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An agreement which is enforceable by law is a contract. It is an undertaking given by a person (not being a Govt. servant), Syndicate or firm, for the execution of any work or supply of materials or performance of any service in this connection.



This term is applied normally to a person (other than a Govt. servant), Syndicate or firm, giving an undertaking for the execution of any work or supply of materials or performance of any service in that connection.


               Qualification of contractor


The following categories of contractors are generally enlisted with P.W.D:

1.For building and roads

2.For sanitary installations and water supply

3.For electrical, and Air conditioning

4.For furniture

Each of these categories of contractors should be competent enough to deal with the work entrusted to them and have an engineering organisation to do the work. For 2 and 3  of works, contractors should have valid licence to perform the work. Each contractor is expected to have the required equipment and machinery for the job. The qualification of contractors are further adjudged from (a) their financial resources (b) their professional ability to understand and implement the contractual obligation (c) their ability to control labour (d) the income tax clearance certificate.

After the Gujarat earthquake, Govt. has introduced a bill to change the qualification required for building contractor. If the contractor is an individual then he must have civil Engg. Degree and if it a firm, then they must have civil engineers with them.

               Essentials of contracts

The essential elements of a contract are:

  1. Minimum two parties: Minimum of two parties are necessary to form a contract because one person cannot enter into a contract with himself. In order to form a contract, one party has to make an offer and the other must accept it. The person who makes the offer is called the ‘promisor’ and the person who accepts the offer is called the ‘promisee’.
  2. Offer and acceptance: There must be an ‘offer’ and ‘acceptance’ to the offer in any contract. Both ‘offer’ and ‘acceptance’ should be lawful.
  3. Competent parties: The parties to a contract must be competent i.e., they are of the age of majority, of sound mind and not disqualified form contracting by any law to which they are subjected.
  4. Free consent: To form a valid contract, all parties should give their free consent. Consent means that the parties must agree upon the same thing in the same sense, consent should be free unless it is induced by undue influence, fraud, misrepresentation and mistake.
  5. Intention to create legal obligation: The parties must have the intention to create a legal obligation. In a commercial agreement, an intention to create legal relations is presumed, unless the parties have expressly agreed to otherwise.
  6. Lawful object: The object of an agreement is said to be lawful if it is not fraudulent or illegal or immoral or opposed to public policy and also it should not imply injury to the person or property of another.
  7. Not expressly declared void: An agreement expressly declared to be void under any law, is not enforceable and is, thus, not a contract.

            Different types of contract

Contracts are of the following types:

(A) Item rate contract, including

(1) percentage rate contract

(2) Schedule rate contract

(3) Labour rate basis

(4) Through rate basis

(B) Lumpsum contract

(C) Combination of both item rate and lumpsum contract.

     (A) Item rate contract

In this type of contractor, the contractors have to quote the rate of each item of the work without reference to any schedule of rates. This method is adopted when a reasonably complete schedule of rates is not available for the place where the work is to be carried out or when the number of non-schedule items in the work is more.

  1. Percentage rate contract

In this type of contract, the rates for various items are fixed by the department and the contractor agrees to do the works at a percentage above or below fixed rates. This method is adopted for works at places where a reasonable and complete schedule of rates is available.

  1. Schedule rate contract

In this type of contract, the work is allotted at fixed rates for different items and the payment depends upon the quantity and kind of work done or supply made.

  1. Labour rate basis

In some cases, the contractor quotes the labour rate at some percentage above or below the rates prevailing in the area for various items of works.

  1. Through rate basis

In some cases, the contractor quotes the rates for doing work some percentage above or below the through rates.

  1. Lumpsum contract

In this type of contract, the contractors have to quote a lumpsum figure for completing the work according to the given specification, drawings etc. This type of contracts is given only in exceptional cases. The contracts must include the necessary conditions to safeguard and protect the interest of the government.

  1. Combination of both

In this contract, a fixed sum is agreed upon for the completion of a particular work by the contractor. In case of any addition or alterations, the payment is made or deducted on the basis of a schedule of rates.

        Advantages and Disadvantages

                  Item rate contract


  1. This form of contract ensures a more detailed analysis of cost by the contractor and is more scientific.
  2. The contractor is required to quote rates for individual items of work and hence it is not easy to form a ring during submission of tender and to allot a work to one of the contractors without competition.
  3. This form of contract helps in smooth progress and timely completion of a work because the unworkable rated tender may be avoided.

4  Intermediate payment to contractors for the completed item is easier.


  1. In this type of contract, there is always a loophole for a contractor to correct a rate in order to be the lowest tenderer.
  2. This type of contract is not always advantageous when the quantities of certain items are to be increased or decreased. If by anticipation or by some other source a contractor comes to known the items whose quantities are likely to be increased may quote a high price for these items and similarly can quote low prices for items likely to be decreased. In that case, the department would stand to lose heavily due to unbalanced tender.
  3. Preparation to a comparative statement of this type of tender requires more time and through scrutiny required for this type of tenders.
  4. Chances of rejection of such type of tenders are more because of human error like overwriting and cutting and not doing the initial to their overwriting and cutting in the quoted rates of items by the contractor.
  5. It requires accurate measurements of all the items of work.

                   Lumpsum contract


  1. The cost of the work is known before hand.
  2. Detailed measurements of the work done or not required except in case of any addition and alteration.
  3. Since there is difficulty in making intermediate payment to contractors in this type of contract, every contractor has a tendency to complete the work quickly, resulting in the early completion of work.
  4. Proper planning and efficient management for the execution of work are more convenient.


  1. Making an intermediate payment to contractors is not so easy.
  2. Detailed drawing with full information and specification is essential to avoid any dispute.

                  Scheduled Contract


  1. The materials stored in Government are utilised.
  2. Delay of work due to non-availability of materials in the open market is avoided. Thus better progress with standard quality of materials can be maintained.
  3. The increase in the cost of work is checked in spite of any rise in the price of materials in the market.


  1. There may be a delay in the obtaining materials from the department stores resulting in the delay in completion of the work.
  2. A large storage area is required by the department to store the materials.
  3. Theft of materials from a store, shortage of material and damage of material are constant worries for a department.
  4. Reconciliation of material is essential in this type of contract.

         Book- Civil estimating & Costing, Writer- A.K. Upadhyay