What is Contract and What are it's types ?

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 What is Contract?

Contract is an agreement enforced by Law. In lay-man's term Contract is an agreement where one party gives proposal and the other party accepts it. Without the enforcement of Law the Contract becomes Void i.e. it can be avoided by any of the parties.

In Public Works Department Contract means written Undertaking of Execution of work or Supply of Materials or for performance of any service accepted and registered by the competent authority on behalf of the Union or State Authority.


Essentials of Contract

1. Contract shall be made by two or more competent parties.

2. It shall be made with the free consent of each and every parties involved.

3. The Contract should have a definite proposal.

4. The contract should be made in such a way that the considerations and objects are lawful.


Types of Contracts

1. Item Rate Contract

2. Labor Rate Contract

3. Percentage Rate Contract

4. Lump-Sum Contract

5. Materials Supply Contract

6. Piece Work Agreement


Item Rate Contract : For this type of Contract the contractor has to quote the rates of each item individually on the basis of schedule furnished by the department. The schedule indicates the full nomenclature of the items as per sanctioned estimate, estimated quantities and units therein. While filling up the  contracts the contractors are required to express the amount in figures and words and also work out the cost each time.

Labor Rate Contract:  Labor Rate Contract is a contract where only the labor that is required for construction are supplied. In this type of contract the material required for the construction are sourced by the owner himself.

Percentage Rate Contract: In this types of Contracts the department draws up the schedule of items according to the description of items sanctioned in the estimates with quantities, rates, units and amounts shown therein. Thus the department fixes up the rates of tender.

Material Supply Contract: A material supply contract is an agreement with term and conditions between two or more persons or the owner and the contractor where the contractor takes the responsibility to supply all the materials along with the execution of work.

Piece Work Agreement:  As the name suggests. In this type of agreement the rate is agreed upon without disclosing the quantity of work to be done or the quantity of work to be done in a given period of time. This type of contract is not a contract in true sense rather it could be called as an agreement. That means the contractor is free to discontinue the execution of work at any point of time.

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