AN

ASSIGNMENT ON

STANDARD FORM OF BUILDING CONTRACTS IN NIGERIA

COMPILED BY:

OMOTAYO I.AARC/04/3220

OLUWAFEMI A.O.ARC/04/3217

SUBMITTED TO THE DEPARTMENT OF ARCHITECTURE

FEDERALUNIVERSITY OF TECHNOLOGY, AKURE

LECTURER-IN-CHARGE:

PROF. OGUNSOTE

NOVEMBER, 2009

Table of Contents

1.0INTRODUCTION………………………………………….. 3

2.0MEANING OF CONTRACT………………………………………….. 4

2.1ELEMENTS OF A CONTRACT………………………………….. 4

2.2TYPES OF CONTRACT………………………………….. 5

2.2.1LUMP SUM CONTRACTS………………………………….. 5

2.2.2MEASUREMENT CONTRACTS…………………………... 5

2.2.3COST REINBURSEMENT CONTRACTS…………………... 6

3.0STANDARD FORM OF BUILDING CONTRACTS IN NIGERIA…… 7

3.1ARTICLES OF AGREEMENT…………………………………… 7

3.2CONDITIONS…………………………………………… 8

4.0CONCLUSION………………………………………………….. 13

1.0INTRODUCTION

In the Construction industry, different professionals and non-professionals are engaged in the process of construction of different projects. Each of these professionals or non-professionals has its own different roles to the success of the project in a specified range of time. In lieu of this, there is a need to put a check on the activities, responsibilities, and powers of each of these persons so as to prevent disputes or differences for each own personal interests. These needs brought about the birth of a document called the Standard Form of Building Contracts.

Different building industry in different countries has its own Standard form of building contracts which the complexities and contingencies in its construction industry for example, the JCT Standard Form of Building Contracts. In Nigeria, the form is simply called the Standard Form of Building Contracts in Nigeria.

The Standard form of Building Contracts in Nigeriais provided and reviewed by the Nigerian Institute of Architects (NIA) to act as a guideline to different issues and complexities of building contracts and construction in the building industry of Nigeria. This paper explains the meaning of contracts and the Standard Form’s stance on some issues, problems and possible solutions that arise in the construction process.
2.0MEANING OF CONTRACT

A contract has been defined as “a legally binding agreement between two or more parties, by which rights are acquired by one or more to acts or forbearances on the part of the other or others”(sir William Anson).

The formation of a contract may be formed in a number of ways which could be: Orally, By Conduct, By Deed, In Writing and Evidence in writing.

2.1ELEMENTS OF A CONTRACT

There are a number of basic elements which are necessary for the creation of a legally binding and enforceable contract:

  • OFFER AND ACCEPTANCE:an offer by one party must be clearly made, and that offer must be unconditionally accepted by the other party. Upon acceptance, the contract comes into effect.
  • INTENTION:this must be shown by both parties, indicating their desire to enter into a legally binding contract.
  • CAPACITY:all parties entering into a contract must have a legal capacity to do so. For example, children, persons of unsound mind e.t.c may be excluded from certain types of contracts.
  • CONSENT:this must be proper, and not obtained from either party by fraud or duress.
  • LEGALITY:the contract must be formed within the boundaries of the law. For example, a contract to commit a crime would not be binding.
  • POSSIBILITY:contrats formed to undertake impossible tasks are unenforceable.
  • CONSIDERATION:Each party must contribute something in consideration of the other’s promise. This must be real, not necessarily adequate, legal, possible, not in the past and must move from the promise.

2.2TYPES OF CONTRACT

A building contract may take any form which is agreeable to the parties involved, but certain proven methods of contracting have been developed which are useful in differing building situations. These include:

  • LUMP SUM CONTRACTS
  • MEASUREMENT CONTRACTS
  • COST-REIMBURSEMENT CONTRACTS

2.2.1LUMP SUM CONTRACTS

The contractor agrees in advance to undertake a specified amount of work for a fixed price. The inflexible nature of the price may mean that the contractor could fall foul of inflation or unforeseen circumstances, and may be inclined to raise his prices as a safeguard. There are two forms of lump sum contract:

  • LUMP SUM WITH PLAN AND SPECIFICATION: which is used for minor building projects and repair work where the requirement are simple and easily definable.
  • LUMP SUM WITH BILL OF QUANTITIES: This is used in most building work of traditional nature.

In practice, variations, fluctuations and loss and/or expense clause relieve the contractor of some of the consequences.

2.2.2MEASUREMENT CONTRACTS

A price for a work is determined by measurement and valuation in relation to agreed formulas and rates. A measurement contract may be based on:

  • APPROXIMATE QUANTITIES: where, on completion of the project, the contractor is paid according to the prices established in an approximate bill of quantities.
  • A SCHEDULE: where the outcome of the work is to vague as to preclude even an approximate set of quantities. Instead, the work is carried out and measured according to an agreed schedule of prices. This method is suitable for minor works and repairs.

2.2.3COST REINBURSEMENT CONTRACTS

The contractor is paid the actual cost of the work, plus an agreed price to come overhead and afford him a profit. Methods of using this type of contract include:

  • COST PLUS FIXED FEE: a method sometimes employed where a rough estimate of the final cost can be made.
  • COST PLUS PRECENTAGE: where the percentage is calculated on the final cost of the work.
  • COST PLUS FLUCTUATUING FEE: where the fee varies in an inverse ratio to whether the ultimate cost is more or less than an estimate agreed at the onset.
  • TARGET COST: the contractor is paid either all cost and additional fee agreed upon earlier, or the value of the completed work based upon the schedule of prices.
  • VALUE COST: the contractor receives a variable fee assessed interms of a percentage of a valuation based on a schedule of prices. This method tends to be used by larger organizations which have suitable facilities for valuation and general accounting.

3.0STANDARD FORM OF BUILDING CONTRACTS IN NIGERIA

Just as any type of contract can be chosen by the parties concerned, so can any form of agreement be used to determine the terms of agreement. The standard form of contract attempts to deal with the complexities and contingencies which may arise in the construction process. It spells out the extent of power and jurisdiction of every member of the construction team. The published form contains articles of agreement, the conditions of the contract and an appendix.

3.1ARTICLES OF AGREEMENT

The form contemplates that a contract will be made by the parties executing the articles of agreement. The article provide for specifying the names of the parties, a brief description of the works and a list of contract drawings.

The articles themselves state that:

Article 1

ContractorsFor the consideration hereinafter mentioned the Contractor will upon and subject to the Contractor Documents carry out and complete the Works shown upon, described by or referred to in these documents in …….. weeks or such other extended period in accordance with the Conditions.

Article 2

Contractor SumThe Employer will pay to the Contractor the sum of

…………………………………………………………………………………..

…………………………………………………………………………………..

…………………………………………………………………………………..

Article 3

ArchitectThe term the Architect in the Articles and Conditions shall mean the said

…………………………………………………………………………………..

of ……………………………………………………………………………….

………………………………………………………………………………….. or, in the event of his death or ceasing to be Architect for the purpose of this contract, such other person as the Employer shall nominated within a reasonable time but in any case not later than 21 days after such death or cessation for that purpose, not being a person to whom the Contractor not later than 7 days after such nomination shall object for reasons considered to be sufficient by an Arbitrators appointed in accordance with Article 6. Provided always that no person subsequently appointed to be the Architect under this contract shall be entitled to disregard or overrule any certificate or opinion or decision or approval or instruction given or expressed by the Architect for the time being.

Article 4

Quantity SurveyorThe term the Quantity Surveyor in the Article and Conditions shall mean the said

………………………………………………………………………………………….

of ………………………………………………………………………………………. …………………………………………………………………………………………. or, in the event of his death or ceasing to the Quantity Surveyor for the purpose of this Contract, such that person as the Employer shall nominate within a reasonable time but in any case not later than 21 days after such death or cessation for that purpose, not being a person to whom the contractor not later than 7 days after such nomination shall object for reasons considered to be sufficient by an Arbitrator appointed in accordance with Article 6.

Article 5

EngineerThe term the Engineer in the Articles and conditions shall mean the said …………………………………………………………………………….of .……………………………………………………………………… or in the event of his death or ceasing to be the Engineer for the purpose of this contract.

Article 6

Settlement of disputes-

Arbitration

3.2CONDITIONS

The second part of the standard form is the conditions of contract which specifies the works, expectations, power and jurisdiction of different members of the construction team at different stages of the construction process. The document; standard form of building contract in Nigeria which is published by the Nigerian Institute of Architects stated about thirty-five (35) different conditions in the execution of a construction project. These conditions are summarised as follows;

Contractor’s obligations

The form states that the contractor should “carry out and complete the works shown upon the Contract Drawings” and Contract Bills. It also states that if the Contractor finds any discrepancy between the Contract Drawings and/or Contract Bills he shall write notice specifying the discrepancy or divergence. It also obligates that the Contractor to produce a Programme/progress chart in accordance with the accepted completion period for the approval of the Architect.

Architects’ Instructions

On the architects’ instructions, the form (Clause 2.1) states that the “Contractor shall forthwith comply with all instruction issued to him by the Architect” in regard to any matter the Architect is empowered to issue instructions. The form (clause 2.3) states that these instructions be in writing after which may have been communicated orally to the contractor. Any other instruction shall be of no effect except issued through the Architect.

Contract Documents

Clause 3.1 of the form states that the Contract Drawings and the Contract Bills shall remain in the custody of the Employer while certified true copies of the Contract Bills shall be given to the Contractor, the Architect and the Quantity Surveyor. These Contract Drawings as well as copies of the unpriced Bills of Quantities, as described in clause 3.2, would be furnished to the Employed upon the execution of the contract. The form in clause 3.6 requires the Contractor to return to the Architect all drawings, details, specifications, descriptive schedules and other documents.

Levels and Setting out of the Works

In clause 5 of the form, the “Architect shall determine any levels which may be required for the execution of the Works, and furnish to the Contractor by way of accurately dimensioned drawings such information as shall enable the Contractor to set out the works at ground level”.

Quality of materials, goods and workmanship to conform to description, testing and inspection.

Clause 6.1 states that “All materials, goods and workmanship shall so far as procurable be of the respective kinds and standards in the contract Bills”. The contractor shall upon the request of the Architect furnish him with vouchers to prove that the materials and goods comply with clause 6.1.

The Architect may issue instructions requiring the contractor to open up for inspection any work covered up or to arrange for or carry out any test of any materials or goods (whether or not already incorporated in the works) or of any executed works and the cost of such opening up or testing (together with the cost of making good in consequence thereof)shall be added to the contract sum unless provided for in the Contract Bills or unless the inspection or test shows that the work, materials or goods are not in accordance with this contract this contract.

Clerks of Works

The form states that the “Employer shall be entitled to appoint a Clerk whose duty shall be solely to act as inspector on behalf of the Employer under the directions of the Architect”. The forms also explained that any directions given to the contractor by the clerks of works except issued by the Architect of which must have been expressed in writing within 5 working days.

Variation, provisional and prime cost sums

The term Variation as used in these Conditions means the alteration or modification of the design, quality and quantity of the Works as shown upon the Contract Drawings and described by or referred to in Contract Bills. Clause 11.3 states that “The Architect may issue instructions requiring a variation made by the Contract otherwise than pursuant to the instructions of the Architect”.Notwithstanding the provisions of clause 11.3, any variation required by the Architect resulting in a net addition to the Contract sum in excess of the amount stated in the Appendix shall be of no effect unless approved by the Employer in writing to the Architect which approval shall be given by the employer within 14 working days of request and clause 11.5 states that the Architect shall issue instructions in regard to the expenditure of prime cost and provisional sums included in the Contract Bills.Clause 11.7 states that “Effect shall be given to the measurement and valuation of variation under clause 11.3 in interim certificates and by adjustment of the Contract sum; and shall be given to the measurement and valuation of work for which a provisional sum is included in the Contract Bills under the said clause in interim certificates and by adjustment of the Contract Sum”.

Contract Sum

Clause 13 of the form states that the “Contract sum shall not be adjusted or altered in any way whosoever otherwise, than in accordance with the express provisions of these conditions, and subject to clause 12 any error whether of arithmetic or not in the computation of the Contract sum shall be deemed to have been accepted by the parties hereto”.

Extension of Time

Clause 23.1 identifies the possibility of a delay in the progress of works. In view of this, the form stipulates that the contractor to give a written notice to the Architect. The form identifies different causes of delay which may be on of the following:

  • By force majeure, or
  • By reason of any exceptional inclement weather other than could reasonably be expected in the season, or
  • By reason of loss or damage occasioned by any one or more of the contingencies.
  • By reason of civil commotion, strike or lockout affecting any of the trades engaged in the completion of the project, or
  • By reason of the Contractor not receiving in due time the time necessary instruction, drawings, details e.t.c, or

The form went further to explain in clause 23.2 that the granting of an extension of time shall not entitle the Contractor to any additional payment.

Fluctuations

The form states in clause 31.1 that the Employer shall entertain fluctuations only in respect of approved basic wages and emoluments and certain materials or certain sections of works. Clause 31.2 specifies that the contract sum shall be deemed to have been calculated in a manner and shall be subject to variation in the events specified below:-

  • “The prices contained in the Contract Bills are based upon the rates of wages and other emoluments and expenses payable by the Contractor to workers”.
  • The prices contained in the contract bills are based on market prices of materials including purchase tax(es), import duty or any other levy applicable to the date of tender.
  • “If during the progress of the works the market prices of materials used in the works varies from the basic prices thereof, then the net difference in price thus arising shall be paid to or allowed by the Contractor”.

Arbitration

The form stipulates in clause 35.1 that provided that in case of any dispute or difference shall arise between the Employers or the Architect on his behalf and the Contractor shall not be allowed to interfere with or delay the execution of the works but either party shall forthwith give to the other notice in writing of such disputes or differences and such disputes or differences shall be referred to an Arbitrator. The form went further to note that such person shall be an experienced professional in the building industry or failing agreement, a person appointed by the President of the Nigerian Institute of Architects (NIA).

Clause 35.2 stated that the award of such Arbitrator shall be final and binding on the Parties.

The above listed conditions are just a few out of the ones provided by the Standard Form of Building Contracts in Nigeria so as to act as a guideline to all activities and members of the construction team.

4.0CONCLUSION

In conclusion, it is worthy of note of the great importance the Standard Form of Building Contracts has on the building industry and the construction professionals in any country it is being used. It is also unarguable that without the existence of this form, there would be lots of differences and disputes as every individual engaged in the construction process are concerned about their own profit and personal gains.

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