KNOW YOUR CONTRACT #17

PART -1

50
CONTRACT
MANAGEMENT
TERMINOLOGIES
YOU NEED TO KNOW AS A CONTRACTS PRO

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CONTRACT

A legally binding agreement

between two or more parties

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SCOPE OF WORK
(SOW)
Detailed description of the
work to be performed under
the contract.

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BID DOCUMENT
The set of documents that
provide information to
potential bidders for a
construction project

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REQUEST FOR
PROPOSAL (RFP)
A document that solicits
proposals from potential
contractors.

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CONTRACTOR
The party responsible for
executing the construction
work as per the contract.

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OWNER
The party who owns the
construction project and enters
into the contract

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SUBCONTRACTOR
A contractor hired by the main
contractor to perform a specific
portion of the work

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CHANGE ORDER
An amendment to the original
contract that outlines changes
in scope, time, or cost

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LIQUIDATED
DAMAGES
Pre-determined damages
payable by the contractor for
specific delays or breaches

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FORCE MAJEURE

Unforeseeable events that may

excuse a party from fulfilling
contractual obligations

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11

PERFORMANCE
BOND
A guarantee that the
contractor will perform the
work as specified in the
contract

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RETENTION
A percentage of the contract
amount withheld until the
completion of the project.

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INDEMNIFICATION
The act of compensating for
loss or damage

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14

PENALTY CLAUSE
A provision specifying penalties
for non-compliance with
contract terms.

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MILESTONE
A significant event or stage in a
construction project

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16

VALUE
ENGINEERING
A systematic review to improve
project value without
sacrificing performance

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DEFECTS
LIABILITY PERIOD
The timeframe during which
the contractor is responsible
for rectifying defects at no
additional cost

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18

PROGRESS
PAYMENT
Payments made to the
contractor based on the
completion of specific project
milestones

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COST-PLUS
CONTRACT
A contract in which the owner
agrees to reimburse the
contractor for the actual costs
of the work plus a fee

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CERTIFICATE OF
COMPLETION
A document confirming that
the construction work has been
completed as per the contract

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BID BOND
A guarantee that a bidder will
enter into a contract if awarded

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22

TIME EXTENSION

Additional time granted to the

contractor to complete the
project due to unforeseen
circumstances

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GENERAL
CONDITIONS
Standard terms and conditions
that apply to all contracts

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SUBSTANTIAL
COMPLETION
The stage where the project is
sufficiently completed for its
intended use

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CONTRACT SUM
The total amount agreed upon
for the construction project

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DISPUTE
RESOLUTION
Procedures for resolving
disagreements between parties

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OWNER'S
REPRESENTATIVE
A person or entity representing
the owner's interests during
the construction process

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28

PROCUREMENT
The process of acquiring goods,
services, or construction

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DESIGN-BUILD

A project delivery method

where the design and
construction are contracted to
a single entity

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DISBURSEMENT
SCHEDULE
A plan outlining when
payments will be made during
the project

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WARRANTY
PERIOD

The period during which the

contractor warrants the quality
of their work

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PUNCH LIST
A list of minor issues or
incomplete items that need to
be addressed before final
acceptance

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CLOSEOUT

The final phase of the project

involving paperwork,
inspections, and final payments

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CONSEQUENTIAL
DAMAGES
Damages that result indirectly
from a breach of contract

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BREACH OF
CONTRACT
Failure to fulfill contractual
obligations, leading to legal
consequences

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BACKCHARGE
The process of charging a
contractor for costs incurred
due to their failure to meet
contractual obligations

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LIQUIDATION
DAMAGES CAP
The maximum amount of
liquidated damages that can be
assessed against the contractor

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SUSPENSION OF
WORK
Outlines conditions permitting
one party to temporarily
suspend or delay the
construction work

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DEFAULT

The failure of either party to

fulfill contractual obligations,
along with the associated
consequences and procedures

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CONFIDENTIALITY

Protects sensitive information

shared during the contract,
restricting its disclosure

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GOVERNING LAW
Specifies the jurisdiction and
legal framework that govern
the interpretation and
enforcement of the contract

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HOLD HARMLESS
An agreement where one party
agrees to indemnify and shield
the other from specified
liabilities or claims

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NOTICES

Defines the formal

communication process,
specifying how and where
notices and communications
should be delivered

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SPECIAL
CONDITIONS
Additional terms and
requirements specific to the
project, supplementing the
general conditions and
addressing unique project
aspects

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LIEN WAIVER
A document by which a party
gives up the right to place a lien
on the owner's property

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EPC CONTRACT

A lumpsum contract for

Engineering Procurement and
Construction services

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NOTICE OF
DEFAULT
A written notice indicating that
a party has failed to fulfill its
contractual obligations

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48

JOINT VENTURE
A partnership between two or
more entities to jointly
undertake a construction
project

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ESCROW
AGREEMENT
A three-party agreement
where funds or documents are
held until specified conditions
are met

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DEFAULT
TERMINATION
The termination of a contract
due to a party's failure to fulfill
its obligations

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