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Rights & Obligations of Contracting Parties in Engineering Contracts in

Bangladesh

Article  in  International Journal of Mechanical & Mechatronics Engineering · July 2011

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 International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03 31

Rights & Obligations of Contracting Parties in Engineering Contracts in

Bangladesh

Mohammad Anisur Rahman, Md. Moinul Islam, Mohammad Zoynal Abedin

Department of Mechanical Engineering, Dhaka University of Engineering and Technology,

Gazipur-1700, Bangladesh
Email: anis9174@yahoo.com

ABSTRACT
This paper introduces the basics of contracts related to engineering works and services. It also describes the process of
contracting works to give an idea how the contract issues are framed out in the process. In addition, it describes the
relationship and interfaces of engineering and law, definition and meaning of contract, types of contracts, and
prerequisites to the formation of a valid contract, interpretation of contract and performance or breach of contract.
Moreover, it analyzes the elements of contract in the light of the guidelines, rules and regulations to formulate sound
contracts.

It also frames out the model conditions of contract, in which it distinguishes between two types of contract i.e.
“General Conditions of Contract” and “Conditions of Particular Application” and describes all issues that are related
to the first one.

The core objective of this paper is to analyze some special contracting issues, which are vital for both the contractor
and the employer. Furthermore, it finds out the rights and obligations of contractor and employer on those
contracting issues.

KEYWORDS: GoB, Issue, Cross-reference, Model Condition, Contractor, Employer, Financier, FIDIC

1. INTRODUCTION In this process various documents are being generated by

In Bangladesh, many development projects are
implemented every year. These development projects may
be grouped as construction project and engineering project.
Most of these projects are implemented by contractors
under some agreement called contracts. The terms of these
contracts are mostly taken from common law or business
law.
In Bangladesh contract terms vary from contract to contract
depending on the financier of the project. Financiers could
be Government of Bangladesh (GoB), multilateral donors
like World Bank, ADB and bilateral donors like SIDA,
CIDA, US AID, JICA, DANIDA, NORAD etc. If a project
is financed by Government’s own money usually the
contract terms are guided by the Government’s form
no.2911 guideline. On the other hand, if the project is
financed by multilateral or bilateral donor agency, the
contract terms are guided by their own guidelines.
Federation International Des Ingenieurs-Conseils (FIDIC)
has formulated general guidelines for construction,
engineering procurement contact (EPC) and Turnkey
projects, which are widely accepted in Bangladesh. Each of
the multilateral and bilateral donor agencies has their own
guidelines for the terms of contracts. Although the donor
agencies have their own guidelines, sometimes they follow
the FIDIC guidelines for its versatility. FIDIC guidelines
are also followed in the case of supplier’s credit projects.
Various organizations and people are involved in project
formulation, evaluation, and contract preparation process.
111303-0404 IJMME-IJENS © June 2011 IJENS
them. Some of these documents eventually become the
parts of contract. General contracts of a work or project
consist of the conditions of contract, terms of negotiations,
tender documents and specifications, bids of the contractor.
In case of confusion or dispute, all these documents are
studied for possible explanation or resolution.
As mentioned above, there are numbers of guidelines for
formulating contracts. The terms of these contracts are
written in legal styles. Besides, there are many cross-
reference clauses. These create complexity in contract
issues. Since most of the time, contracts are administered
by people without legal background, it often becomes
difficult for them to understand the rights and obligations of
contract issues. Most of the engineering contracts are
administered by the engineers. So the engineers’ knowledge
on the basics of the law is important in their work. It helps
them recognize situations in which the assistance of a
lawyer should be sought, preferably before difficulties
actually arise. This interfacing knowledge also helps them
to fully cooperate with the attorneys they have to work
with. An engineer must have some generalized
understanding of the law in the following areas for his/her
work.
 The preparation of contract documents and
specifications.
 The conduct of contractual relationships and the
handling of claims and payments.
 The interpretation of contract clauses and the
settlement of disputes arising there from.
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 International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03
 The education of attorneys regarding engineering
matters and customs
 The preparation of material for use as trail evidence.
 The serving as an expert witness on technical points at
arbitration hearings and court proceedings.
 The settlement of disputes out of court.
 The giving of assistance in tax and valuation problems.
 The handling of engineering matters connected with
purchase and sale of property and goods.
 The preparation of reports on zoning, environmental,
and other matters involving governmental agencies and
organizations.
In order to meet the above work requirements, the
engineers must be aware of the basics of contracts as well
the elements of contract issues in construction, EPC,
turnkey. Although engineers deal with this type of projects
in different capacity, they are often not aware of the
implications of the actions. It is felt that a comprehensive
body of knowledge is essential for the engineers managing
different kinds of contracts.
2. METHODOLOGY
Relevant rules and procedures of the government of
Bangladesh have been collected to study the project
development and implementation processes. Documents
like Bangladesh Form No. 2911, FIDIC guidelines and
World Bank guidelines have also been collected and
studied to analyze the rights and obligations for both the
Employer and the Contractor.
There are different guidelines for different types of
contracts such as Construction Contracts, Engineering and
Procurement Contracts, Turnkey Contracts, etc. Here, only
on the contracts related to construction projects are
concentrated to study
Various types of contracts and prerequisites to the
formation of a valid contract have been studied for getting
basic concepts of contract. Besides, various project-
processing procedures in engineering contract in
Bangladesh and the formation process of contract have also
been studied. Finally, project-processing flow diagram has
been drawn to explain the various steps in the processes. It
helps the people to understand how the contract issues are
framed in the process. It is also possible to know how some
of the documents, which are being generated during the
project-process, become the part of contract.
The guidelines of GoB, FIDIC and World Bank and all the
general conditions of contracts have been studied. Some of
the general issues have been analyzed, which are common
to those guidelines and vital for both the contracting parties
and put them in plain words. So the contract-governing
people who have no legal background can easily understand
the rights and obligations of both the contracting parties.
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32
3. FINDINGS
One of the issues, which is put in plain words, is shown
bellow:
Name of the issue: Designs, Quality, Inspection and
Testing
4. SUMMARY
In an engineering project design, quality, inspection and
testing issues are part and parcel. In a typical contract
document these issues are addressed in clauses related to
Design, Materials, Plant and Workmanship depending on
the type of contract.
In the “construction” contracts the duties and
responsibilities are more related to preparation, custody,
privities, and communication of drawings and
specifications.
4.1 Sample Wording
 FIDIC 6.1 through 6.5, 7.1 through 7.3, 8.1 and 8.2,
36.1 through 36.5, 37.1 through 37.5, 38.1, 38.2, 39.1
and 39.2 for “construction” contracts.
 World Bank Clauses 33.1, 34.1, 35.1, 35.2 and 36.1 for
“construction” contracts.
 Clause 11, 15, 16, 17 and 18 of Bangladesh Form No
2911, Item Rate Tender and Contract for works.
4.2 Contractor’s Obligations
 The Contractor will not release or communicate the
drawings, specifications and other documents to any
third party without the consent of the Employer or his
representative. (FIDIC6.1)
 One copy of the drawing shall be kept by the
Contractor on the site and shall make it available to
Employer or his representatives’ at all reasonable time
for inspection. (FIDIC 6.2)
 The Contractor must notify the Employer of any delay
in work for any delay in supplying drawings by the
Employer. (FIDIC 6.3)
 The Contractor must carry out works according to any
supplementary drawings or specifications issued by the
employer or its representative. (FIDIC 7.1)
 Any works designed by the Contractor must be
submitted to the Employer and get approved before
execution (FIDIC7.2a). Such approval shall not relieve
the Contractor of any of his responsibilities under the
contract (FIDIC7.3)
 The operation and maintenance manual along with
drawings of completed permanent works must be
submitted to the Employer for the latter’s approval and
use. (FIDIC7.2b)
 The Contractor shall carry out the works and remedy
any defects thereof with utmost care and diligence.
(FIDIC 8.1).
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 International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03
 `The Contractor shall provide all materials, plants and
workmanship as specified in the contract and in
accordance with the instruction of the Employer’s
representative. (FIDIC 36.1 and GoB 11)
 The Contractor shall supply necessary assistance,
labor, electricity, fuels, apparatus and instruments for
the purpose of testing as required by the Employer at
the place of manufacture, fabrication or preparation,
or on the site or at such other places as specified in the
contract. (FIDIC 36.1)
 Cost of samples and cost of tests clearly intended or
provided for in the contract shall be borne by the
Contractor.
 The Contractor shall agree to timing and place of test
provided Employer has notified at least 24 hours
before such test(s). Also the Contractor shall obtain
necessary permission for the employer or its
representative’s access to places other than
Contractor’s to carry out such tests.
 The Contractor shall not cover up or put out of view
any works without giving notice to the employer for
inspection and subsequent approval of the Employer’s
representative. In breach of this responsibility, the
Contractor shall, at his cost, open up the works as
demanded by the Employer.
4.3 Contractor’s Rights
 To obtain 2 copies of the drawings and specification.
(FIDIC 6.1)
 To extension of time or provision of cost if any delay in
delivery of drawing or instruction from the employer
due to employer’s negligence. (FIDIC 6.4)
 If the Employer or its representative instructs the
Contractor to carry out any test without their presence,
then the results of such test must be accepted by the
Employer. (FIDIC 37.3).
 To obtain notice of any delegation of testing and
inspection to any third parties by the Employer.
(FIDIC 37.5).
4.4 Employer’s Obligations
 To supply 2 copies of the drawings and specification to
the Contractor. (FIDIC 6.1).
 To agree to test results if instructed the Contractor to
carry out any test without his presence. (FIDIC 37.3).
 To give notice of any delegation of testing and
inspection to any third parties. (FIDIC 37.5)
 To respond to notices by the Contractor of any delay or
disruption due to some drawing or instruction from the
Employer and determine time extension or cost
provision for any delay in providing necessary drawing
or instruction. (FIDIC 6.3 and 6.4).
 To inspect and measure works once the Contractor
gives notice of readiness of the work or part of it for
inspection and measurement. The Employer cannot
delay such inspection unreasonably. (FIDIC 38.1).
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4.5 Employer’s Rights
 The employer has the right to get notice of any delay or
disruption of work. (FIDIC 7.1).
 The employer has the right to decide on any additional
tests other than the ones provided in the contract. The
Employer has the right to decide whether such tests
would warrant time extension of cost provision.
(FIDIC 36.4, 37.5).
 The Employer has the right to access and inspect
works any time with a 24- hour notice to the
contractor. (FIDIC 37.1,37.2,AND 37.3)
 The Employer has the right to reject any work or
material if found defective after testing .However, he
must give reasons for such rejection. (FIDIC 37.4)
 The Employer has the right to delegate inspection and
testing to any third party. (FIDIC 37.5).
 The Employer has the right to issue instruction to
remove, replace materials or plants or workmanship if
he thinks they are not in accordance with the contract.
The Employer has the right to employ and pay other
persons to carry out the above if the Contractor is in
default to obey the instructions. (FIDIC 39.1 and 39.2)
5. CONCLUSIONS
This paper explores most of the people dynamically in the
field of contracts, which is not utterly unknown to them. In
addition, it provides information in boosting up the people
to complete an engineering contract fruitfully.
Most of the time people who guide the contract usually do
not want to comprehend carefully the contract issues
because of cross-reference clauses. This paper eliminates a
few vital cross-reference clauses as much as possible for
easy realization of the contract issues. This realization will
assist the people of various government organizations who
guide the contract to make a sound contract. Not only the
Employer but also the Contractor should read the contract
issues before the signing of the contract to refrain from
making a huge amount of losses or from counting
compensation.
ACKNOWLEDGEMENTS
The authors are very much grateful to Late Dr. Mahiuddin
Ahmed, Ex-Professor & Head, Department of Industrial
and Production Engineering, Bangladesh University of
Engineering and Technology (BUET), Bangladesh, for his
constant guidance, valuable suggestions and moral supports
throughout the study.
REFERENCES
[1] “Conditions of Contract for Works of Civil Engineering
Construction”, FIDIC, Fourth Edition 1987.
[2] “Standard Bidding Documents”, The World Bank,
September 5, 2000.
[3] “Item Rate Tender and Contract For Works”,
Bangladesh Form No.-2911.
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 International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03 34

4]“Managing Project In Bangladesh”- Dr.

Skylark Ishwaran S. Chadha, Second revised
edition 1989

[5]“General Instruction and Guidelines On

Planning, Programming, Processing and
Implementation Of Technical Assistance (TA)”-
Economic Relations Division , Ministry of
Finance, GoB, May,1992

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