Professional Documents
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DEFINITION:-
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Fundamental Breach of Contract:These are the breaches of contract due to the occurrence of an
event / situation / circumstance which are brought about by the
acts/defaults of one of the contracting parties and to which they
can be held responsible.
In this case the party responsible for the Breach of contract is liable
to pay compensation to the other party.
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Breach due to frustration or Force Majeure: Occurrence of an event/ situation/ circumstance which are
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Fundamental Breach of contract: In common usage unless specifically termed Force
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In such an event the party suffering the loss has the
following two options:-
COMMON BREACHES BY THE PRINCIPAL:The breaches of contract that are attributable to the Principal
can be classified into following three categories:1. starting of the work is prevented / not facilitated.
Example: i) not giving possession of site, not obtaining
necessary sanctions, permissions.
ii) not furnishing necessary plans, designs,
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2. performance of the contract is delayed:Example :
i) timely supply of materials specified in schedule of materials in
required quantities and quality is not done.
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COMMON BREACHES BY THE CONTRACTOR:The breaches of contract that are attributable to the contractor can
also be classified into three categories as follows:-
[ project execution team, site offices, stores, staff, and labour colony,
arrangements for construction water, power, lighting, roads]
ii) procurement of materials is not done, labour and equipments not
deployed.
iii)subcontractors work is not being coordinated and monitored.
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2. contractor fails to meet the quality requirement or the
contract is excessively delayed
Example:work is not being executed in compliance with plans/ drawings,
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iii) extra expenditure due to escalations in cost of materials and
labour.
Action that can be taken by Principal:The Principal is entitled to take following actions when there is
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iii) Recover liquidated damages to the maximum extent specified
in the contract (liquidated damages can be up to about 10% to
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vii) Recovering expenses and charges towards site clearance of
the contractor has not done so.
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Documentary evidences as regards the assessment of the
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In the earlier days, provisions were being made in the contract to
PROCEDURE FOR TAKING ACTION:If the contractor neglects or fails to proceed with the work with
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It should also clearly state that the notice is being given
corrective measure even after 10 days period, Engineer-incharge can take the actions deemed to be appropriate.
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After a notice being served on the contractor for breach of
machinery tools etc. deployed at the site. They will be held in lieu
to the Principal / Owner, till the deficiencies have been corrected or
the amount due to the Principal has been recovered.
The Principal is entitled to recover the shortfall in the amount
due to him from the sale of any or all of the plants, equipments,
machinery, tools, that had been deployed at the site by the
contractor.
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iii) Cost of mobilization and demobilization
iv) Expenditure towards on site overheads
v) Expenditure towards off site overheads
CLAIMS BY THE CONTRACTOR FOR COMPENSATION:The contractor can claim compensation under section 74 of the
Indian Contracts Act or as Quantum Meruit.
QUANTUM MERUIT
Definition :- claims of payment for work which is done
but not covered in terms and conditions of contract or
claims for payments of compensation not stipulated in
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Claims on the basis of Quantum Meruit can arise and is awarded
reasonable amount but the agreement has been later discovered to be void.
Where something is lawfully done by one party for the other party for
the other party who has derived an advantage or privilege without
intending to do so as a charity.
Litigation.
This can be done only if up to date records are regularly and
FORCE MAJEUR
Occurrence of an event/ situation/ circumstance which
The requirements for applicability of Force Majeure: Event / situation must be a result of a cause not brought about
impossible.
[self-induced
frustration]
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frustration.
Eg :- bad weather, labour problem, breakdown of machinery,
disruption of power supply , water supply etc
and that despite all care and caution he could not have control over the
event and that the execution of contract is totally impossible.
Occurrence of an event after the contract has been made which both
the parties could not have foreseen or prevented, that makes the
performance of the contract impossible or unlawful.
Eg- changes in laws, changes in permit or license rules, abnormal economic
objectives or purpose which the parties had while entering into the
contract.
Eg- ban on exports/ imports, abolition of tax incentives or any such incentives,
Where the performance of the contract was known could have been