should be no links

between personnel having this knowledge and the bidders. Should the subsequent bidding result in bids

received that vary greatly from this estimate, questions should be raised on the validity of the bids.

Underestimates from bidders could lead to poor contract performance and the need for changes and

variations as the contract proceeds and overestimates may suggest over pricing, cartel links or other

unrealistic bidding.



Decision-making criteria at all stages must be clear, justifiable and objective (with a written

record where needed) with no room for discretion at any time, especially in the evaluation and

comparison of the bids.Prequalification of bidders for significantly expensive contracts or a series of

small contracts18 is recommended, but avoiding the possibility of establishing cartels.

This prequalification should be based on professional competence (staff and equipment), relevant

experience, financial capability and integrity. Any contractor or consultant that has recent, relevant

convictions or has been disbarred for irregu-18 Awarding contracts for a number of small dams in one

area, or for one project as one overall contract, may result in economies of scale in mobilization, the use

of plant and equipment and in supervision. 102 Manual on small earth damslar, financial activities, or

failure to complete contracts, should not be allowed to prequalify.

PREPARATION WORK

The preparation of tender and contract documents, including all survey and design work needed to

prepare quantities and guideline costings, should take place in good time. If funds are to be sourced from

international lending agencies or donors, their guidelines will have to be followed and examples of

advertisements and documents from such organizations should be obtained at the beginning of this

process.

Preparation may require the application for land and water rights, environmental impact

assessments plus any needed compensation or resettlement plans. These must be completed before the

dam construction can be approved and allowed to proceed.

In many places, construction can only take place in the dry season when river levels are low,

access to the site easier and moisture control for compaction possible. Thus, the design and tender

process should take place in the rainy season and be timed to be completed by the beginning of the next

dry season in time for mobilization of plant and equipment as the ground begins to dry out. Clearing

access roads, felling and removing trees and stripping foundation areas is often best begun before the

ground has completely dried out. The end of one rainy season and the start of the subsequent dry season

are the best times for this.

ADVERTISEMENT OF THE TENDER

Always include a site visit in any tender advertisement and award procedure. The tender

advertisement period has to take into account the need for approval (usually at the advertisement and

award stages) from the lender or donor, the need to adhere to local or national government regulations



and bureaucratic procedures, whether it will be advertised internationally, regionally or nationally and the

scope of works. A tender for one small dam could be advertised nationally and potential tenderers given

6 to 8 weeks to respond, including site visits and collection of documents. Thus, the tender period for

this, including advertisement and evaluation could be around 12 weeks.A series of dams being funded by

one or more donors may require international advertisement with time for potential bidders to collect

documents, make site visits and prepare timetables and bids (in their home countries). Such a tender may

require up to 20 weeks to complete with further time required for the winning bidder to mobilize.The

more complicated the works and the size and number of dams to be built, the longer the tender process

will take. Guidelines to assist in the preparation of tender and contract documents, and in the award of a

contract for a simple project involving only one or two small dams, are given below:

The evaluation modalities (see details hereafter) – or any modified equivalents – are to be attached to

every tender document to permit bidders to understand the proposed evaluation process.Annex 1 103

Always keep written records of significant events and always advise bidders in writing of any matter that

could have legal implications. Any specific information given to any tenderer that is not in the documents

should be passed on, in writing, to all other tenderers.

THE EVALUATION MODALITIES

Two options exist for tender, and the choice has to be indicated in the tender document.In the first

option, the technical and financial offer are combined and presented in a single envelope. The second

option, called staged tender, involves a two envelope system in which the technical proposal (first

envelope) is evaluated and bids ranked before the financial offer (second envelope) is opened. It ensures

that price does not influence the technical evaluation of the bid. This approach should be preferred, in

particular in the case of complex contracts. Where a two envelope tendering process is used, it should be

indicated in the tender document that tenderers are to place the technical and financial components of

their tenders in separate, clearly marked, envelopes. These envelopes are to be placed inside a single

envelope and normal procedures apply for the lodging of the tender. A points system should be adopted,

based on criteria that can be adjusted according to country, individual dam sites, scope of work and other

factors. All tenderers must be made aware of the evaluation procedure to be followed and whether there

are any special conditions involved

The following steps are to be followed:

RECEPTION OF THE BIDS



Following advertisement of the tender, ensure that every tenderer who pays the required, non-

refundable, fee19 receives the documents, design drawings, quantities (but no guideline costs), any

Community Agreement, the date of the site visit and details on where the tender documents are to be

delivered, the deadline for delivery and the location and time of tender opening.If the deadline is

changed, all potential tenderers must be advised either personally (if few in number) or by advertisement

in the media.Bids received should be noted in a diary and the bidder and staff member sign to confirm

date and time received. Any bids delivered in unsealed envelopes should be rejected and the bidder

advised in writing that his/her fee is forfeited and that s/he cannot re-bid. All other bids are to be kept in a

secure and inaccessible location until the time of tender opening.The site visit should be formally

recorded in the same diary and any bidder unable to make the visit should be excluded from the process

and his/her bid returned unopened.

OPENING OF THE BIDS

The responsible officer opening the bids should first advise all those present of the procedure

he/she will follow. Brief details on the evaluation process (already provided in the documents and based

on the guidelines above should be given to assure potential bidders that the evaluation is to be fair and

equitable.At tender opening, one staff member should be given the responsibility for opening the bids

received. A secretary will be required to note persons attending and any comments (especially objections)

made. The minutes – brief and noting points only – should be filed for future reference.19 Accept cash or

bank certified chequesonly.Annex 1 105Step 3: REVIEW OF THE DOCUMENTATIONAs each bid is

opened, the responsible staff member may name the bidder but then must check that the bid is complete

and conforms to the advertised conditions. If for any reason it is not complete (for example the site visit

certificate is missing), the bid should be rejected and the bid price not disclosed. The whole document has

to be returned to the bidder with a covering letter stating why it had been rejected. There is no appeal on

this matter.

Minor omissions or errors can be accepted. Small arithmetic errors should be corrected and the

revised figure used in the evaluation. If significantly large errors that may affect the bid price are noted,

and at the discretion of the evaluation team, the bid should be rejected.Unrealistic bids with either costs

shown at levels impossible to achieve or for bidders who show that they are completely inexperienced or

have completely inappropriate equipment, can also be rejected at this stage.If the bidders have not been

prequalified some investigation at this stage (this process should be noted in the bidding ocuments and/or

tender advertisement) into the integrity of the bidder should be carried out. Any bidder with recent20

criminal convictions relating to fraud, bribery or corruption or with serious, proved cases of contract



malpractice or failure, should be excluded at this time. The bid should not be evaluated. As above, the bid

should be returned to the bidder with a covering letter and all other bidders informed of the decision.

TECHNICAL EVALUATION

Once the bids are declared valid, the actual points evaluation procedure can begin.Tenders should

initially be assessed, in accordance with the evaluation methodology being utilized, against non-price

criteria, that is, on their technical merits. The evaluation team should not have access to the tender price

at this stage. The assessment of the non-price criteria is to be documented before moving onto the next

stage of the evaluation.

FINANCIAL ASSESSMENT

Once tenders have been assessed against the technical criteria, a financial evaluation of the prices

tendered (or quoted) can then be undertaken. The results of the financial assessment are to be

documented before moving onto the next stage of the evaluation.

ASSESSMENT OF ‘BEST COMBINED OFFER’

Having separately assessed tenders against technical and financial criteria, a comparison of

‗technical worth‘ and ‗price‘, is undertaken in accordance with the criteria established in the tender

document, to determine which tender represents the best combined offer. This stage will establish the

final ranking of the tenders.

AWARDING THE CONTRACT

Once the final ranking has been established, the contractor with the highest total should be

awarded the contract.If, for exceptional reasons, a decision is made that does not award the contract to the

highest evaluated bidder, other bidders must be formally advised of the reasons why and given a period

(10-14 days) in which to object but not change their bids. All objections then have to be looked at and a

final decision made. Because this can lead to delays and legal issues it is best not to make decisions that

award contracts to bidders other than the highest evaluated.



Lastly, once a decision has been made to award the contract, the potential contractor can be

contacted and the contract awarded. It is recommended that the winning bidder should not be negotiated

with to either reduce the price (i.e. if above the budget for the dam or project or if all bids are considered

unacceptably high in part or whole) or to improve on the bid to include items considered deficient. It is

not unethical to do so as long as it is done for the interest of the cost effectiveness and in a open and

transparent way. If the award of contract fails, or is stopped for any reason, the second highest bidder can

be brought in. Do not however negotiate with two bidders at any one time in an attempt to play off one

against the other. This is extremely unethical and unprofessional.

Once the contract has been awarded, the other, unsuccessful bidders should be formally advised

of the award but not of the final price. The actual evaluation is confidential and information therein is

only released if a losing bidder should complain and arbitration has to take place. The award decision

should be published with a list of all the bidders, major elements of the evaluation process detailed and

specific reasons why the award has been made to the winning contractor.

CONTRACT SUPERVISION

Continuous monitoring and auditing is required to supervise any contract. This can be carried out

by the dam owner, government agencies or consultants appointed to supervise a contract being funded by

an international financing agency. For all but the former, the supervisor must in turn be monitored and

audited to ensure compliance with the contract and to encourage cost effectiveness and to avoid

corruption.

The World Bank establishes a panel of experts for every large dam contract and Annex 1 107these

personnel are fully independent and are able to carry out regular (and irregular) monitoring and auditing

activities throughout the duration of the contract.

Particular attention should be paid to contract variations. Any variation should be scrutinized both

individually and in aggregate, and once a financial ceiling is reached (based on the contract price and

usually in the range of 10-15 percent) the independent outside experts should be called in. Any proven

case of variation in response to bribery and corruption should cause the immediate cancellation of the

contract (without any penalty payment to the contractor) and dismissal and prosecution of any

supervision personnel involved.

For all contracts, an effective dispute resolution organization/entity is required. As with the panel

of experts, this should be independent and suitably qualified to resolve disputes impartially and in the



interest of fairness and integrity. This may be a government agency or could be based in the private

sector. Details of such an agency should be clearly stated in all tender and contract documents.

PAYMENTS

The sequence of payments to the contractor will have been outlined in the tender and contract

documents. Usually these will have been negotiated at contract signing and any variations allowed

outlined in the tender documents.

Advance payment:

Most dam contracts will require an advance payment being made to the contractor for

mobilization (establishing a site complete with offices, power, communications and water supplies,

clearing the dam site, establishing stockpiles of materials, moving equipment and staff to site and related

initial activities). This would be recorded as an advance payment and can comprise between 10 and 25

percent of the total contract amount. It can either be made as a lump sum payment or can be

proportionally recovered as routine payments are made to the contractor as the works proceed.

Routine progress payments:

Routine payments can be agreed at contract signing and can take the form of a monthly payment

based on estimated amounts of work completed or can be based on proportion of the dam being

completed. Either way, the payment requests have to be submitted by the contractor and then checked

and approved by the Engineer supervising the works.All approved payments should be scrutinized and

cleared; then paid quickly. Many contractors do not have the financial resources to cater for lengthy

delays in routine payments and, where private sector contractors are working for public sector clients

such as government ministries, effective and transparent ways and means of ensuring quick payments to

the contractors should be established before the project starts.

Variation payments:

In all but the simplest contracts, a sum for unexpected works or for variations to the design should

be catered for. Usually listed in the Bill of Quantities as Contingencies, this can be calculated at around 5

to 15 percent of the total contract sum. 108 Manual on small earth damsAgain all such payments should



be initially approved by the engineer, scrutinized once the works have been done and then paid quickly to

the contractor. Note the comment above on this.

Final payments:

At the end of construction, the works should be inspected and signed off by the engineer. The

contractor can then demobilize and leave the site. Usually, the final payment is withheld for a period

agreed in the contract – one year is satisfactory and will give the dam a chance to fill and be used before

the contractor‘s liability is removed. During this period, the dam should be closely monitored and

checked. Defects should be noted and rectified at his/her expense.

If the contractor is unable or unwilling to do this work, the retained sum can be used to pay

another contractor to do the work required.Once the liability period is over, the engineer certifies the dam

as good, and the contractor can be paid the balance owed.

FINAL INSPECTION AND MEASUREMENT

This is an important activity and can be carried out by the engineer to ensure the completed dam

has been built to the design and to the highest standard possible. This activity can be carried out jointly

by the engineer and the contractor to ensure there are no disputed findings but the engineer is the overall

responsible officer.The final inspection is best completed before the contractor demobilizes to ensure that

any outstanding work noted can be completed without delay. As built drawings should be produced and

kept on record.The maintenance and safety programme can then be instigated.

CONTRACT

While construction contracts serve as a means of pricing construction, they also structure the

allocation of risk to the various parties involved. The owner has the sole power to decide what type of

contract should be used for a specific facility to be constructed and to set forth the terms in a contractual

agreement. It is important to understand the risks of the contractors associated with different types of

construction contracts (Follow the link to learn further explanation of construction contract template)

Lump Sum Contract

In a lump sum contract, the owner has essentially assigned all the risk to the contractor, who in

turn can be expected to ask for a higher markup in order to take care of unforeseen contingencies. Beside



http://constructionheadline.com/construction-contract-template/

the fixed lump sum price, other commitments are often made by the contractor in the form of submittal

such as a specific schedule, the management reporting system or a quality control program. If the actual

cost of the project is underestimated, the underestimated cost will reduce the contractor‘s profit by that

amount. An overestimate has an opposite effect, but may reduce the chance of being a low bidder for the

project.

Unit Price Contract

In a unit price contract, the risk of inaccurate estimation of uncertain quantities for some key tasks

has been removed from the contractor. However, some contractors may submit an ―unbalanced bid‖

when it discovers large discrepancies between its estimates and the owner‘s estimates of these quantities.

Depending on the confidence of the contractor on its own estimates and its propensity on risk, a

contractor can slightly raise the unit prices on the underestimated tasks while lowering the unit prices on

other tasks. If the contractor is correct in its assessment, it can increase its profit substantially since the

payment is made on the actual quantities of tasks; and if the reverse is true, it can lose on this basis.

Furthermore, the owner may disqualify a contractor if the bid appears to be heavily unbalanced. To the

extent that an underestimate or overestimate is caused by changes in the quantities of work, neither error

will effect the contractor‘s profit beyond the markup in the unit prices.

Cost Plus Fixed Percentage Contract

For certain types of construction involving new technology or extremely pressing needs, the

owner is sometimes forced to assume all risks of cost overruns. The contractor will receive the actual

direct job cost plus a fixed percentage, and have little incentive to reduce job cost. Furthermore, if there

are pressing needs to complete the project, overtime payments to workers are common and will further

increase the job cost. Unless there are compelling reasons, such as the urgency in the construction of

military installations, the owner should not use this type of contract.

Cost Plus Fixed Fee Contract

Under this type of contract, the contractor will receive the actual direct job cost plus a fixed fee,

and will have some incentive to complete the job quickly since its fee is fixed regardless of the duration

of the project. However, the owner still assumes the risks of direct job cost overrun while the contractor

may risk the erosion of its profits if the project is dragged on beyond the expected time.

Cost Plus Variable Percentage Contract



For this type of contract, the contractor agrees to a penalty if the actual cost exceeds the estimated

job cost, or a reward if the actual cost is below the estimated job cost. In return for taking the risk on its

own estimate, the contractor is allowed a variable percentage of the direct job-cost for its fee.

Furthermore, the project duration is usually specified and the contractor must abide by the deadline for

completion. This type of contract allocates considerable risk for cost overruns to the owner, but also

provides incentives to contractors to reduce costs as much as possible.

Target Estimate Contract

This is another form of contract which specifies a penalty or reward to a contractor, depending on

whether the actual cost is greater than or less than the contractor‘s estimated direct job cost. Usually, the

percentages of savings or overrun to be shared by the owner and the contractor are predetermined and the

project duration is specified in the contract. Bonuses or penalties may be stipulated for different project

completion dates.

Guaranteed Maximum Cost Contract

When the project scope is well defined, an owner may choose to ask the contractor to take all the

risks, both in terms of actual project cost and project time. Any work change orders from the owner must

be extremely minor if at all, since performance specifications are provided to the owner at the outset of

construction. The owner and the contractor agree to a project cost guaranteed by the contractor as

maximum. There may be or may not be additional provisions to share any savings if any in the contract.

This type of contract is particularly suitable for turnkey operation.

Tender

Tender means the Contractor‘s priced offer to the Employer for the execution and completion of

the Works and the remedying of any defects therein in accordance with the provisions of the Contract, as

accepted by the Letter of Acceptance. Depending upon the context, ―Tender‖ may designate:- either one

of the tender documents, the executed and signed Form of Tender, which

becomes one of the Contract Documents, called ―The Tender‖, or- the Contractor‘s detailed offer in a

complete set of tender documents as defined in the Tender .

Appendix to Tender



It means the executed Form of Appendix to Tender completed by the Employer and the

Contractor and attached to the Tender by the Contractor;

Letter of Acceptance

It means the formal acceptance of the Tender by the Employer. The Letter of Acceptance is one of

the Contract Documents, which states the Contract Price.

CONTRACT DOCUMENTS

(1) Contract Agreement

(2) Letter of Acceptance

(3) Tender and Appendix to Tender

(4) Particular Conditions of Contract

(5) General Conditions of Contract,

(6) Specifications (part of Tender Documents)

(7) Drawings (part of Tender Documents)

(8) Priced Bill of Quantities (part of Tender Documents)

(9) Other Documents, as listed in the Appendix to Tender (part of Tender Documents)

(C) In those cases, where other documents are listed in the

(D) Specifications may be provided in one or two parts.

If Specifications are provided in two parts, General Specifications and Particular Specifications,

then Particular Specifications have priority over the General Specifications.

(E) Tender Queries and Answers and all Clarification related Post-offer Submission or respondence shall

be collected in one volume and incorporated in the Contract as Annexes. This Annexes volume shall not

be ranked among Contract Documents. However, each particular question and the corresponding answer

belong to the Contract Document they related to, and have priority over this Contract Document, but their

overall rank is determined by the rank of the Contract Document itself.

(F) Before the signature of the Agreement by the Parties, the Employer‘s acceptance of the Contractor‘s

Tender in the Letter of Acceptance establishes a contractual relationship between the Employer and the

Contractor. However, at this point no Data of Commencement of the Contract is set as this depends on

the Effective Date. Consequently, the Works cannot start, but the contractual relationship between the

Employer and the Contractor is legally binding and based on the existing Contract Documents at that



time. The existing Contract Documents consist of those isted under Sub-Clause (B) above without the

Agreement and the Items, if any, specified in the Appendix to Tender.

UNIT- III -ARBITRATION

Notes for Arbitrators :

Introduction

1. Arbitration is now the first choice option for the binding resolution of commercial disputes in the

widest range of contractual relationships and across many jurisdictions.

2. Arbitration that is administered by an institution can be significantly more efficient, expeditious and

cost effective than ad hoc arbitration, provided the parties and the arbitrators understand and adopt the

best practices inherent in the institution‘s rules and procedures.

3. The purpose of this note is to provide guidance to arbitrators conducting arbitrations in accordance

with the LCIA India Rules, though it must be stressed that it neither supplants nor interprets those Rules,

being principally concerned with issues of independence, impartiality and confidentiality, and with the

effective management of time and costs in accordance with the arbitrator‘s duty as set out at Article 14 of

the LCIA India Rules, as follows.

―The Arbitral Tribunal has a duty at all times:

(i) to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its

case and dealing with that of its opponent; and

(ii) to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay or

expense, so as to provide an efficient means for the final resolution of the parties‘ dispute.‖

4. This note is by no means intended to provide an exhaustive list of ―best practices‖ in the conduct of

arbitration, but does highlight the broad principles by which tribunals should be guided in the conduct of

arbitral proceedings.

Independence and Impartiality

Accepting appointment

5. Parties to international arbitrations are entitled to expect of the process, a just, well reasoned and



enforceable award. To that end, they are entitled to expect arbitrators to disclose possible conflicts of

interest at the outset; to avoid putting themselves in the position where conflicts will arise during the

course of the proceedings; to conduct the arbitration fairly, in a timely manner and with careful regard to

due process; to maintain the confidentiality of the arbitration; and to reach their decision in an impartial

manner.

6. Under Article 5.3 of the LCIA India Rules, all arbitrators will, before appointment, be required to sign

a declaration that there are no circumstances known to them likely to give rise to any justified doubts as

to their impartiality or independence.

7. In completing their statements of independence, arbitrators will take into account, inter alia, the

existence and nature of any past or present

relationships, direct or indirect, with any of the parties or their counsel; any doubt as to which must be

resolved in favour of disclosure.

8. There is a continuing obligation on all arbitrators immediately to disclose any circumstances that might

give rise to conflicts, if such circumstances arise at any time during the course of the arbitration.

Communications

9. All communications between the tribunal and the parties must be copied to the LCIA India secretariat.

10. No arbitrator is permitted, during the course of the arbitration, to make any unilateral communication

with any party or with any party‘s representative.

11. If an arbitrator who has been nominated by a party wishes to communicate with that party before the

tribunal has been formally constituted, he must do so through the LCIA India Registrar, in accordance

with Article 13.1 of the LCIA India Rules.

Availability

12. It is, of course, essential that an arbitrator should not only be impartial and independent of the parties,

but that his diary commitments should permit him to undertake and to fulfil his mandate without delay.

13. Before appointment, therefore, all arbitrators will also be required to confirm their ability to devote

sufficient time to the proceedings, over an appropriate timeframe, including drafting the Award.

Confidentiality

14. Article 30 of the LCIA India Rules imposes duties of confidentiality on parties and arbitrators, with

which arbitrators should familiarise themselves, and with which the tribunal should ensure that it and the

parties comply.



Conduct of the Arbitration

The procedural timetable

15. Although the LCIA India Rules provide, at Article 15, a default timetable for the submission of key

written statements and documents, Article 14.3 of the Rules encourages the parties to agree on the

conduct of the proceedings and either to do so in writing or to have such agreement recorded by the

tribunal in writing.

16. The tribunal should, therefore, consider whether it would be beneficial to hold an early procedural

conference with the parties, whether in person or by telephone or video conference, with a view to

agreeing a timetable for the proceedings, or if it cannot be agreed, to setting such a timetable, which

should be realistic and reasonable both to the parties and to the tribunal.

Meetings and hearings

17. Article 16 of the LCIA India Rules provides that meetings and hearings need not be held at the seat or

legal place of the arbitration.

18. With a view to saving time and costs, therefore, the tribunal should, in consultation with the parties,

hold hearings at the location which is most convenient for all concerned, whether parties, witnesses or the

arbitrators themselves.

19. The tribunal and the parties should also carefully consider a realistic schedule and timeframe for

hearings, so as to avoid the need for rescheduling, and to avoid the imposition of cancellation charges in

the event of late postponement; and the tribunal should only adjourn a hearing where there is good reason

for doing so.

20. The tribunal should make every reasonable effort to hold hearings on consecutive days, rather than in

separate periods. A hearing day will normally be expected to cover about 8 hours.

21. The tribunal should also consider, where appropriate, whether some or all of those who must attend

any meeting or hearing might do so by video conference, rather than in person.

22. Consideration should also be given to whether the nature and circumstances of the claim and any

counterclaim are such that they may be decided on the documents alone.

Witness evidence

23. For the purposes of Article 20.2 of the LCIA India Rules, the tribunal should endeavour to determine

as early as possible in the proceedings, the time, manner and form of taking witness evidence.

The Award

24. One common cause for complaint is the time taken by tribunals to render their Awards after the close

of the proceedings.



25. Once the timetable for the final stages of the arbitration is fixed and the length and complexity of the

Award can be better judged, the tribunal should make an appropriate provision in its diary for its

deliberations and the completion of the Award.

Costs of the Arbitration

26. Another common cause for complaint concerns overly lengthy proceedings. Subject to the overriding

principle of due process, therefore, arbitrations should be conducted and concluded as expeditiously as

possible, avoiding not only unnecessary delay, but also the unnecessary cost associated with protracted

proceedings.

27. By Article 24.2 of the LCIA India Rules, the tribunal may not proceed with the arbitration unless it

has ascertained from the Registrar of LCIA India that sufficient funds are held on deposit. Arbitrators

should, therefore, regularly submit interim fee notes during the course of proceedings, to permit the

secretariat to ensure that sufficient advances are directed from time to time.

28. Arbitrators are entitled to charge for time reserved for hearings but not used as a result of late

postponement or cancellation by the parties, provided that the basis for such charges have been approved

by LCIA India and notified, in advance, to the parties.

29. If the tribunal is aware that a scheduled hearing might be postponed or cancelled, it should remind the

parties as the hearing dates approach, so that they do not inadvertently trigger cancellation charges by

failing to give the tribunal adequate notice.

30. Under the LCIA India schedule of arbitration costs, which form part of the Rules, all arbitrators must

keep full details of all time spent on the arbitration, including details of the activities on which the time

was spent, and these details must accompany any request for payment on account of fees.

31. No payment, either interim or final, will be made to any arbitrator until LCIA India has satisfied itself

that an arbitrator‘s fees are reasonable in the circumstances of the case and in light of the agreed

procedural timetable.

32. All expenses must also be reasonably incurred and in a reasonable amount, and all claims for

expenses must be supported by invoices or receipts.

33. Prior to incurring expenses, the arbitrator should consult the LCIA India secretariat as to what is

considered reasonable, in regard, for example, to the class of travel for the distance concerned, and the

amount of travel time that may be charged to the parties.

34. By Article 28.2 of the LCIA India Rules, tribunals must specify in their final Award the total amount

of the costs of the arbitration. As these costs must be submitted to, and approved by the LCIA Court, it is

essential that arbitrators keep their timesheets fully up to date, so that their Award is not delayed whilst

the LCIA India secretariat awaits final details of the time spent, and costs incurred, for approval by the



LCIA Court and inclusion in the Award.

Secretaries to Tribunals

35. Subject to the express written agreement of the parties, a tribunal may appoint an administrative

secretary to assist it with the internal management of the case.

36. The duties of the administrative secretary should, however, neither conflict with those for which the

parties have contracted with LCIA India, nor constitute any delegation of the tribunal‘s authority.

37. Administrative secretaries should, therefore, confine their activities to such matters as organising

papers for the tribunal, highlighting relevant legal authorities, maintaining factual chronologies, keeping

the tribunal‘s time sheets and so forth, and LCIA India will liaise with the administrative secretary on

such matters.

38. The LCIA India secretariat will deal with all matters required of it under the LCIA India Rules; will

provide any reminders that may be required on the procedural timetable; and will, if requested, finalise

arrangements for hearing venues, transcripts and so on.

Keeping the Secretariat

39. Secretariat staff are always available to assist the tribunal with all practical matters and the tribunal

should not hesitate to call for assistance whenever this may be required.

40. The tribunal should, in all circumstances, keep the secretariat fully informed of progress during the

course of the arbitration.



UNIT –IV – LEGAL REQUIREMENTS

Bid guarantees:

(a) A contracting officer shall not require a bid guarantee unless a performance bond or a

performance and payment bond is also required (Except as provided in paragraph (c) of this

subsection, bid guarantees shall be required whenever a performance bond or a performance and

payment bond is required.

(b) All types of bid guarantees are acceptable for supply or service contracts .Only separate bid

guarantees are acceptable in connection with construction contracts. Agencies may specify that only

separate bid bonds are acceptable in connection with construction contracts.

(c) The chief of the contracting office may waive the requirement to obtain a bid guarantee when a

performance bond or a performance and payment bond is required if it is determined that a bid guarantee

is not in the best interest of the Government for a specific acquisition (e.g., overseas construction,

emergency acquisitions, sole-source contracts). Class waivers may be authorized by the agency head or

designee.

Solicitation provision or contract clause:

(a) The contracting officer shall insert a provision or clause substantially the same as the provision at

52.228-1, Bid Guarantee, in solicitations or contracts that require a bid guarantee or similar guarantee.

For example, the contracting officer may modify this provision—

(1) To set a period of time that is other than 10 days for the return of executed bonds;

(2) For use in connection with construction solicitations when the agency has specified that only separate

bid bonds are acceptable

(3) For use in solicitations for negotiated contracts; or

(4) For use in service contracts containing options for extended performance.



Performance and payment bonds for other than construction contracts:

General:

(a) Generally, agencies shall not require performance and payment bonds for other than construction

contracts. However, performance and payment bonds may be used

(b) The contractor shall furnish all bonds before receiving a notice to proceed with the work.

(c) No bond shall be required after the contract has been awarded if it was not specifically required in the

contract, except as may be determined necessary for a contract modification.

Performance bonds:

(a) Performance bonds may be required for contracts exceeding the simplified acquisition threshold when

necessary to protect the Government's interest. The following situations may warrant a performance

bond:

(1) Government property or funds are to be provided to the contractor for use in performing the contract

or as partial compensation (as in retention of salvaged material).

(2) A contractor sells assets to or merges with another concern, and the Government, after recognizing

the latter concern as the successor in interest, desires assurance that it is financially capable.

(3) Substantial progress payments are made before delivery of end items starts.

(4) Contracts are for dismantling, demolition, or removal of improvements.

(b) The Government may require additional performance bond protection when a contract price is

increased.

(c) The contracting officer must determine the contractor‘s responsibility (see Subpart 9.1) even though a

bond has been or can be obtained.



Payment bonds:

(a) A payment bond is required only when a performance bond is required, and if the use of payment

bond is in the Government‘s interest.

(b) When a contract price is increased, the Government may require additional bond protection in an

amount adequate to protect suppliers of labor and material.

Other types of bonds:

The head of the contracting activity may approve using other types of bonds in connection with acquiring

particular supplies or services. These types include advance payment bonds and patent infringement

bonds.

Advance payment bonds:

Advance payment bonds may be required only when the contract contains an advance payment provision

and a performance bond is not furnished. The contracting officer shall determine the amount of the

advance payment bond necessary to protect the Government.

Patent infringement bonds:

(a) Contracts providing for patent indemnity may require these bonds only if—

(1) A performance bond is not furnished; and

(2) The financial responsibility of the contractor is unknown or doubtful.

INSURANCE :

INSURANCE UNDER COST-REIMBURSEMENT:

Cost-reimbursement contracts (and subcontracts, if the terms of the prime contract are extended to the

subcontract) ordinarily require the types of insurance with the minimum amounts of liability indicated.



Group insurance plans:

(a) Prior approval requirement. Under cost-reimbursement contracts, before buying insurance under a

group insurance plan, the contractor must submit the plan for approval, in accordance with agency

regulations. Any change in benefits provided under an approved plan that can reasonably be expected to

increase significantly the cost to the Government requires similar approval.

(b) Premium refunds or credits. The plan shall provide for the Government to share in any premium

refunds or credits paid or otherwise allowed to the contractor. In determining the extent of the

Government‘s share in any premium refunds or credits, any special reserves and other refunds to which

the contractor may be entitled in the future shall be taken into account.

Liability:

(a) Workers’ compensation and employer’s liability.

Contractors are required to comply with applicable Federal and State workers‘ compensation and

occupational disease statutes. If occupational diseases are not compensable under those statutes, they

shall be covered under the employer‘s liability section of the insurance policy, except when contract

operations are so commingled with a contractor‘s commercial operations that it would not be practical to

require this coverage. Employer‘s liability coverage of at least $100,000 shall be required, except in

States with exclusive or monopolistic funds that do not permit workers‘ compensation to be written by

private carriers. (See for treatment of contracts subject to the Defense Base Act.)

(b) General liability.

(1) The contracting officer shall require bodily injury liability insurance coverage written on

the comprehensive form of policy of at least $500,000 per occurrence.

(2) Property damage liability insurance shall be required only in special circumstances as determined by

the agency.

(c) Automobile liability.

The contracting officer shall require automobile liability insurance written on the comprehensive form of

policy. The policy shall provide for bodily injury and property damage liability covering the operation of



all automobiles used in connection with performing the contract. Policies covering automobiles operated

in the United States shall provide coverage of at least $200,000 per person and $500,000 per occurrence

for bodily injury and $20,000 per occurrence for property damage. The amount of liability coverage on

other policies shall be commensurate with any legal requirements of the locality and sufficient to meet

normal and customary claims.

(d) Aircraft public and passenger liability.

When aircraft are used in connection with performing the contract, the contracting officer shall require

aircraft public and passenger liability insurance. Coverage shall be at least $200,000 per person and

$500,000 per occurrence for bodily injury, other than passenger liability, and $200,000 per occurrence for

property damage. Coverage for passenger liability bodily injury shall be at least $200,000 multiplied by

the number of seats or passengers, whichever is greater.

(e) Vessel liability.

When contract performance involves use of vessels, the contracting officer shall require, as determined

by the agency, vessel collision liability and protection and indemnity liability insurance.

SELF INSURANCE:

(a) When it is anticipated that 50 percent or more of the self-insurance costs to be incurred at a segment

(see 31.001) of a contractor‘s business will be allocable to negotiated Government contracts, and the self-

insurance costs at the segment for the contractor‘s fiscal year are expected to be $200,000 or more, the

contractor shall submit, in writing, information on its proposed self-insurance program to the

administrative contracting officer and obtain that official‘s approval of the program. The submission shall

be by segment or segments of the contractor‘s business to which the program applies and shall include—

(1) A complete description of the program, including any resolution of the board of directors authorizing

and adopting coverage, including types of risks, limits of coverage, assignments of safety and loss

control, and legal service responsibilities;

(2) If available, the corporate insurance manual and organization chart detailing fiscal responsibilities for

insurance;

(3) The terms regarding insurance coverage for any Government property;



(4) The contractor‘s latest financial statements;

(5) Any self-insurance feasibility studies or insurance market surveys reporting comparative alternatives;

(6) Loss history, premiums history, and industry ratios;

(7) A formula for establishing reserves, including percentage variations between losses paid and losses

reserved;

(8) Claims administration policy, practices, and procedures;

(9) The method of calculating the projected averageloss; and

(10) A disclosure of all captive insurance company and reinsurance agreements, including methods of

computing cost.

(b) Programs of self-insurance covering a contractor‘s insurable risks, including the deductible portion of

purchased insurance, may be approved when examination of a program indicates that its application is in

the Government‘s interest. Agencies shall not approve a program of self-insurance for workers‘

compensation in a jurisdiction where workers‘ compensation does not completely cover the employer‘s

liability to employees, unless the contractor—

(1) Maintains an approved program of self-insurance for any employer‘s liability not so covered; or

(2) Shows that the combined cost to the Government of self-insurance for workers‘ compensation and

commercial insurance for employer‘s liability will not exceed the cost of covering both kinds of risk by

commercial insurance.

(c) Once the administrative contracting officer has approved a program, the contractor must submit to

that official for approval any major proposed changes to the program. Any program approval may be

withdrawn if a contracting officer finds that either—

(1) Any part of a program does not comply with the requirements of this subpart and/or the criteria at

31.205-19; or

(2) Conditions or situations existing at the time of approval that were a basis for original approval of the

program have changed to the extent that a program change is necessary.



(d) To qualify for a self-insurance program, a contractor must demonstrate ability to sustain the potential

losses involved. In making the determination, the contracting officer shall consider the following factors:

(1) The soundness of the contractor‘s financial condition, including available lines of credit.

(2) The geographic dispersion of assets, so that the potential of a single loss depleting all the assets is

unlikely.

(3) The history of previous losses, including frequency of occurrence and the financial impact of each

loss.

(4) The type and magnitude of risk, such as minor coverage for the deductible portion of purchased

insurance or major coverage for hazardous risks.

(5) The contractor‘s compliance with Federal and

State laws and regulations.

(e) Agencies shall not approve a program of self-insurance for catastrophic risks (e.g., see 50.403, Special

procedures for unusually hazardous or nuclear risks). Should performance of Government contracts

create the risk of catastrophic losses, the Government may, to the extent authorized by law, agree to

indemnify the contractor or recognize an appropriate share of premiums for purchased insurance, or both.

(f) Self-insurance programs to protect a contractor against the costs of correcting its own defects in

materials or workmanship shall not be approved. For these purposes, normal rework estimates and

warranty costs will not be considered self-insurance.

LEGAL REQUIREMENTS:

What the owners of residential buildings are responsible for under the building laws, and what

work is exempt.

Compliance with the Building Act

Under the Building Act, all building work must comply with the Building Code.If you are planning on

building a new house or doing alterations, you have to get a building consent from your local

council before construction starts (unless it is work that is exempt).To help explain the building consent



and approval process, the Department of Building and Housing has produced a booklet entitled The

Building Act and You, which contains essential information about your rights and responsibilities as

you build or renovate. It tells you what you need to do at each step to ensure your building project is done

legally, which will avoid potentially costly mistakes or delays. It also explains how the law will protect

you if things don't go to plan.Building Consent Authorities (BCAs) look at the detailed plans drawn by

the registered architect or designer to see if the proposed house or building work complies with the

Building Code. If it does comply, the BCA will issue you with a building consent allowing the work to

proceed. When the house is finished, you apply to your BCA. The BCA conducts a final inspection and

issues a code compliance certificate (CCC) if it is satisfied that the building work complies with the

building consent.

You must apply for a CCC once the work is complete. If you do not apply within two years from the date

your consent is granted, your BCA should contact you to follow up on the work.Councils are required by

the Building Act 2004 to keep information for the life of any building. This information will include the

plans and specifications provided when applying for building consent, inspection reports by BCAs, and

code compliance certificates.This information can be researched, for example, when you are looking to

buy an existing house.

Who is responsible?

Most people use the expertise of those in the building industry to advise them on the legal requirements

of the building laws and many delegate the task of obtaining a building consent to their

architect/designer, builder or project manager.When you employ a registered architect or other type of

designer, they must prepare plans and specifications that meet the Building Code performance standards

or the building consent application won‘t be approved by your BCA. The builder then has to build the

house to the specifications and plans so that the end result matches what was approved in the building

consent.

Ultimately you will be responsible under the Building Act if your house does not meet the required

standards, so make sure you employ skilled people who know all the building controls and keep up-to-

date with new standards and rules.



http://www.consumerbuild.org.nz/uploads/BuildingActandyou.pdf

http://www.consumerbuild.org.nz/uploads/BuildingActandyou.pdf

Meeting minimum performance levels

Subject to planning and resource management requirements, no one can make you achieve a higher or

more restrictive standard than that which is required by the Building Code. In other words, when you are

building a house or doing some other building work around home, provided it meets the minimum

performance levels in the Building Code, you can be confident that your home will be sufficiently

strong, durable, weatherproof, fire-resistant and use energy relatively efficiently. You must build the

house to the specifications agreed in your approved consent.

However, there is nothing to stop you exceeding these performance levels if you choose. For example,

you can use concrete tile roofing that exceeds the minimum standards and is likely to outlast you and

your grandchildren. You are free to look for creative and innovative ways of adding features that improve

your comfort and enjoyment of the house, providing they at least meet the minimum performance levels

in the Building Code, and are checked as doing so through the building consent process.

What work is exempt?

Generally, only work specified in Schedule 1 of the Building Act 2004 is exempt from needing a

building consent. Amendments to the Schedule came into effect on 16 October 2008.

The Department of Building and Housing has a useful guide back-grounding the exemptions

Some common examples are:

Retaining walls up to 1.5 metres in height, providing they are not carrying any load other than the

ground.

Construction, alteration or removal of an internal wall of an existing building but only if structural

stability is not reduced, the means of fire escape is not affected or the wall is not made of bricks,

concrete blocks mortared together.

Fences up to two metres in height (other than fences around swimming pools).

Garden sheds that are less than one storey and less than 10 square metres in floor area which do not

sanitary facilities or facilities for the storage of drinking water, and are not positioned any closer than

the shed's own height to a boundary.

Closing in an existing veranda or patio where the floor area does not exceed five square metres.

Low platforms (deck) not more than one metre off the ground.

Note that building work that is exempt from requiring a building consent must still comply with the

Building Code.



http://www.legislation.govt.nz/act/public/2004/0072/latest/DLM306036.html?search=ts_act_building+act&sr=1

PROPERTY LAW:

Property law is the area of law that governs the various forms of ownership and tenancy in real

property (land as distinct from personal or movable possessions) and in personal property, within the

common law legal system. In the civil law system, there is a division between movable and immovable

property. Movable property roughly corresponds to personal property, while immovable property

corresponds to real estate or real property, and the associated rights and obligations thereon.

The concept, idea or philosophy of property underlies all property law. In some jurisdictions, historically

all property was owned by the monarch and it devolved through feudal land tenure or other

feudal systems of loyalty and fealty.

Though the Napoleonic code was among the first government acts of modern times to introduce the

notion of absolute ownership into statute, protection of personal property rights was present

inmedieval Islamic law and jurisprudence,[1]

and in more feudalist forms in the common law courts of

medieval and early modern England.

CLASSIFICATION:

Property law is characterised by a great deal of historical continuity and technical terminology. The basic

distinction in common law systems is between real property (land) and personal property (chattels).

Before the mid-19th century, the principles governing the transfer of real property and personal property

on an intestacy were quite different. Though this dichotomy does not have the same significance

anymore, the distinction is still fundamental because of the essential differences between the two

categories. An obvious example is the fact that land is immovable, and thus the rules that govern its use

must differ. A further reason for the distinction is that legislation is often drafted employing the

traditional terminology.

The division of land and chattels has been criticised as being not satisfactory as a basis for categorising

the principles of property law since it concentrates attention not on the proprietary interests themselves

but on the objects of those interests.[3]

Moreover, in the case offixtures, chattels which are affixed to or

placed on land may become part of the land.

Real property is generally sub-classified into:

1. corporeal hereditaments – tangible real property (land)

2. incorporeal hereditaments – intangible real property such as an easement of way



http://en.wikipedia.org/wiki/Law

http://en.wikipedia.org/wiki/Ownership

http://en.wikipedia.org/wiki/Tenancy

http://en.wikipedia.org/wiki/Real_property

http://en.wikipedia.org/wiki/Real_property

http://en.wikipedia.org/wiki/Possession_(law)

http://en.wikipedia.org/wiki/Personal_property

http://en.wikipedia.org/wiki/Common_law

http://en.wikipedia.org/wiki/Legal_system

http://en.wikipedia.org/wiki/Civil_law_(legal_system)

http://en.wikipedia.org/wiki/Real_estate

http://en.wikipedia.org/wiki/Philosophy

http://en.wikipedia.org/wiki/Property

http://en.wikipedia.org/wiki/Jurisdiction

http://en.wikipedia.org/wiki/Monarch

http://en.wikipedia.org/wiki/Feudal_land_tenure

http://en.wikipedia.org/wiki/Feudal

http://en.wikipedia.org/wiki/Loyalty

http://en.wikipedia.org/wiki/Fealty

http://en.wikipedia.org/wiki/Code_Napoleon

http://en.wikipedia.org/wiki/Government

http://en.wikipedia.org/wiki/Modern_history

http://en.wikipedia.org/wiki/Statute

http://en.wikipedia.org/wiki/Medieval

http://en.wikipedia.org/wiki/Sharia

http://en.wikipedia.org/wiki/Fiqh

http://en.wikipedia.org/wiki/Property_law#cite_note-Makdisi-2005-1

http://en.wikipedia.org/wiki/Feudalism

http://en.wikipedia.org/wiki/Terminology

http://en.wikipedia.org/wiki/Intestacy

http://en.wikipedia.org/wiki/Property_law#cite_note-3

http://en.wikipedia.org/wiki/Fixture_(property_law)

AGENCY LAW:

Definition of agency

Principal—the party who employs another person to act on his or her behalf Agent—the party who

agrees to act on behalf of another Agency—the principal/agent relationship

Any person with the capacity to contract can appoint an agent to act or his or her behalf. An agency

relationship can only be created to accomplish a lawful purpose.

Kinds of employment relationships

Employer/employee—a relationship that results when an employer hires an employee to perform some

form of physical service.

Principal/agent—an employer hires an employee and gives that employee authority to act and enter into

contracts on his or her behalf.

Principal/independent contractor—a relationship that results when a person or business that is not an

employee is employed by a principal to perform a certain task on his or her behalf. Critical factors in

determining independent contractor status include:

Whether the worker is engaged in a distinct occupation or an independently established business.

The length of time the agent has been employed by the principal.

The amount of time the agent works for the principal.

Whether the principal supplies the tools and equipment used in the work.

The method of payment, whether by time or by the job.

The degree of skill necessary to complete the task.

Whether the worker hires employees to assist him or her.



Whether the employer has the right to control the manner and means of accomplishing the desired

result.

When is a principal liable for actions of independent contractors?

The crucial factor in determining whether a person is an employee or an independentcontractor is the

degree of control that the principal has over that person. If the principal has substantial control, there is an

employer/employee relationship, and the principal can be held liable for actions of the independent

contractor.

Types of agency

Express agency-an agency that occurs when a principal and an agent expressly agree to enter into

an agency agreement with each other.

Implied agency-an agency that occurs when a principal and an agent do not expressly create an

agency, but it is inferred from the conduct of the parties.

Apparent agency-an agency that arises when a principal creates the appearance of an agency that

in actuality does not exist; the principal's actions, not the agent's, create the agency.

Agency by ratification-an agency that occurs when a person misrepresents him or herself as

another's agent when in fact he or she is not and the purported principal ratifies the agency.

Termination of agency by acts of the parties

An agency may be terminated by the following acts of the parties:

Mutual agreement

Lapse of time

Purpose achieved

Occurrence of a specified event

Termination of agency by operation of law

An agency is terminated by operation of law if there is:

Death of the principal or agent



Insanity of the principal or agent

Bankruptcy of the principal

Impossibility of performance

Change in circumstances

War between the principal's and agent's countries

Notification when an agency is terminated

If an agency is terminated by agreement of the parties, the principal is under a duty to give certain third

parties notification of the termination.

Wrongful termination of an agency contract

Wrongful termination is the termination of an agency in violation of the terms of the agency contract. The

non breaching party may recover damages from the breaching party.

Irrevocable agency

An agency coupled with an interest is a special type of agency relationship that is created for the agent's

benefit. It is irrevocable by the principal. This type of agency is commonly used in security agreements to

secure loans

Terms

agency by ratification—An agency that occurs when (1) a person misrepresents him- or herself as

another's agent when in fact he or she is not and (2) the purported principal ratifies the

unauthorized act.

agency—The principal-agent relationship: the fiduciary relationship "which results from the

manifestation of consent by one person to another that the other shall act in his behalf and subject

to his control, and consent by the other so to act."

agency law—The large body of common law that governs agency; a mixture of contract law and

tort law.

agent—The party who agrees to act on behalf of another.

apparent agency—Agency that arises when a principal creates the appearance of an agency that in

actuality does not exist.

employer-employee relationship—A relationship that results when an employer hires an

employee to perform some form of physical service.



employment relationships—(1) Employer-employee, (2) principal-agent, and (3) principal-

independent contractor.

exclusive agency contract—A contract a principal and agent enter into that says the principal

cannot employ any agent other than the exclusive agent.

express agency—An agency that occurs when a principal and an agent expressly agree to enter

into an agency agreement with each other.

implied agency—An agency that occurs when a principal and an agent do not expressly create an

agency, but it is inferred from the conduct of the parties.

independent contractor—"A person who contracts with another to do something for him who is

not controlled by the other nor subject to the other's right to control with respect to his physical

conduct in the performance of the undertaking." [Restatement (Second) of Agency].

independent contractor—A person or business who is not an employee who is employed by a

principal to perform a certain task on his behalf.

power of attorney—An express agency agreement that is often used to give an agent the power to

sign legal documents on behalf of the principal.

principal-agent relationship—An employer hires an employee and gives that employee authority

to act and enter into contracts on his or her behalf.

principal—The party who employs another person to act on his or her behalf.

termination by acts of the parties—An agency may be terminated by the following acts of the

parties: (1) mutual agreement, (2) lapse of time, (3) purpose achieved, and (4) occurrence of a

specified event.

termination by operation of law—An agency is terminated by operation of law, including: (1)

death of the principal or agent, (2) insanity of the principal or agent, (3) bankruptcy of the

principal, (4) impossibility of performance, (5) changed circumstances, and (6) war between the

principal's and agent's countries.

wrongful termination—The termination of an agency contract in violation of the terms of the

agency contract. The nonbreaching party may recover damages from the breaching party.



UNIT-V - LABOUR REGULATIONS

Social Security:

A guide to the social welfare benefits available to overseas workers in India…

Traditionally, the family has been the informal social security system in India. Joint families often live

together, with members taking responsibility for those who are in need.

Social security is available only to those who are employed in the organized sector (less than 10 percent

of India‘s workforce). The Employees‘ State Insurance scheme provides medical care and other benefits

(in the case of workplace accidents, temporary or permanent disability, incapacity, maternity leave,

support for dependants) to employees who earn less than Rs15,000 a month.

Employees’ Provident Fund

The Employees‘ Provident Fund Organisation (EPFO) is a statutory body under the Ministry of Labour

and Employment that administers social security regulations.

The EPFO covers pensions and survivors‘ benefits in the event of an employee‘s death. It is compulsory

for all workers employed by companies with more than 20 staff. Employers must apply for the fund on

behalf of their workers.

Since October 2008, all foreigners employed in India have been subject to the terms of the EPFO under

the category of ―international workers‖.

The employee is required to contribute 12 percent of their salary to the EPFO, which is automatically

deducted by the employer. Employers must match this 12 percent contribution. Employers are legally

required to deduct these contributions and remit them to the EPFO.

Tax-free interest is earned on contributions made to the fund at a specified rate, which is updated

regularly by the government. For 2012-13, the rate is 8.8 percent.



Foreigners can withdraw the accumulated balance from this fund only when they reach 58, except in the

case of citizens of those countries that have a social security agreement in force with India. It can also be

withdrawn in the case of permanent and total incapacity to work due to illness.

Workmen's Compensation Act, 1923

Purpose & Object

The Workmen's Compensation Act, 1923 has been enacted to provide

payment of compensation to workmen or their dependants in case of injury /

accident arising out of and in the course of employment and resulting in

disablement or death.

Workmen's Compensation Act, 1923 has been remaned as 'Employees'

Compensation Act, 1923' vide Workmen's Compensation (Amendment)

Act, 2009

Applicability

The Workmen's Compensation Act, 1923 extends to whole of India.

It applies to workmen employed in factories, mines, plantations,

mechanically propelled vehicles, construction works and certain

other hazardous occupations in any such capacity as is specified in

Schedule II of the Act;

It applies to persons recruited for working abroad and who is

employed outside India in any such capacity as is specified in

Schedule II of the Act.

It also applies to a person recruited as driver, helper, mechanic,

cleaner or in any other capacity in connection with a motor vehicle

and to a captain or other member of crew of an aircraft.

Eligibility

The workmen or their dependants shall be entitled for compensation under

the Act in case of injury / accident arising out of and in the course of

employment and resulting in:

Death or



Permanent Total Disablement or

Permanent Partial Disablement or

Temporary Disablement (whether total or partial)

Determination of Compensation

Subject to provisions of this Act, the amount of compensation depends upon nature of the injury,

average monthly wages and age of the workmen and the same is determined on the following basis:

Cases Amount of Compensation

Death resulting from

injury

Amount equal to 50% of the monthly wages of the deceased workman

multiplied by the relevant factor or an amount of 80,000/-whichever is

more;

Permanent Total

Disablement resulting

from injury

Amount equal to 60% of the monthly wages of the injured workman

multiplied by the relevant factor or an amount of 90,000/-whichever is

more.

Permanent Partial

Disablement resulting

from injury

in case of injury specified in Part II of Schedule I, such percentage of

the compensation which would have been payable in the case of

permanent total disablement as is specified therein as being the

percentage of the loss of earning capacity caused by that injury, and

in case of injury not specified in Schedule I, such percentage of the

compensation payable in the case of permanent total disablement as

is proportionate to the loss of earning capacity (as assessed by the

qualified medical practitioner) permanently caused by the injury.

Temporary

Disablement, whether

total or partial, resulting

from injury

Half-monthly payment of the sum equivalent to 25% of monthly wages of

the workman, to be paid in accordance with the provisions of section 4(2).



Services We Offer:

We are Labour Law Consultants and at FuturAgeSM

, we provide following services in compliance to the

provisions of Workmen's Compensation Act, 1923:

Providing day to day consultancy on matters pertaining to Workmen Compensation;

Assistance in determination of nature of injury as per provisions of the Act like Temporary Partial

Disablement, Permanent Partial Disablement, Total Disablement;

Preparation & Submission of notices of accidents / serious bodily injuries with the commissioner;

Assistance in medical examination of workmen;

Assistance in determination / calculation of amount of compensation payable to workman;

Assistance in timely payment / distribution of compensation to workmen;

Complying special provisions of the Act as applicable on master & seamen, captains & other

members of crew of aircrafts, workmen of companies working abroad;

Preparation & Submission of return of compensation

Preparation & Maintenance of notice - book;

Making reference to commissioner for determination of nature of disablement, amount or duration

of compensation, whenever required;

Preparation & filing of applications with commissioner as & when required under the Act;

Drafting / Registration of Agreements to be entered with workman fixing lump sum amount

payable as compensation;

Ensuring / Assistance in complying various provisions of the Act related to disclosures, notices,

displays, deductions, forfeiture etc.;

Replying / Satisfying Show Cause Notices issued by Inspector / Commissioner;

Representing establishments before Inspector / Commissioner;

Assistance at the time of inspection and search of any premises by Inspector;

Representing establishments at the Inquiries conducted by the inspector.



Factories act 1948-Applicability of the Act

Any premises whereon 10 or more persons with the aid of power or 20 or more workers are were

without aid of power working on any day precedng 12 months wherein Manufacturing process is

being carried on.

Sec.2 (ii)

Employer to ensure health of workers pertaining to

o Cleanliness Disposal of wastes and effluents.

o Ventilation and temparature dust and fume.

o Overcrowding Artificial humidification Lighting.

o Drinking water Spittions

Secs.11 to 20

Saftey Measures

o Facing of Machinery

o Work on near machinery in motion.

o Employment prohibition of young persons on dangerous machines.

o Striking gear and devices for cutting off power.

o Self acting machines.

o Casting of new machinery.

o Prohibition of employment of women and children near cotton-openers.

o Hoists and lifts

o Working Hours

o Weekly hours not more than 48.

o Daily Hours, not more than 9 Hours.

o Intervals for rest at least 1/2 hour on working for 5 hours.

o Spreadover not more than 10 1/2 hours.

o Overlapping shifts prohibited.

o Extra Wages for overtime double than normal rate of wages.

o Restrictions on employment of women before 6 AM and beyond 7 PM



Secs.51,54 to 56, 59 & 60

Welfare Measures

o Washing facilities.

o Facilities for storing and drying clothing.

o Facilities for sitting.

o First-aid appliances - one first aid box not les than one for every 150 workers.

o Canteens when there are 250 or more workers.

o Shelters, rest rooms and lunch rooms when there are 150 or more workers.

o Creches when there are 30 or more women workers.

o Welfare office when there are 500 or more workers.

OFFENCE PENALTIES

For Contravention of the

provision of the Act or Rules

Imprisonment upto 2 years or fine upto

Rs.1,00,000 or both.

On Contribution of Contravention Rs.1000 Per day

On Contravention of Chapter IV

pertaining to safety or dangerous

operations.

Not Less than Rs.25000 in case of detah.

Not less than Rs.5000 in case of serious

injuries.

Subsequent contravention of some

provisions.

Imprisonment upto 3 years or fine not less

than Rs.10,000 which may extend to

Rs.2,00,000.

Obstructing Inspectors Imprisonment upto 6 months or fine upto

Rs.10,000/- or both.

Wrongful disclosing result

pertaining to results of analysis.

Imprisonment upto 6 months or fine upto

Rs.10,000/- or both

For contravention of the provisions

of Sec.41B, 41C and 41H

pertaining to compulsory

disclosure of information by

occupier, specific responsibility of

occupier or right of workers to

work imminent danger.

Imprisonment upto 7 years with fine upto

Rs.2,00,000/- and on continuation fine @

Rs.5,000 per day.

Imprisonment of 10 years when contravention

continues for one year.



CHILD Protection & Child Rights » IV.National Mechanisms » Child Related Legislations » Child

Labour (Prohibition and Regulation) Act 198

The Child Labour (Prohibition and Regulation) Act, 1986 is one the most debated acts regarding children

in India. It outlines where and how children can work and where they can not. The provisions of the act

are meant to be acted upon immediately after the publication of the act, except for part III that discusses

the conditions in which a child may work. Part III can only come into effect as per a date appointed by

the Central Government (which was decided as 26th of May, 1993).

The act defines a child as any person who has not completed his fourteenth year of age. Part II of the act

prohibits children from working in any occupation listed in Part A of the Schedule; for example: Catering

at railway establishments, construction work on the railway or anywhere near the tracks, plastics

factories, automobile garages, etc. The act also prohibits children from working in places where certain

processes are being undertaken, as listed in Part B of the Schedule; for example: beedi making, tanning,

soap manufacture, brick kilns and roof tiles units, etc. These provisions do not apply to a workshop

where the occupier is working with the help of his family or in a government recognised or aided school.

The act calls for the establishment of a Child Labour Technical Advisory Committee (CLTAC) who is

responsible for advising the government about additions to the Schedule lists.

Part III of the act outlines the conditions in which children may work in occupations/processes not listed

in the schedule. The number of hours of a particular kind of establishment of class of establishments is to

be set and no child can work for more than those many hours in that particular establishment. Children

are not permitted to work for more than three hour stretches and must receive an hour break after the

three hours. Children are not permitted to work for more than six hour stretches including their break

interval and cannot work between the hours of 7 p.m. and 8 a.m. No child is allowed to work overtime or



http://www.childlineindia.org.in/national-mechanisms-child-protection-child-rights.htm

http://www.childlineindia.org.in/Child-Related-Legislations.htm

http://www.childlineindia.org.in/Ministry-of-Labour-and-Employment-and-Related-Bodies.htm

work in more than one place in a given day. A child must receive a holiday from work every week. The

employer of the child is required to send a notification to an inspector about a child working in their

establishment and keep a register of all children being employed for inspection.

If there is a dispute as to the age of the child, the inspector can submit the child for a medical exam to

determine his/her age when a birth certificate is not available. Notices about prohibition of certain child

labour and penalties should be posted in every railway station, port authority and

workshop/establishment.

The health conditions of work being undertaken by children shall be set for each particular kind of

establishment of class of establishments by the appropriate government. The rules may cover topics such

as cleanliness, light, disposal of waste and effluents, drinking water, bathrooms, protection of eyes,

maintenance and safety of buildings, etc.

Section IV of the act outlines various remaining aspects such as Penalties. The penalty of allowing a

child to work in occupations/ processes outlined in the schedule which are prohibited is a minimum of 3

months prison time and/or a minimum of Rs. 10,000 in fines. Second time offenders are subject to jail

time of minimum six months. Failure to notify an inspector, keep a register, post a sign or any other

requirement is punishable by simple imprisonment and/or a fine up to Rs. 10,000. Offenders can only be

tried in courts higher than a magistrate or metropolitan magistrate of the first class. Courts also have the

authority to appoint people to be inspectors under this act.

Rules of this act must be passed by the respective parliaments (state or central). Any changes or added

provisions must be passed by the parliament. The establishment of this act also calls for a change in a

number of other acts. The Employment of Children Act of 1938 is repealed. The enactment of this act

changes the definition of child to one who has not completed his fourteenth year of age. Hence under

provisions of this act the age of a child is also changed in the Minimum Wages Age 1948, the Plantations

Labour Act 1951, the Merchant Shipping Act 1958, and the Motor Transport Workers Act 1961

Tamil Nadu

Tamil Nadu Shops and Establishments Act, 1947

Tamil Nadu Shops and Establishments Rules, 1948

Tamil Nadu Catering Establishments Act, 1958



Tamil Nadu Catering Establishments Rules, 1959

Tamil Nadu Labour Welfare Fund Act, 1972

Tamil Nadu Labour Welfare Fund Rules, 1973

Tamil Nadu Payment of Wages Rules, 1937

Tamil Nadu Payment of Wages (Unclaimed Amounts) Rules, 1949

Tamil Nadu Handloom Workers (Conditions of Employment and Miscellaneous Provisions) Act,

1981

Tamil Nadu Manual Workers (Regulation of Employment and Conditions of Work) Act, 1982

Tamil Nadu Manual Workers (Regulation of Employment and Conditions of Work) Rules

Tamil Nadu Industrial Establishments (National and Festival Holidays) Act, 1958

Tamil Nadu Industrial Establishments (National and Festival Holidays) Rules

Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981

Tamil Nadu Payment of Subsistence Allowance Act, 1981

Tamil Nadu Construction Workers Welfare Scheme

Tamil Nadu Building Construction Workers (Condition of Employment and Miscellaneous

Provisions) Act, 1983

Tamil Nadu Factories (Welfare Officers) Rules, 1953

Tamil Nadu Child Labour (Prohibition and Regulation) Rules, 1994

Tamil Nadu Factories Rules, 1950

Tamil Nadu Beedi and Cigar Workers (Condition of Employment) Rules, 1968

Tamil Nadu Motor Transport Workers Rules, 1965

Tamil Nadu Tax on Professions, Trades Callings, and Employment's Act, 1992

Overall review of all labour regulations :

Full employment and the raising of standards of The Objectives are, The employment of workers

in the occupation in living, which they can have the satisfaction of giving the fullest measure of their

skill, and make their The provision, as a contribution to the common well being, means to the attainment

of this end, and under adequate guarantees for all concerned, of facilities for training and the transfer of

labour, including migration for employment and settlement,



Policies in regard to wages and earning, bonus and other conditions of work, calculated to ensure

a just share of the fruits of progress to all, and a minimum living wage to all employed and in need of

The effective recognition of the right of collective protection, bargaining, the cooperation of management

and labour in the continuous improvement of productive efficiency and the collaboration of workers and

employers in social and economic measures,

The extension of social security measures to provide a basic income to all in need of such

protection and comprehensive medical care, Adequate protection for the life and health of workers in all

The Provision for child welfare and maternity protection, occupations, provision of adequate nutrition,

housing and facilities for creation The assurance of equality of educational and culture, vocational

opportunity

The body of Conventions and Recommendations adopted by the International Labour Conference

constitutes the International Labour As of now over 180 Conventions (and Code Recommendations)

have been adopted by the The international labour code covers and Conference enormous range of

important subjects in the labour and social fields

Labour Administration Basic Human Rights The Important Subjects are, Employment Policy and

Human Resource and Industrial Relations Employment of Children, General Conditions of Employment

Development Social Industrial Safety, Health and WelfareYoung Persons and Women Indigenous and

Tribal Populations Migrants Security and Social Policy and Plantation Workers

So far, India has ratified 39 out of 185 Conventions adopted by ILO In India, the provisions of

most of the ratified Conventions have been given effect mainly through their incorporation in Labour

laws in the country have also been influenced extensively by the provisions of even unratified

Conventions and a number of The assistance of ILO‘s experts in the drafting of Recommendations

certain labour enactments, technical assistance, and studies, reports and publications of the organisations

have also been influencing factors

Conditions of work Hours of work The hours of work Convention, 1919 adopted in the first

session of the International Labour Conference limits the hours of work in industrial undertakings to 8 in

the day and 48 in the week It provides certain exceptions in respect of persons holding supervisory or

managerial positions and those employed in confidential capacity The limits of hours of work may be

exceeded in certain cases,, for instance, in the events of accident, urgent work, in continuous processes,



and so on Weekly rest The weekly rest Convention,1921 was ratified by India in 1923 The Convention

provides that the entire personnel employed in any industrial undertaking is to enjoy in every period of 7

days a period of rest amounting to at least 24 consecutive hours

Holidays with pay India has not ratified ILO‘s Holidays with pay Conventions, as the standards

laid down under the protective labour laws in the country have been higher than those prescribed under

the Protection of Wages conventions The protection of wages Convention,1949 provides that wages

payable in money must be paid regularly in legal tender and deductions may be permitted only under

conditions Protection of wages Recommendation adopted the same year, contains detailed rules relating

to deductions from wages, fixation of wage periods, and so forth Although India has not ratified the

Convention, its provisions have been contained in, the Payment of Wages Act,1936 Minimum Wages

Act,1948 Shops and Establishments Acts Beedi and Cigar Workers Act,1966 and a few other protective

labour laws

Minimum Wages The Minimum Wage Fixing Machinery Convention,1928, 1970 and

Recommendation,1928, deal with the provision of wage-fixing machinery and consultation with

employers and workers in minimum wage fixation India has ratified convention,1928 and incorporated

its provisions in the Minimum Wages Act,1948 The Minimum Wage Fixing Machinery conventions and

Recommendations have also influenced the contents of the Labour Minimum Wages Act, 1948

Administration India has ratified the Labour Inspection Convention,1947, the existing protective labour

laws such as those relating to factories, mines, plantations, shops and establishments, motor transport,

beedi and cigar establishments, payment of wages, minimum wages child labour, maternity benefit and

others contain the provisions of the Convention

Employment of Children and Young Persons India has ratified quite a few Conventions relating

to employment of children and young persons. These include, Minimum Age (Industry) Con.,1919

Minimum Age (Trimmers and Stockers) Con.,1921 Minimum Age (Underground Work) Con., 1965

Medical Examination of Young Persons (Sea) Con.,1921 Night Work of Young Persons (Industry) Con.,

1919 and Employment of Women1948 The relevant Conventions relating to women workers ratified by

India are, Night Work (Women) Con., 1919 Night Work (Women) (Revised) Con., 1934 Night Work

(Women) ( Revised) Con.,1948 Equal Remuneration Con.,1951 Discrimination (Employment and

Occupation) Con.,1958 Underground Work (Women) Con.,1935

Health, Safety, and Welfare Existing safety and health provisions of labour laws relating to

factories, mines, docks, and others also contain many provisions of a few other Conventions and



Recommendations. Some of these are, Prevention of Industrial Accidents Rec.,1929 Power-driven

Machinery Rec.,1929 Labour Inspection Rec.,1923 Guarding of Machinery Con.,1963 Occupational

Safety and Health Con.,1981 Industrial Social Security accidents Con., 1993 The conventions relating

to social security ratified by India are, Workmen‘s Compensation (Occupational Diseases) Con., 1925

and Con., 1934 Equality of Treatment (Accident compensation) Con.,1925 Equality of Treatment

(Social Security) Con.,1962 The provisions of Conventions No.s 18 and 19 have been incorporated in

the, Workmen‘s Compensation Act,1923 Employees‘ State Insurance Act,1948

Industrial Relations The Conventions relating to industrial relations ratified by India are, Right

of Association (Agriculture) Con., 1921 Rural Workers Organization Con., 1975 Tripartite Consultation

(International Labour Standards) Con., 1976 The provision of Conventions No.s 11 and 141 have been

included in the Trade Unions Act, 1926 The Industrial Disputes Act, 1947 contains some provisions of a

few unratified conventions Employment and Unemployment and Recommendations The Conventions

concerning employment and unemployment ratified by India include, Unemployment Con.,1919

Employment Services Con., 1948 Employment and Social Policy Con.,1964 Forced Labour Con., 1930

and Abolition of Forced Labour Con., 1957

Other Special Categories Other special categories of Conventions ratified by India include.

Inspection of Emigrants Con., 1926 Seamen‘s Articles of Agreement Con., 1928 Marking of Weight

(Packages transported by Vessels) Con., 1929 Final Articles Revision Con., 1947 Indigenous and Tribal

Population Con., 1957 and Certain Articles of Labour Statistics Con., 1985

Conventions and Recommendations of ILO, seek to prescribe and indicate internationally uniform

minimum labour The purpose is to see standards that the labour standards in the Member countries are

not below the Standards once Some of the countries are extremely prescribed by ILO poor, economically

and technologically backward having, therefore, very poor labour standards, and are incapable of

securing any immediate improvement in the same

The uneven economic development on the world scale presents the main hindrance to the

adoption of Convention or Recommendation, laying down a A Convention or Recommendation has to

gain minimum labour standard acceptance from the Member countries if it is to be effective in The

Convention which seeks to provide really achieving its purposes high labour standards will fail to secure

acceptance

The ILO has played a significant role in promoting international labour India is a founder

member of the ILO and has contributedstandards to India is in turn benefited from thethe codification



of standards international labour standards in framing its own legal and institutional In recent

years,framework on social and labour aspects efforts are being made to link the standards to world trade

through social clause and company codes and consumer boycotts are seeking to achieve the same purpose

through social labelling

The future of international labour standards is caught up in the contradictory parallel processes

of globalisation and regionalisation Although usually seen as and issue of developing and transition

economies, harmonising core labour standards within developing countries itself could be contentious

and difficult Governments and trade unions of workers in many developed countries favour linkage

between core labour standards and international trade Much of the controversy about linkage between

core labour standards and trade is over the difficulties in harmonisation between or among countries at

drastically different stages of economic development The relationship between economic growth and

labour standards may be less than proportionate; meaning that while labour standards may not improve at

the same pace or rate as economies grow

On the basis of specific objectives, the labour legislations can be Protective Regulative classified

into following categories, Welfare both inside and outside the Social Security Wage-Related workplace

His category covers those regulations whose primary purpose is to Laws lyingprotect labour

standards and to improve working conditions down the minimum labour standards in the areas of, Hours

of work Safety Employment of children and women, etc. in the, Factories Mines Plantations

Transport Shops and Other establishments

The Plantations Labour The Mines Act, 1952Factories Act, 1948 The Shops and The Motor

Transport Workers Act, 1961Act,1951 Beedi and Cigar Workers Act, 1966Establishment Acts

The main objective is to regulate the relations between employees and It also provide for

methods and manners of settling employers The laws also regulate industrial disputes The relationship

between the workers and their trade unions The rights and obligations of the organisations of employers

and workers As well as the mutual relationships between employers and workers

Industrial The Industrial Disputes Act,1947The Trade Unions Act, 1926 Relations Legislations

enacted by states of Maharashtra, MP, Gujarat, Industrial Employment (Standing Orders) Act,1946UP,

etc.

After India became independent, it adopted a Constitution on 26th Constitution is the supreme

law of a nation and all January 1950 The trinity of Indian legislations draw their inspiration from it



Constitution, the Preamble, the fundamental Rights and The Directive Principles of State Policy, embody

the fundamental principles, which provide guide to all legislations, including the labour legislations.

