Overview of Contract Law and

Dispute Resolution
Key Contents
Contract express and Contractor licensing
implied terms Insurance and bonds
Breach of contract
Liquidated damages and
Liability for negligence
penalty
Statutory and regulatory
Delays; acceleration;
laws affecting construction
suspension of work,
Rights and liabilities of
termination
project key stakeholders
Changes, Claims
Overview of engineering
Alternate Dispute
and professional
registration Resolutions Techniques.
Types of Contract Laws in
Pakistan
FIDIC
The International Federation of Consulting Engineers
(Commonly Known As FIDIC, Acronym For Its French Name
Fédération Internationale Des Ingénieurs-conseils)
Applicable to International Projects/international donors
(Dams, Motorways, CEPEC Projects), Wapda Etc.
Government of Punjab Contract Form For Execution of
Work
Applicable to projects of C&W, irrigation, public health, local
govt. etc.
PEPRA (Public Procurement Regulatory Authority)
Applicable to projects funded by Federal Govt.
Contract Express and Implied Terms
 The rights and duties of both employers and employees are
found in the contract of employment. They are called 'terms' of
the contract.
 Some of these terms are 'express' terms i.e; they are expressly or
specifically stated, either orally (at the initial interview, say) or in
writing. Express terms include things like pay, hours and
holidays.
 The law states that certain express terms must be put in writing
and handed to the employee in the form of a written statement of
particulars within two months of starting work.
 There are other contractual terms called 'implied' terms. These
are not expressly or explicitly stated because, in the main, they
are fairly obvious to both parties to the contract of employment.
Contract Express and Implied Terms
Implied terms include statutory rights, such as the
right to equal pay and duties, such as a duty of
care.
An important implied term is the duty of mutual
trust and confidence, which is implied in every
employment contract.
 Breaching a Contract
In a perfect world, agreements would be entered into, both sides
would benefit and be pleased with the outcome, and no disputes
would arise.
But in the real world of business, delays happen, financial problems
can crop up, and other unexpected events can occur to hinder or
even prevent a successful contract from being carried out.
A business contract creates certain obligations that are to be
fulfilled by the parties who entered into the agreement.
Legally, one party's failure to fulfill any of its contractual
obligations is known as a "breach" of the contract.
Depending on the specifics, a breach can occur when a party fails
to perform on time, does not perform in accordance with the terms
of the agreement, or does not perform at all.
 What Happens After a Contract is Breached?
When a breach of contract occurs or is alleged, one or both
of the parties may wish to have the contract enforced on its
terms, or may try to recover for any financial harm caused
by the alleged breach.
Courts and formal lawsuits are not the only option for
people and businesses involved in contract disputes. The
parties can agree to have a mediator review a contract
dispute, or may agree to binding arbitration of a contract
dispute.
Remedies for breach of contract
The principal remedies for breach of contract are:
(a) damages;
(b) specific performance of the contract; and
(c) Cancellation and Restitution

Damages
The payment of damages - payment in one form or
another - is the most common remedy for a breach
of contract.
 Specific Performance
If damages are inadequate as a legal remedy, the non-
breaching party may seek an alternative remedy
called specific performance.
Specific performance is best described as the
breaching party's court-ordered performance of duty
under the contract.
Specific performance may be used as a remedy for
breach of contract if the subject matter of the
agreement is rare or unique, and damages would not
suffice to place the non-breaching party in as good a
position as they would have been had the breach not
occurred.
Cancellation and Restitution
A non-breaching party may cancel the contract and
sue for restitution if the non-breaching party has
given a benefit to the breaching party.
"Restitution" as a contract remedy means that the
non-breaching party is put back in the position it
was in prior to the breach, while "cancellation" of
the contract voids the contract and relieves all
parties of any obligation under the agreement.
Liability for negligence
In law, liable means responsible or answerable in law;
legally obligated.
Negligence is a failure to exercise the appropriate and or
ethical ruled care expected to be exercised amongst
specified circumstances.
The core concept of negligence is that people should
exercise reasonable care in their actions, by taking account
of the potential harm that they might foreseeably cause to
other people or property
 Liability for negligence
Clause 27: Subletting (Punjab Govt.)
The contractor shall not sublet the works or any part thereof
except where otherwise provided by the contract, without the
prior written consent of the engineer-in-charge and such
consent, if given, shall not relieve the contractor from any
liability or obligation under the contract and he shall be
responsible for the acts, defaults and negligence of any sub-
contractor, his agents, servants or workmen as if they were
the acts, defaults or neglects of the contractor, his agent,
servant or workmen.
 Statutory and Regulatory Laws affecting
Construction
Statutory obligations are those obligations that do not arise out
of a contract, but are imposed by law such as FIDIC or
Punjab Govt. Laws.
The statutory obligations applicable to the design, construction
and operation of buildings are extensive and complicated, and
they will depend on the specific nature of the proposed
development.
It is very important that contracts and appointment documents
make it clear whose responsibility it is to satisfy statutory
obligations and who is bearing the risk of failure to satisfy a
statutory obligation.
 Rights and Liabilities of project key
Stakeholders
What is a 'Stakeholder‘ ?
 Stakeholders are individuals or companies with a vested
interest in the outcome of their specific projects.
Stakeholder project management began in England during
the 1960s, according to the Project Management Institute.
 Stakeholders have legal decision-making rights and may
control project scheduling and budgetary issues.
 Most project stakeholders have responsibilities to businesses
that include educating developers, financing projects,
creating scheduling parameters and setting milestone dates.
Oversight Responsibilities
Stakeholders are responsible for reviewing deliverable
project items. Project deliverables can include
architectural diagrams, blueprints and construction
drawings.
With the assistance of engineers, architects and
contractors, project stakeholders are responsible for
approving these items.
Stakeholders who work on business projects may have
specific project duties, depending on the types of projects
they fund.
 The stakeholder categories
1) Shareholders
2) Employees
3) Customer
4) Suppliers
5) Financiers/creditors
6) Local and National authorities
7) Social/political organizations
8) Land owners
9) Environmentalists
10) Nearby residents
11) Media
Overview of engineering and professional registration
1. Who is Registered Engineer (R.E)?
 "Registered Engineer" means a person who holds an accredited engineering
qualification, whether working privately or in the employment of an engineering public
organization and is registered as such by the Council. Registered Engineer shall perform
all professional engineering works except independently signing design.
2. Who is Professional Engineer (P.E)?
 "Professional Engineer" means a person who holds an accredited engineering
qualification and after obtaining a professional experience of five years, whether working
privately or in the employment of an engineering public organization, has passed the
prescribed engineering practice examination and is registered as such by the Council.
 Eligibility Crieteria
5 years of professional experience since registration with PEC till closing date of
announcement.
17 CPD points since 10th July 2010.
3. What is the difference between Registered Engineer and Professional Engineer?
 A newly graduate is registered with PEC as Registered Engineer. A Registered Engineer
can become Professional Engineer after completing five years experience and passing
engineering practice examination (EPE)
 Contractor Licensing
All the contractors are bound to get a license from
Pakistan Engineering Council (PEC) as per the standard
rules and regulation of PEC.
All cases of new, renewal & up gradation of
constructors/operators will be processed and approved at
all Regional/Branch Offices through Regional Enrolment
Committees (REC) and at PEC HQ, Islamabad by Central
Enrolment Committee (CEC) as per following table.
In addition, contractors are also need to get registered
with the concerned department whom they intend to
work with as per their own rules and regulations.
Contractor Licensing
cont……
 Contractor Licensing
cont……

A firm may apply for issuance of renewal of PEC license

for one year to three year. It is subject to deposit of fee
for no. of years, they want renewal. In case of renewal
more than a year, owner will submit undertaking on 1st
July of every financial year at PEC HQ, Islamabad that:
(a) The company is not black listed by any department.
(b) The list of engineers serving with the company.
 Insurance and bonds
A surety bond or surety is a promise by a surety or guarantor to
pay one party (the obligee) a certain amount if a second party
(the principal) fails to meet some obligation, such as fulfilling the
terms of a contract. The surety bond protects the obligee against
losses resulting from the principal's failure to meet the obligation.
A performance bond, also known as a contract bond, is a type
surety bond issued by an insurance company or a bank to
guarantee satisfactory completion of a project by a contractor.
It typically governs one project that the contractor is working on,
especially a construction project. Because the bond deals with
performance, the owner can specify materials, time frame and
other factors to ensure the project is completed according to
specifications.
 Liquidated damages and penalty/ bonus
clauses
Liquidated Damages:
 It is a sum fixed or ascertained by the parties to the contract, which
is a fair and genuine per-estimate of the probable loss that might
occur as a result of breach of contract. Thus, liquidated damages
are an assessment of loss which in the opinion of the parties will
occur due to breach. Such damages are effective and recoverable by
the aggrieved party from the other.
Penalty:
 On the other hand, penalty is the sum mentioned in the contract at
the time of its formation which is disproportionate to the
damages likely to occur as a result of the breach of the contract.
Penalty is fixed with a view to getting the contract performed, but it
has no concern with the probable loss likely to occur to the
parties due to the breach of the contract.
 Liquidated damages and penalty/ bonus clauses
(FIDIC)
 If the Contractor fails to comply with Sub-Clause 8.2 [Time for
Completion], the Contractor shall subject to notice under Sub-Clause
2.5 [Employer’s Claims] pay delay damages to the Employer for this
default. These delay damages shall be the sum stated in the Contract
Data, which shall be paid for every day which shall elapse between
the relevant Time for Completion and the date stated in the Taking-
Over Certificate. However, the total amount due under this Sub-
Clause shall not exceed the maximum amount of delay damages
(if any) stated in the Contract Data.
 These delay damages shall be the only damages due from the
Contractor for such default, other than in the event of termination
under Sub-Clause 15.2 [Termination by Employer] prior to
completion of the Works. These damages shall not relieve the
Contractor from his obligation to complete the Works, or from any
other duties, obligations or responsibilities which he may have under
 Delays
 “Delay” in the construction context can be specifically defined as
any failure to complete a specific construction activity within the
time planned for it.
 However, when we think of construction delays that cause added
costs and disputes, it is almost always delay to the overall
construction contract completion that is being referenced, and not
delay to just a single activity or part of the construction process.
 Delays to individual work activities typically have relatively little
or no distinguishable cost. The damages due to delays are primarily
incurred when the overall project duration is extended.
 So when assessing the costs and consequences of a particular event
that delays some aspects of the construction work, the first step is
to assess that event’s effect on the project’s overall completion
schedule.
 Delays cont……..
 Commencement of work. (Punjab Govt.)
Clause 35: (The contractor shall commence the works on the site within the
period named in the Memorandum, after the receipt by him of an order in
writing to this effect from the Engineer Incharge and shall proceed with the
same with due diligence and without delay, except as may be expressly
sanctioned or ordered by the Engineer Incharge.
 Extension of time for completion . (Punjab Govt.)
Clause 37: The Engineer Incharge, in case of hindrance in the execution or
completion of the work or any part thereof, the contractor shall apply in
writing to the Engineer Incharge within thirty days or the date of such
circumstances, the full and detailed particulars of his claim on account of
which he desires a extension for the said delay. The Engineer Incharge shall,
if in his opinion (which shall be final) reasonable grounds shown therefor by
the contractor are such as fairly to entitle the contractor to an extension of
time in writing, either prospectively or re-form time to time in writing,, such
extension of time for the completion of the work or any part thereof, as may
in his opinion be necessary or proper.
 Acceleration of work
 Boosting up construction work is called acceleration of work. It has two
types
1. Actual Acceleration
This may take place if the contractor is requested to complete the work before
the date fixed in the contract documents. The contractor have to accelerate the
construction activities. It may charge some extra cost of acceleration.
2. Constructive Acceleration
If the completion time of the project is approaching but the project is lacking
behind the completion time and the delay is not allowed, the contractor has to
accelerate the project activities by spending more resources.
 Additional costs of revised methods including acceleration measures,
instructed by the Engineer to reduce delays resulting from causes listed
under Sub-Clause 8.4 (FIDIC)[ Extension of Time for Completion ] shall
be paid by the Employer, without generating, however, any other
additional payment benefit to the Contractor.
 Termination of contract
Clause 16.1 (FIDIC) Contractor’s Entitlement to
Suspend Work
If the Engineer fails to certify in accordance with Sub-
Clause 14.6 [Issue of Interim Payment Certificates] or the
Employer fails to comply with Sub-Clause 2.4
[Employer’s Financial Arrangements] or Sub-Clause 14.7
[Payment], the Contractor may, after giving not less than
21 days’ notice to the Employer, suspend work (or reduce
the rate of work) unless and until the Contractor has
received the Payment Certificate, reasonable evidence or
payment, as the case may be and as described in the notice.
 Suspension of Contract/Work
Clause 8.8 (FIDIC)
The Engineer may at any time instruct the Contractor
to suspend progress of part or all of the Works. During
such suspension, the Contractor shall protect, store and
secure such part or the Works against any
deterioration, loss or damage.
The Engineer may also notify the cause for the
suspension. If and to the extent that the cause is
notified and is the responsibility of the Contractor.
 Change in construction contracts
Almost every construction project encounters change. In
fact, it has been said that the only constant in construction is
change.
Whether it is a change to the scope of work, a revision to the
specifications, or an impact to the means and methods of
performing the work, changes can significantly impact a
project’s cost and schedule. Followings are the main reasons:
 Unclear bid documents
 Owner directed changes
 Late, incomplete, or defective drawings, specifications,
and other contract documents
 Preferential (special) changes by the owner
 Misinterpreted contract requirements by the parties
 Change in construction contracts
cont…..
Differing site conditions
New or revised codes/standards
Rework
Impacts/changes to the construction means and
methods
Scope additions
Acceleration and/or schedule changes
Constructive or productive changes
Change in construction contracts cont…..
 Clause 42: (Punjab Govt.)
No compensation for alteration in or restriction of work to be
carried out if variation does not exceed 20%
 If at any time after the commencement of the Work, the Engineer
Incharge shall not require the whole thereof as specified in the
tender to be carried out, or increase or decrease the quantity of work
included in the contract or omit any such work, or change the
contractor or quality to execute additional work of any kind, the
Engineer Incharge shall give notice in writing of this fact to the
contractor, who shall have no claim to any payment or
compensation due to alteration having been made in the original
specifications, drawings, designs, and instructions on completion of
the whole of the works, does not exceed 20 per cent of the sum
named in paragraph of 1 (one) of this tender.
Change in construction contracts cont…..
Clause 42: (Punjab Govt.)
 Variation exceeding 20%
 If, on completion of the whole of the works, it shall be Found that a
reduction or increase greater than 20 per cent of the sum named in
Paragraph 1 of the tender results from the aggregate effect of all
increases, decreases, omissions or adjustments, as a result of the
requirement of the Engineer Incharge the amount of the contract
price shall be adjusted by such sum (s) as may be determined by the
Engineer Incharge and the contractor. In the event of disagreement,
the Engineer Incharge shall fix such sum as shall, in his opinion, be
relevant factors including the contractor’s cost and overheads.
 Claims (FIDIC)
 If the Contractor considers himself to be entitled to any extension of
the Time for Completion and/or any additional payment, under any
Clause of these Conditions or otherwise in connection with the
Contract, the Contractor shall give notice to the Engineer, describing
the event or circumstance giving rise to the claim. The notice shall be
given as soon as practicable, and not later than 28 days after the
Contractor became aware, or should have become aware, of the event
or circumstance.
 If the Contractor fails to give notice of a claim within such period of
28 days, the Time for Completion shall not be extended, the
Contractor shall not be entitled to additional payment, and the
Employer shall be discharged from all liability in connection with the
claim.
 Claims (FIDIC)
Within 42 days after the Contractor became aware of the event
or circumstance giving rise to the claim, or within such other
period as may be proposed by the Contractor and approved by
the Engineer, the Contractor shall send to the Engineer a fully
detailed claim which includes full supporting particulars of the
basis of the claim and of the extension of time and/or additional
payment claimed
Within 42 days after receiving a claim or any further
particulars supporting a previous claim, or within such other
period as may be proposed by the Engineer and approved by
the Contractor, the Engineer shall respond with approval, or
with disapproval and detailed comments. He may also request
any necessary further particulars, but shall nevertheless give his
response on the principles of the claim within the above
defined time period.
 Dispute Settlement
Procedure in disagreement
Clause 65 (Punjab Govt): In the event of any disagreement
between the Engineer In charge and the contractor arising out of the
contract, the matter shall first be referred to the Supdt.Engr, for
decision who shall, after making such enquiries, as he may deem fit,
give his decision in writing not later than three months after the
reference is made to him.
The period for decision of the case by the Supdt.Engr, may however,
be extended by the Chief Engineer under special conditions
according to the circumstances, justification, available in each, case.
The contractor shall straightaway give effect to the decision of the
Supdt.Engr, and shall proceed with due deligence, whether
Procedure in disagreement arbitration is intended or not.
 Dispute Settlement
Contractor dissatisfied with the decision of the
Superintending Engineer
 If the contractor be dissatisfied with the decision of the Supdt.Engr, or if
his decision is not forthcoming within the stipulated or extended period
and desires arbitration under the arbitration clause, he shall give notice in
writing of such intention to the Supdt.Engr, within a period of 28 days of
the receipt of the Supdt.Engr, decision or in case no decision is given, at
the end of the period or periods within which the Supdt.Engr, was to give
his decision.
 The said notice shall contain the cause of action material facts of the case
and relief sought, failing which the decision of the Supdt.Engr, shall
become final conclusive and binding, and the contractor shall be deemed
to have forfeited or departed from the claim in excess of that allowed by
the Supdt.Engr. The subsequent inflation/increase in the amount of claim
once preferred in the said notice of the same work be entertained from
the contractor at any later stage.
 Alternate Dispute Resolutions Techniques.
 Reference to arbitration.
A reference to arbitration shall be made by the contractor in writing
not later than three months after the completion of the work. Failure
to make such a reference within this period shall be deemed to mean
that the contractor has waived all claims in respect of all disputes.
(a) Disputes which may be referred to arbitration shall be limited
to :-
(i) Any question, difference, or objection, whatsoever which shall
arise in any way, connected with or arising out of the contract ; or/and
(ii) The meanings of the operation of any part of the contract ; or/and
(iii) The rights, duties and liabilities of other party to the contract ; and
(iv) Whether the contract should be terminated or has been rightly
terminated and as regards the rights and obligations of the parties as a
result of such termination :
 Alternate Dispute Resolutions Techniques.
(Cont.)
(b) The venue of arbitration shall be in Punjab. The contractor will
have to deposit 20% of the amount of the claim up to Rs. 0.20 million
and 10% of claims, exceeding Rs. 0.20 million along with the claim.
This amount will be refunded after the Award has been made Rule of
the Court. Otherwise the amount deposited will be forfeited.

(c) In the event of any dispute arising in accordance with the

limitations provided in Sub-Clause (a) of this clause, the same shall be
referred to the decisions of a sole arbitrator to be appointed by the
Chief Engineer (Incharge of the region of Concerned Superintending
Engineer), and other than the Claim preferred is for an amount up to
half a million Rupees, the decision of the sole arbitrator in such cases
shall be final and binding on the parties concerned.
 Alternate Dispute Resolutions Techniques.
(Cont.)
(d) In case the amount of the claim preferred in over Half a Million
Rupees, the dispute shall be referred to the award of two arbitrators, to
be appointed from the Superintending Engineers of the concerned
Department, other than the Superintending Engineer Incharge of the
work
 One Superintending Engineer to be nominated the Chief Engineer of
the Region concerned and the other by the contractor.
 In the case of the said two arbitrators not agreeing the case shall be
referred to the award of an umpire who shall be an officer of the
department not below the Rank of Chief Engineer to be appointed by
the Government in the Administrative Department.
 The decision of the two arbitrator, umpire, as the case may be shall be
final and binding on the parties concerned. Where the matter involves
claim for the payment or recovery or deduction of money only, the
amount, if any, awarded in the arbitration shall be recoverable in