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CE-898
Contract Management
TITELMASTERFORMAT DURCH KLICKEN BEARBEITEN
Lecture No. 01
Dr.-Ing Abdur Rehman Nasir

Assistant Professor
Department of CE&M
Assistant Professor of Construction Engineering and Management
1
NIT (SCEE), NUST H-12, Islamabad 24.09.2019
NIT (SCEE), NUST H-12, Islamabad
CE-898
Contract Management
Topics to Cover
 Contract
 Fundamentals of a contract
 Contract Management
 Contract Management Functions
 Essentials for a good Contract Management

Assistant Professor of Construction Engineering and Management 24.09.2019
NIT (SCEE), NUST H-12, Islamabad 2
CE-898
Contract Management
Contract Agreement
What is
MOU DEED
CE-898
Contract Management
What is a Contract?

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Contract Management
Contract
• “A written or spoken agreement, especially one concerning employment, sales,
or tenancy, that is intended to be enforceable by law”. – Oxford Dictionary
• “A contract is an agreement that can be enforced in court.”
• “A contract is an agreement between two or more parties that is legally

binding”.

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Contract Management
Contract
 “A voluntary, deliberate, and legally binding agreement between two or more
competent parties. Contracts are usually written but may be spoken or
implied, and generally have to do with employment, sale or lease, or tenancy”.
– Business Dictionary.
 “A binding agreement between two or more persons or parties; especially :one

legally enforceable” – Merriam Webster
 “A legal document that states and explains a formal agreement between two
different people or groups” – Cambridge Dictionary
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Contract Management
Fundamentals of a Contract?

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Contract Management
Fundamentals of a Contract
 Twelve elements need to be in place, before a contract can be considered
legally binding and enforceable.
1. Offer 7. Consideration
2. Acceptance 8. Free Consent
3. Written 9. Certain and Definite
4. Intention to create legal relations 10. Illegal and void contracts
5. Lawful Object 11. Possibility of Performance
6. Legal Capacity 12. Legal Formalities
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Contract Management
1. Offer
A contract is formed when there is a lawful offer by one party to the
other party.
2. Acceptance
A contract is formed when the offer is lawfully accepted by the other
party.

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Contract Management
3. Written
In modern times, it is necessary to have a contract in written form.
4. Intention to create legal relations

The contract does not exist simply because there is an agreement
between people. The parties to the agreement must intend to enter into a
legally binding agreement.

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Contract Management
5. Lawful Object
The objective of the contract must not be
i. Illegal
ii. Immoral
iii. Opposed to public policy
6. Legal Capacity
Not all people are completely free to enter into a valid contract. Only
parties with the appropriate authority or capacity can make a contract
binding and enforceable.
For e.g. Minors, insane, bankrupts etc.
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Contract Management
7. Consideration
Consideration is something of a value that is exchanged between the
parties.
Consideration can be something of value, goods, or services, though it

need not only be money.
Normally consideration is usually evidenced by the payment of money.

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Contract Management
8. Free Consent
The offer and acceptance must be freely consented to by the parties,
without any sort of coercion, undue influence, fraud etc.
All parties must agree to the same terms.
The law recognizes the existence of a contract, if there is a mutual

agreement on all the essential terms.

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Contract Management
9. Certain and Definite
Contract must not be uncertain, vague or indefinite.
Where the agreement is vague and meaning cannot be ascertained,

All parties must agree to the same terms.

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Contract Management
10. Illegal and Void Contracts
The law will not enforce all contracts. There are some categories of
contract to be wary of.
Where a contract is illegal, this may affect its enforceability.
Contracts absolutely prohibited by statute will be void, whether the

parties know of the illegality or not.

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Contract Management
11. Possibility of Performance
For a valid contract, it is necessary that it must be capable of being
performed.
12. Legal Formalities

There are certain formalities which needs to be fulfilled.
For e.g. i) Registration of contract and
ii) Its attestation

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Contract Management
 If “A” says to “B”, ‘I will repair your house’ and “B” makes no promise in
return, there is no agreement.
 If “B” says, ‘I will pay you Rs. 100,000/-, is there an agreement? NO
WHY
 Because it takes two to make an agreement. An agreement involves an
exchange of promises or goods. “A” has not yet agreed to accept
Rs. 100,000/-for doing the work. If “A” says, ‘I will accept Rs. 100,000/-
there is agreement on price, but is there a contract?

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Contract Management
 Unless there is agreement on all the essential terms, the law does not
recognize the existence of a contract.
 Is there agreement on the actual work to be done to repair the house? It

may be that “A” and “B” know exactly what work is necessary, for example
repair of a leak in the roof. In that event, the actual work to be performed
is agreed and there may be a contract.

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Contract Management
The contract consists of the following express terms:

• “A” will repair “B’s” house
• “B” will pay “A” Rs. 100,000/-
• “A” will accept Rs. 100,000/-
These terms are said to be ‘express’ because they are the actual words
spoken.

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Contract Management
In law a ‘contract’ can be defined as follows:
‘A valid contract is an agreement made between two or more parties

whereby legal rights and obligations are created which the law will
enforce’.

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Contract Management
The contract includes two types of ‘implied’ terms.
 The first type of implied term is implied from the circumstances (what
work is to be done) and
 The second category of implied term is implied by law. Some of the terms
that the law would imply in this contract would be:
– payment will be made upon completion of the work
– the work will be done in a reasonably workmanlike manner
– “B” will give “A” reasonable access to the project site to enable “A” to carry out the
work.
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Contract Management
 “A” and “B” might sign a document (a ‘formal instrument of agreement’) to

record their agreement on the specification and conditions of contract.
 This document is also called a contract.
 The term ‘contract’ is used to describe the arrangement between the

parties and also the document that evidences the arrangement.
 The double use of the term can be confusing. One ‘contract’ may not be
identical to the other.
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Contract Management
Significance of a written contract

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Contract Management
 A written contract usually supersedes all previous agreements,

correspondence and so on.
 What is written is what is meant.
 Such is the finality of a signed contract that a complete

understanding of all the contract conditions by both parties is
essential.
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Classification of Contract

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 According to validity, contract is generally classified into two type:
i. Valid Contract
ii. Void Contract
i. Valid Contract
 A contract which satisfies the fundamentals, is a valid contract. A valid contract consists of
following two elements:
a. Agreement
b. The agreement should be enforceable by law
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Contract Management
ii. Void Contract
 A contract which is not enforceable by law is called void contract.
 The word ‘void’ means ‘not binding in law’
 A contract which cannot be enforced by either party is a void contract.
For e.g.: Agreement in restraint of trade, agreement in restraint of marriage, Agreement in

restraint of legal proceedings.
Reasons of Void Contract

 Subsequent impossibility to perform
 Subsequent illegality
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Voidable Contract
 An agreement which is enforceable by law at the option of one or more parties thereto
but not at the option of others is a voidable contract.
For e.g.: Agreement by person of unsound mind, agreement by undue influence
Reasons of Void Contract

 Consent is not free
 Promisor fails to perform within specified time

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Contract Management
Difference between Void and Voidable Contract
 As to enforceability
 Time factor
 Legal effect

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Contract Management
What is an Agreement?

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Contract Management
Agreement
• An understanding or arrangement (usually informal) reached between two or

more parties that is not enforceable by law i.e. non-binding.
• Consideration is also not essential.
• The words contract and agreement are often used to mean the same thing,
yet there are unmistakable differences between the two.

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What is an M O U?

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Contract Management
Memorandum of Understanding (MOU)

• A memorandum of understanding (MOU) is an agreement between two or
more parties outlining the terms and details of an understanding, including
each parties' requirements and responsibilities.
• An MOU is a non-binding agreement.
• An MOU is sometimes the first stage for the formation of a formal contract.

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What is a DEED?

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Contract Management
DEED
• A deed is a special type of binding promise or commitment to do something.
• At its simplest, a deed is a promise that is not supported by consideration. As

such, the intention of the parties to be bound by the deed cannot be inferred
like it would be if the document were a contract.
• Deeds is an whereby ‘Party A’ promises to do something for Party B but ‘Party

B’ does not provide Party A with any consideration.

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Contract Management
Contract Samples

CE-898
Contract Management

CE-898
Contract Management

CE-898
Contract Management
Assignment No. 01
While considering yourself and a Construction
Contractor as parties to a contract, Draft a contract for
construction of your house that fulfills all the essentials
of a contract.
Deadline: 26 Sep 2019

Type: Written, A4 page, Maximum two pages in MS Word format.
Submission: Only on LMS
CE-898
Contract Management
What is Contract Management?

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Contract Management
Contract Management
 Contract management is the process that enables parties to a contract to
meet their obligations in order to deliver the objectives required from the
contract.
 It also involves building a good working relationship between the parties.
 It continues throughout the life of a contract and involves managing

proactively to anticipate future needs as well as reacting to situations that
arise.

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Contract Management
 The central aim of contract management is to obtain the services as agreed in
the contract and achieve value for money.
This means
− optimizing the efficiency, effectiveness and economy of the service or
relationship described by the contract,
− balancing costs against risks and actively managing the relationship
between the parties.
 Contract management also involve aiming for continuous improvement in
performance over the life of the contract.
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Contract Management
What are Contract Management Functions?

CE-898
Contract Management
Contract Management
Functions
Service delivery Relationship Contract

management Management Administration
All three areas must be managed successfully if the arrangement is to be a success.

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Contract Management
Service delivery management

 The ability to measure the level of performance and quality and to provide the
feedback is critical to successful contract management.
 Service delivery management ensures that the service is being delivered as

agreed, to the required level of performance and quality.

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Relationship Management
 Contractual arrangements may commit the party(s) for some time and to
varying degrees of dependency.
 It is therefore important to make the relationship work effectively.
 Relationship management keeps the relationship between the parties open

and constructive, aiming to resolve or ease tensions and identify problems
early.

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Contract Administration
• While the changes will almost inevitably occur during the period of a contract
and managing these changes is a particularly important activity.
• Contract administration handles the formal governance of the contract and

changes (variations) to the contract.

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Functions of contract administrator Include:
− Change Management
− Specification interpretation
− Adherence to Quality
− Warranties
− Subcontractor Management
− Production surveillance
− Waivers
− Contract breach
− Resolution of disputes
− Project Termination
− Payment “Schedule”
− Project Closeout
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Contract Management
Essentials
for
Good Contract Management

CE-898
Contract Management
Essentials for good contract management

 Good preparation
An accurate assessment of needs helps create a clear output-based
specification. Effective evaluation procedures and selection will ensure that
the contract is awarded to the right provider.
 Getting the right contract

The contract is the foundation for the relationship. It should include aspects
such as allocation of risk and quality required as well as procedures for
communication and dispute resolution.

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Contract Management

 People, skills and continuity
There must be people with the right interpersonal and management skills to
manage these relationships on a peer-to-peer basis and at multiple levels in
the organization. Clear roles and responsibilities should be defined, and
continuity of key staff should be ensured as far as possible. A contract manager
(or contract management team) should be designated early on in the
procurement process.
 Proactivity
Good contract management is not reactive, but aims to anticipate and
respond to future needs.
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Contract Management

 Service delivery management and contract administration
Effective governance will ensure that the customer gets what is agreed, to the
level of quality required. The performance under the contract must be
monitored to ensure smooth running of the project.
 Relationship management
Mutual trust and understanding, openness, and excellent communications are
as important to the success of an arrangement as the fulfilment of the formal
contract terms and conditions.

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 Knowledge
Those involved in managing the contract must understand the project fully and
know the contract documentation inside out. This is essential if they are to
understand the implications of problems (or opportunities) over the life of the
contract.
 Flexibility
Management of contracts usually requires some flexibility on both sides and a
willingness to adapt the terms of the contract to reflect a rapidly changing
world. Problems are bound to arise that could not be foreseen when the
contract was awarded.
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Contract Management
Fundamentals of
for main Stakeholders

CE-898
Contract Management
Fundamentals of Contract Administration for main Stakeholders

Client
Effective administration of construction contracts is a prerequisite for achieving
successful project outcomes. The fundamentals of contract administration
relevant to the client/owner are:
• to appoint suitable consultants
• to define project scope
• to set the key project objectives of cost, time and quality
• to assist in formulating a project brief
• to select the most appropriate method of project delivery
• to ensure accuracy and completeness of tender documentation
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Client
• to award a contract to the contractor on fair and equitable conditions of contract
• to appoint an experienced superintendent for administering the contract during the
construction stage
• to avoid making changes to the design unless knowing the cost and time impact of such
changes
• to pay the contractor strictly in accordance with the contract
• to monitor progress and the use of a contingency

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Client
• to resolve issues as early as possible before they develop into major problems
• to document actual progress in terms of cost, time and the use of resources to be able to
defend against a potential claim from the contractor
• to advise the contractor in writing of any deviation from contract conditions and to
request compliance with same within a specified period.

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Contractor
The fundamental aspects of contract administration from the contractor’s point of view are:
• to execute the project strictly in accordance with the contract conditions
• to award subcontracts on fair and equitable subcontract conditions
• to monitor and control progress of subcontractors
• to pay subcontractors on time
• to minimize overall project time, thus reducing site overheads

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Contract Management

Contractor
• to balance increased direct costs of additional resources on critical activities, against
possible saving in site overheads
• to advise the client early in the project that the program is arranged to maximise use of
resources and any additional work required
• to allow sufficient time to rearrange activities, acquire additional resources, perform
additional planning, fabrication, etc.
• to manage extensions of time and a prolongation of overhead costs

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Contractor
• to recommend to the client not to make any changes to the design
• to document the actual progress compared with a program to identify areas of progress
loss
• to take immediate action on contractor-caused problems and immediately advise the
client of other problems
• to instruct all internal staff to carry out work as specified in the contract documents,
unless written instructions have been given by the client’s representative.

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Concepts of Contract Law

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Contract Management

 It is important to understand that contract law differs from other branches of
law in most jurisdictions.
 Common Law generally establishes the rights and duties that the law will
enforce; however, Contract law regulates the relationships between people
who have agreed to do something mutually beneficial.
 When disputes arise with contractual agreements, a court of law will refer to
any contract and associated documentation to determine rights and/or
obligations of any of the parties to a contract.
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 A breach of a contract entitles the injured party to seek damages in the form
of money from the person guilty of the breach.
 In general, the damages must reflect the cost to put the injured party into the
same position they would have otherwise been in without the breach
occurring.
 This essentially means that damages cannot provide profit to an injured party.

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What is Breach of Contract?

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Breach of Contract
 A breach of contract is a failure to fulfill the duties under the contract terms. A
contract can be breached in the following ways:
− One party does not perform as he or she promised

− One party does something that makes it impossible for the other party to
perform the duties under the contract
− One party makes it clear that he or she does not intend to perform the
contract duties

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Contract Management
Any Queries??

CE-898
Contract Management
Thank You!


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CE-898

TITELMASTERFORMAT DURCH KLICKEN BEARBEITEN

Dr.-Ing Abdur Rehman Nasir

 Contract Management Functions

 Essentials for a good Contract Management

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

• “A contract is an agreement that can be enforced in court.”

• “A contract is an agreement between two or more parties that is legally

Dr.-Ing Abdur Rehman Nasir

 “A binding agreement between two or more persons or parties; especially :one

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

4. Intention to create legal relations

Dr.-Ing Abdur Rehman Nasir

Consideration can be something of value, goods, or services, though it

Normally consideration is usually evidenced by the payment of money.

Dr.-Ing Abdur Rehman Nasir

All parties must agree to the same terms.

The law recognizes the existence of a contract, if there is a mutual

Dr.-Ing Abdur Rehman Nasir

Where the agreement is vague and meaning cannot be ascertained,

Dr.-Ing Abdur Rehman Nasir

Where a contract is illegal, this may affect its enforceability.

Contracts absolutely prohibited by statute will be void, whether the

Dr.-Ing Abdur Rehman Nasir

12. Legal Formalities

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

 Is there agreement on the actual work to be done to repair the house? It

Dr.-Ing Abdur Rehman Nasir

The contract consists of the following express terms:

Dr.-Ing Abdur Rehman Nasir

In law a ‘contract’ can be defined as follows:

‘A valid contract is an agreement made between two or more parties

Dr.-Ing Abdur Rehman Nasir

The contract includes two types of ‘implied’ terms.

 “A” and “B” might sign a document (a ‘formal instrument of agreement’) to

 This document is also called a contract.

 The term ‘contract’ is used to describe the arrangement between the

Significance of a written contract

Dr.-Ing Abdur Rehman Nasir

 A written contract usually supersedes all previous agreements,

 What is written is what is meant.

 Such is the finality of a signed contract that a complete

Dr.-Ing Abdur Rehman Nasir

For e.g.: Agreement in restraint of trade, agreement in restraint of marriage, Agreement in

Reasons of Void Contract

For e.g.: Agreement by person of unsound mind, agreement by undue influence

Reasons of Void Contract

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

• An understanding or arrangement (usually informal) reached between two or

• Consideration is also not essential.

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

Memorandum of Understanding (MOU)

• An MOU is a non-binding agreement.

Dr.-Ing Abdur Rehman Nasir

Dr.-Ing Abdur Rehman Nasir

• At its simplest, a deed is a promise that is not supported by consideration. As