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Ramos, Chris Almer D.

Civil Engineering Law, Contracts and Specifications

 Discuss the contracts and obligations of Civil Engineer.
Construction contracts are a tool that every builder must know inside and out. Each contractor uses
a different checklist when building a contract, starting with the most basic of line items, matching
the complexity of the contract with that of the project. Aside from the construction itself, the
contract is one of the most important facets when starting a new project, and even items
considered common sense shouldn't be overlooked.
The list below covers some of the more basic items found in construction contracts, as well as
some of the factors that need to be considered and written into the contract when appropriate.
 Contract Documents
The contract documents are some of the most important pieces that help ensure a successful
project. No matter what the building, having a solid contract represents one of the first
steps toward the success of the project. This list contains the documents that typically form
part of every construction contract. Numerous other exhibits or forms can be used in
combination with the documents listed below, but the contract documents are a priority.

 Contract Types
Different types of construction contracts are used in the industry, but professionals
generally prefer certain ones. Construction contract types are usually defined by the
manner in which the disbursement is going to be made; they also specify other terms, such
as duration, quality, specifications, and other issues of similar importance.
 Successful Contract Negotiations
When the time comes for a builder to sit down with union representatives or project
stakeholders, they need to be prepared. A negotiator should have the characteristics and
skills that allow for the right deal to be struck while achieving set goals. Negotiations,
although rare, can sometimes make things even worse. Certain tricks and methods can
ensure everyone receives a good deal.
 Direct Hire of Subcontract
Subcontracting can offer warranties, while hiring someone directly requires additional
efforts as far as oversight and management. How does a contractor decide between the
two? Based on the scope of the project and existing relationships with subcontractors, the
project manager will make the decision based on what is most cost-effective and timely.
 Construction Contract Agreements
A construction contract agreement is a document that sets a date and specifies which
parties are going to participate in the construction process. Usually, the contract
agreement is executed between the owner of the project and the contractor (or supplier)
that is providing the requested service. It contains several sections of clauses defining the
scope, terms, and conditions of the agreement. The legal writing can be heavy, and both
parties usually involve a lawyer when dealing with these specific documents.
 Differing Site Condition
Differing site conditions can increase construction costs and can delay breaking ground on
the project. Normally, differing site conditions surface during the first weeks of the project,
potentially affecting the schedule and causing unforeseen delays. Considering the
repercussions of delays, it's crucial to document how such impediments affect the general
 Construction Contracting and Escalation Close
Escalation clauses are written into construction contracts regularly. They are more typically
included on large construction projects, where the job might exceed one year and carries
substantial financial backing and risk. Economic changes such as a gas shortage or oil glut
would introduce contract escalation clauses, even on small and medium-size projects. If
executed properly, escalation clauses protect the contractor from unpredicted charges.

Common Types of Construction Contracts

 Lump Sum or Fixed Price Contract Type

This type of contract involves a total fixed priced for all construction-related
activities. Lump sum contracts can include incentives or benefits for early termination, or
can also have penalties, called liquidated damages, for a late termination. Lump Sum
contracts are preferred when a clear scope and a defined schedule has been reviewed
and agreed upon.

This contract shall be used when the risk needs to be transferred to the builder and the
owner wants to avoid change orders for unspecified work. However, a contractor must
also include some percentage cost associated with carrying that risk. These costs will be
hidden in the fixed price. On a lump sum contract, it is harder to get credit back for work
not completed, so consider that when analyzing your options.

 Cost Plus Contracts

This type of contract involves payment of the actual costs, purchases or other expenses
generated directly from the construction activity. Cost Plus contracts must contain specific
information about a certain pre-negotiated amount (some percentage of the material
and labor cost) covering contractor’s overhead and profit. Costs must be detailed and
should be classified as direct or indirect costs. There are multiple variations of Cost Plus
contracts and the most common are:

 Cost Plus Fixed Percentage

 Cost Plus Fixed Fee
 Cost Plus with Guaranteed Maximum Price Contract
 Cost Plus with Guaranteed Maximum Price and Bonus Contract
Cost plus contracts are used when the scope has not been clearly defined and it is the
owner responsibility to establish some limits on how much the contractor will be billing.
When some of the aforementioned options are used, those incentives will serve to protect
the owner's interest and avoid being charged for unnecessary changes. Be aware that
cost-plus contracts are difficult or harder to track and more supervision will be needed,
normally do not put a lot of risk in the contractor.

 Time and material Contracts When Scope is Not Clear

Time and material contracts are usually preferred if the project scope is not clear, or has
not been defined. The owner and the contractor must establish an agreed hourly or daily
rate, including additional expenses that could arise in the construction process.

The costs must be classified as direct, indirect, markup, and overhead and should be
included in the contract. Sometimes the owner might want to establish a cap or specific
project duration to the contractor that must be met, in order to have the owner’s risk
minimized. These contracts are useful for small scopes or when you can make a realistic
guess on how long it will take to complete the scope

 Unit Pricing Contracts

Unit pricing contracts is probably another type of contract commonly used by builders and
in federal agencies. Unit prices can also be set during the bidding process as the owner
requests specific quantities and pricing for a pre-determined amount of unitized items.

By providing unit prices, the owner can easily verify that he's being charged with un-
inflated prices for goods or services being acquired. Unit price can easily be adjusted up
and/or down during scope changes, making it easier for the owner and the builder to
reach into agreements during change orders.

10 Essential Contract Documents for Every Construction Project

Constructing a solid contract represents one of the first steps toward the success of your
project no matter what you're building. This list explains the documents that are typically a
part of every construction contract. There are also numerous other exhibits or forms that
you can use in combination with these documents.

 Contract Agreements and Contracts

This agreement is used by the contracting officer or owner and the contractor. It's an
essential component of the contract documents. It's the main document to which most other
documents attach or reference.

 Statement of Work (SOW)

Having a solid scope of the work involved is helpful during the bidding process and later
on during the construction sequence. A well-defined scope can be used to determine the
amount of work needed to complete the project.
 General Conditions

This contract document defines obligations regarding the execution of the project as well
as each party's rights. Overhead costs, what to claim, and your entitlements must be
included in this portion of the contract.

 Special Conditions

This is usually an extension of the contract and an addendum to the general conditions. It
should specify certain conditions and clauses that pertain to each particular project or job.
Pay special attention to specific instructions and requirements on how to perform the work.

 Bill of Quantities

This document is formed by the list of diverse trades and materials that will form part of
the construction. Sometimes this document is not required by the contracting officer.

 Drawings

All contracts should include a set of drawings that form part of the job to be performed.
These drawings are usually the latest and most recent available and must be received by
the contractor prior to the date of commencement. They must include all drawings from
consultants, and they'll constitute the entire project that's being contracted.

 CSI MasterFormat Outline

This is the technical requirement to complete, execute, and/or perform every little task or
supply every material being incorporated into the construction project. It will add
intelligence to the construction drawings, specify common standards, explain deviations
that have been accepted, detail materials that have been accepted, and cite the required
testing for all materials. Specifications are usually made by referencing construction
standards and codes.

 Creating Construction Schedule

The construction schedule is an important component of the document. The contracting

office will know how and when the project will be completed by reviewing this
part. Construction contracts sometimes require updated schedules throughout the
construction progress, and they might form part of the monthly or agreed term
for application for payments.

 Costs in the Construction Industry

This is a breakdown of all items being incorporated into the construction project. It's usually
the base of the application for payment. It can be detailed per item or in a lump sum
form that doesn't specify individual items.

 List of Common Types of Construction Insurance

This is an essential part of the contract because it provides a guarantee to the owner that
the contractor has the means and the economic backup to perform under the terms of the
construction contract. It will include specific types of coverages, required bonding, and
all insurance protections available to the owner, the contractor and third parties.

What is contract agreement?

A construction contract agreement is a document that sets a date and specifies
which parties are going to participate in the construction process. Usually, the
contract agreement is executed between the owner of the project and the
contractor or supplier that is providing the requested services and contains several
sections of clauses defining the scope, terms, and conditions of such agreement.
A contract agreement should have the following sections:

 Project description: This section of the contract agreement contains a blurb or

extract of what the project is about. The most important idea or description of the
problem being addressed. It can be a summary of items or just a paragraph
defining what needs to be solved.
 Contract price: This area will describe the type of contract price been awarded
and the total amount of money being contracted. It will also set possible additions
or deductions to the contract and how they are going to be released. There are
many variations and different schemes on how to negotiate the right pricing
 Payment basis: How the money is going to be paid to the contractor. Either on a
monthly basis or whatever payment method is preferred, it should also specify
what percentage of money should be retained on every application for payment.
It will also define when the payment is due, the penalty for late payments, interest
being accrued and other applicable situations related to the payment and
invoicing terms.
 Construction schedule or calendar: The total of days or how the project schedule
will be divided. It should describe either calendar days or business days and can
be presented either through a CPM, Gantt Chart, or just a bar chart
 Contract document list: A list of all contract documents that form part of the
contract agreement. Drawings, exhibits, specs and supplemental conditions can be
part of this list.
 Construction scope: Description of all construction activities including some
descriptions of things that will form part of the project. The scope normally can be
measured or quantifiable
 Construction conditions and responsibilities: The section of conditions and
responsibilities is the one that sets responsibilities for the owner and the contractor,
and the extents of who is responsible for providing documents and information. It
contains specific terms for liens, penalties, withholding, arbitration rules, and
specific instructions on how to process claims and proceed with disputes.
 Contract laws: Governing laws, liens requirements, claims procedures, arbitration
procedures, insurance, substantial completion requirements, final completion, and
liquidated damages. It can also provide procedures on how to terminate or
suspend the work and the agreement with the contractor

Why Is a Contract Agreement Important?

A contract agreement is a really important document that will define your scope of
work and that will bind the owner to your services, including the payment terms. It
is really important that you understand the scope of work specified in the contract
agreement, complete the work as scheduled, and invoice per instructed to do so,
and finally it will be the tool used so you can get paid.

However, contract agreements must do as follows:

 Be in writing.
 Contain a description of the product or service being offered.
 Be understood and clear between both parties.
 Include services being contracted clearly.
 Include cancellation or termination policy.
 Have financial terms clear.

Contract Aggreement Types

Contract agreements vary or could have several modifications depending on the

contract being executed:

 Express: This type of agreement defines very well the purpose

and scope of the agreement. Under this alternative, the stipulations and
terms of the contract are understood clearly by each part.
 Executed: An executed contract agreement provides a warranty period or
malfunction. Under this agreement, services have been rendered, but the
contract protects one party when the other's performance fails to provide
the proper warranty for defective or incorrect installation.
 Conditional: A conditional contract agreement is an agreement used when
services could not be provided at the time the contract was signed. It
stipulates a future date when services will be rendered if certain conditions
are met.

A construction contract provides a legal binding agreement, for both the owner
and the builder, that the executed job will receive the specific amount of
compensation or how the compensation will be distributed. There are several types
of construction contracts used in the industry, but there are certain types of
construction contracts preferred by construction professionals.
Construction contract types are usually defined by the way, the disbursement is
going to be made and details other specific terms, like duration, quality,
specifications, and several other items. These major contract types can have many
variations and can be customized to meet the specific needs of the product or the

What is obligation in Article 30 Contractor’s Responsibility for accidents and damages?

1. What are the safeguards that should be undertaken by the Contractor?

 The Contractor shall take all necessary precautions for the safety of employees and
workmen on the Work, and comply with all Laws to prevent injury to persons on,
about, or adjacent to the premises where the Work is being performed.
 The Contractor shall erect and properly maintain at all times, as required by the
conditions and progress of the work, such as barriers, shoring, supports, braces, lights,
danger signs and necessary safeguards, as will protect workmen and the public and
as will effectively prevent any injury to persons and damage to property in
consequence of his work.
 The Contractor shall designate a responsible member of his organization at the site,
whose duty shall be the prevention of accidents and damage to the Work, the
Owner's property, and adjoining property. The name and position.
 The Contractor shall be primarily responsible for all safety measures in prosecuting the
Work in accordance with the safety manual approved by the Construction Industry
Authority of the Philippines (CIAP) (30.01).

2. Will the owner be responsible for the death or injury of the Contractor or his employees from
any source or cause by or to the Contractor's plant or materials? What about damages caused by
the Contractor or his employees to any property of the Owner and adjoining property?

No. Article 30.02(a)states that the Contractor shall indemnify and save harmless the
Owner from and against all losses and all claims, demands, payments, suits, actions,
recoveries, and judgment of every nature and description brought or recovered against
him, for any act or omission of said Contractor, or of his agents or employees, in the
execution of the Work or the guarding of it.

3. Who will pay for the repair and damages of the Contractor?

Claims for payment and repairs for damages for which the Contractor is liable shall be
settled by the Contractor at his own expense. (30.02[b])

4. What if the Contractor fails to repair and pay claims?

The Owner may repair the same and pay the claims, and deduct the entire cost of such
repairs and claims from the payments due the Contractor.

5. What if the Contractor defaults?

The Owner shall have the right to undertake reasonable safety and protection measures,
and charge the cost of such measures to the Contractor. (30.03)

What are the kinds of insurance required of the Contractor?

A. Liability Insurance

1. What is the purpose for securing an insurance?

To protect himself, his sub-contractors, and the Owner from claims for bodily injury, death
or property damage.

2. Can the Contractor commence work without insurance and subsequently acquire one?

No, the Contractor shall not commence work under the Contract until he has obtained the
insurance coverage required and shall have filed the insurance.

3. Is there any special clause that should be provided for in the Insurance policy?

Yes, the insurance policy shall contain a clause providing that it shall not be cancelled by
the insurance company without written notice to and approval of the Owner. The nature,
extent and amount of such insurance coverage shall be as agreed upon between the
Owner and the Contractor. The Contractor shall ensure that such insurance policy is
effective during the execution of the Work.

B. Accident Insurance for workers

In addition to compulsory coverage of workers under the workmen's compensation law, the
Contractor must obtain insurance coverage for accidental death or injury of his officers,
employees and laborers without regard to their tenure of employment as permanent or
regular workers. The amount of the coverage shall be at least P100,000 per worker. The
Contractor shall pay the appropriate premiums without any cost to those covered by the

C. Fire Insurance

In addition to such Fire Insurance as the Contractor elects, he must secure and maintain the
policies upon such structures and materials and in such amounts as shall be designated in
the joint names of the Contractor and the Owner as their respective interest may appear.

2. What are the bonds required of the Contractor?

A. Performance and Payment Bond

1. How much is the performance bond?

• 15% of the Contract amount for the faithful performance of his work; and
• 15% bond covering Contractor's obligations arising from the Contract to its workers,
subcontractors and suppliers.
2. How long will the bond remain in effect?

It shall remain in effect until replaced by the Contractor's guarantee bond.

B. Guarantee Bond

1. When will the performance and payment bond be released?

Upon posting by the Contractor of a Guarantee Bond equivalent to the amount of the
retention released to the Contractor.

2. For how long should the Guarantee Bond be held by the Owner?

For a period of one (1) year commencing from the date of posting as a guarantee that all
materials and workmanship installed under the Contract are of acceptable quality.

C. Guarantee-Warranty

1. What if the Contractor gets a sub-contractor to do its work, who shall guarantee for the sub-

The Contractor shall secure guarantees from said sub-contractors and deliver copies of the
same to the Owner upon completion of work. The term "guarantee" shall include

2. What are the other guarantees by the Contractor?

• All work performed by him directly and for which guarantees are required.
• For a period of one year, or for a longer period where so provided in the Specifications, all
materials and workmanship installed under the Contract are to be of acceptable quality in every
respect and to remain so during the guarantee period.
• Repairs and necessary work to correct defective work to the Owner's satisfaction. This shall
be done at Contractor's exclusive expense and shall be commenced within five (5) days after
receipt of written notice by the Owner.

3. What if the contractor fails to commence or do the work so ordered?

The Owner may have the work done by another contractor and charge the cost against
monies retained as provided for in the Contract and/or against his sureties.

4. What is the effect of the surety or bondsman issuing any bond called for in the Contract?
He is deemed conclusively to have accepted the mandatory conditions, and any provision
thereby issued or in any document made prior to, concurrent with, or after the issuance of
the bond which tends to nullify, modify, or limit by time or otherwise, any right of the
Owner shall be void and shall not prevail over the mandatory conditions.
5. What are the mandatory conditions of these bonds?
 The surety or bondsman agrees in advance to future novation/s of the bond either by
adjusting the scope of the Contractor's work caused by directed or constructive
changes, the Completion Time or the Contract Price. Where the Contract provides that
the Contractor shall obtain the approval of the surety or bondsman to any such
adjustment, the required approval shall be deemed to be a mere formality, the
absence of which shall not affect the obligation and liability of the surety or bondsman
under the bond.
 The bond issued shall continue to have force and effect beyond the effectivity period
stated in the bond if the work or the obligation for which it was issued has not been
completely performed. This is without prejudice to the right of the surety or bondsman
to demand from the Contractor the payment of the premium on the bond or to the
right of the Owner to pay such unpaid premium for the Contractor. The additional
premium on the bond for an extension of the Contract time due to reasons other than
the fault or negligence of the Contractor shall be billed at cost to the Owner. The
bond may not be cancelled or otherwise terminated by the bondsman or surety
without the express written consent of both the Owner and the Contractor. the right of
the surety shall be limited to demand the payment of unpaid premium.
 The Owner shall have a right of recourse against the surety on the bond until (a) it is
cancelled by the Owner and returned to the Contractor, (b) it is replaced by another
bond unless the Owner reserves the right to recover against the former bond due to
default of the Contractor, (c) the Owner issues to the Contractor an unconditional
Certificate of Acceptance of the Work.
 Until the Owner takes over the work or terminates the Contract, the Contractor shall
not be deemed in default notwithstanding the reduction of the Contractor's scope of
work and any assistance provided by the Owner to enable the Contractor to catch up
and complete the remaining work. The Owner's assistance to the Contractor shall not
prejudice nor limit the right of the Owner to have a later recourse against the bond.

D. Other remedies

The Owner's remedies are without prejudice to its rights under the Civil Code and other
applicable laws.

ARTICLE 32: Owner's Responsibilities and Liabilities

1. What are the responsibilities and liabilities of the Owner?

A. Advance Payment
i. How much should the advance payment to the Contractor be?

The advance payment should be in an amount to be mutually agreed upon by the Owner and the
ii. What is the purpose of the advance payment?

The Contractor shall use the advance payment for mobilization, purchase of materials, and
the like for the project. This shall be recouped pro rata in the progress billings.

iii. Are there any conditions before any advance payment is made?

The Contractor shall post a surety bond of equivalent amount callable on demand and
acceptable to the Owner to guarantee its repayment.
iv. When is a bond callable on demand?

A bond is callable on demand when the surety is obliged to pay the Owner upon its call. It
means payable on demand.

B. Protection of employees and professionals performing services for the Owner

The Owner shall be responsible for and shall maintain such insurance as will protect him
from liability for personal injury including disease and death of persons under his employ
or service whether as temporary or permanent in status that are assigned to the project.

C. Owner's optional Insurance

i. What is the purpose of this?

To protect him from his contingent liability for damages, for personal injury, including
death, which may arise from the work under the Contract.

D. Additional information and services required of the Owner

The Owner shall, at the request of the Contractor, at the time of the execution of the
Contract, furnish to the Contractor reasonable evidence that the Owner can fulfill its
obligations under the Contract. Unless such reasonable evidence is furnished, the
Contractor may not be required to execute the Contract or to commence or continue the

ARTICLE 33: Liens, Disputes, and Arbitration


A. Can the Contractor release the Work even though there are legal liens attached to it?

No. The Contractor shall release the Work from any legal liens attaching therewith as a
result of unpaid claims of subcontractors and/or suppliers for the supply of materials
and/or equipment to the Contractor for the project.

B. What documents should be executed by the Contractor in respect of any such legal liens?

A sworn statement by the Contractor or a duly authorized officer of the Contractor stating
that all such claims have been fully paid; and furnishing the Owner, when required, with
receipts or acknowledgements of payment issued by the subcontractors and/or suppliers.

C. What will happen if any of such claims remain unpaid as of the time of executing the sworn

The Contractor shall furnish the Owner with an indemnity bond equal to the amount of the
claims still unpaid. The indemnity bond may be issued by the surety which previously
issued the Contractor's performance bond or any other bond required under the Contract
or by any other surety acceptable to the Owner. The Owner may recover against the
Contractor and/or surety, on the latter's indemnity bond, any amount paid by the Owner
to discharge such liens, including costs incurred incident thereto and a reasonable amount
of attorney's fees.


A. Can the Contract be assigned?

No, the Contract may not be assigned in whole or in part. Any purported assignment
made of the Contract or any part thereof without the consent of either party shall be void
and ineffective. (33.02[A])

B. May the Owner exact full compliance from both the Contractor and assignee?

Yes, he may do so even without waiving his right at any time thereafter to reduce the
Contractor's scope of work by removing from the Contractor the part of the work which
was assigned and giving it to any other contractor and/or terminating the Contract in
either case, without any further cause than the assignment. [33.02(B)]

C. May the Owner request for contracts entered into by the Contractor with any other person?

Yes, the Owner may request any contract, agreement or binding written commitment
entered into by the Contractor either before or after the execution of the Contract, with
any other person as cooperator, consortium member, joint venture member, or supplier of
equipment, technology, materials or services for the joint execution of the Work.

D. What if the Owner finds that such contract entered into by the is a disguised assignment of the

The Owner shall notify the Contractor and shall have the rights under Article 33.02(B).


A. May the Contractor subcontract the Contract?

Yes. The Contractor may subcontract any part of the Contract with the approval of the
Owner (33.03).

B. What are the conditions the Owner may impose for the approval of the subcontract?
 That the subcontract shall be submitted to the Owner and the subcontract must require
the subcontractor to obtain the same bonds and insurance coverage as are required of
the Contractor under the Contract,
 That the Contractor furnish the Owner copies of these insurance policies and bonds
C. What is nominated subcontractor?

A nominated subcontractor is one selected by the Owner to carry out an element of the
work requiring specialized skills and experience, whose scope of work, terms and prices
are pre-negotiated with the owner and, as such, are imposed on the Contractor.


A. May the Owner entrust to his authorized representative the determination of matters which
under the Contract require his acceptance, approval, or decision?

Yes, the Owner may, within a period of 15 days, entrust these to his authorized
representative who shall act as his agent and whose determination binds the Owner.

B. What if the Contractor disagrees with the determination by the Owner or his representative?

Such disagreement shall be brought before an adjudicator, who shall be jointly engaged
by the Owner and the Contractor, not later than fifteen (15) days before the
commencement of the Work to resolve conflicts arising from the foregoing determination
by the Owner or by his representative.

C. What if either party disagrees with the resolution of the adjudicator?

Such shall be deemed as a dispute which may be submitted to arbitration.


A. Dispute or agreement submitted to Arbitration

1. What law governs disputes?

Disputes shall be referred to and finally be resolved by arbitration under the Rules of
Procedure Governing Construction Arbitration promulgated pursuant to Executive Order
No. 1008 (Construction Arbitration Law) by one or panel of three (3) arbitrators
appointed in accordance with such Rules.

2. Where should arbitration take place?

The place of arbitration shall be in Metro Manila, Philippines.

3. How should the claim be done?

By filing a claim with the Construction Industry Arbitration Commission.

B. Substituted Service

1. What is the effect of entering into a Construction Contract?

A party to a Construction Contract for a project in the Philippines shall, by entering into
the same, be deemed to be submitting himself to the jurisdiction of the Construction
Industry Arbitration Commission with regard to any dispute arising out or in connection with
the Contract.

2. To whom should a claim be served?

His co-venturer, partner or authorized representative, notwithstanding any statement to

the contrary in the Agreement, Contract Documents, or any other communication to the
other party or after entering into the Contract, unless he has filed with the Construction
Industry Arbitration Commission an irrevocable special power of attorney authorizing
another person or entity to receive by personal service at a definite address in Metro
Manila, Philippines such claim, notices, and processes.

3. What if a party, his co-venturer, or authorized representative declines service of such claim or
notice? What if they cannot be found at his given address?

Such service shall be made upon the said party by filing the same with the Construction
Industry Authority of the Philippines (CIAP) at its office address, and filing the claim,
complete the service upon the party concerned.