WHAT IS A CONTRACT?

If A says to B, ‘I will repair your house’ and B

makes no promise in return, there is no
agreement.

If B says, ‘I will pay you ETB 1000’, then there is

still no agreement. Why? Because An agreement
involves an exchange of promises or goods. A has
not yet agreed to accept ETB 1000 for doing the
work. If A says, ‘I will accept ETB 1000’ there is
agreement on price, but is there a contract?
Unless there is agreement on all the essential
terms, the law does not recognize the existence
of a contract.

Is there agreement on the actual work to be done

to repair the house? It may be that A and B know
exactly what work is necessary, for example
repair of a leak in the roof.

In that event, the actual work to be performed is

agreed and there may be a contract. The contract
consists of the following express terms:
• A will repair B’s house
• B will pay A ETB 1000
• A will accept ETB1000
• These terms are said to be ‘express’ because
they are the actual words spoken.
The contract also includes ‘implied’ terms. An
implied term is one that ‘goes without saying’.
• The implied term is implied by law.

• The law implies certain terms in any contract

in which the express terms do not cover the
matter. Some of these are:
- The work will be completed within a
reasonable time
- Payment will be made upon completion of the
work
- the work will be done in a reasonably
workmanlike manner
• Writing is usually not necessary to create a
contract. Many everyday contracts are made
without words, for example when shopping at
the supermarket. A contract made by spoken
and not written words is an ‘oral contract’.

• A contract that is made without words is an

‘implied contract’. A contract may be partly
oral, partly written and partly implied. That
part which is not implied is said to be
‘express’.
 Terms of Contract
• Conditions are terms which are fundamental to
the contract and may lead to breach and/or
damage
• Warranties are terms which are subsidiary to the
contract. Can normally lead only to damages
under tort
• Expressed terms are terms clearly stated in the
contract.
• Implied terms are not specifically written into the
contract but are considered by the courts to be
part of the contract
• Exclusion clauses: These are clauses (terms) that
seek to deny liability or limit liability
 extra- contractual liabilities.
1.Liability Arising from an Offense
This is a liability that arises when a person causes
damage to another by an offense. The offense may
consist in an intentional act or in negligence.
2. Liability in the Absence of an Offense

This is a type of liability, which a person will be

liable for any damage he deliberately causes to
another in ordered to save himself or another from
an imminent damage to person or property.
3. Liability for the Action of Others

This is the third types of extra-contractual

liabilities. The father is liable under the law
where his minor child incurs liability. The
employer shall be liable under the law where
one of his employees incurs liability in the
discharge of his duties.
 Construction Contract
Contract is a written agreement between or among two
or more parties whereby each party promises to do or
not to do something and agrees to terms , conditions
set out in the contract.

In other words, A Contract is an Agreement between

two or more parties to do or not to do something for a
certain consideration that fulfill the following seven
requirements:
Lawful and Capable
Intent
Legal and Distinct
Standard
Consideration
Offer and Acceptance
Agreement
Lawful and Capable is to mean they are legally allowed to enter
into contract and provides statements of facts (statement of
opinion + Knowledge) for their ability to perform their
obligations.
Minor
Considered mentally incompetent or ill
Under the influence of alcohol and other drugs

Intent is willingness or consent by the contracting parties to

create a legal contract.

Declare that you have read all the incorporated documents and
are willingly bound by the terms!
Legal and Distinct is a description of both the promises
and considerations (including rights and obligations)
clearly and distinctly stated and they should be
practicable and legally binding.
Standards can be conditions, forms, formats, schedules, instructions,
etc which are created for use as part of contracts.

According to the Civil Code of Ethiopia 1960, Art.1727

Any Contact required in writing shall be supported by a special
document signed by all the parties bound by the contract
 It shall be of no effect unless it is attested by two witnesses

Consideration can simply be interpreted as ‘price for the promise’ which

involves a benefit accrued from the offeree in exchange for the promise
the offeror is bound by the contract.

An Offer is an indication that one party is willing to be bound by specific

terms set out in the contract.
An Acceptance is the key for the formation of a
contract which must be absolute, indication of
consent, and communicated to the offering entity by
the offeree.
Types of Contract

Bilateral Contracts are contracts entered to

promise for an obligation performed in the future
where both (two) parties are mutually bound.

Multilateral Contracts are contracts entered to

promise for an obligation performed in the future
where all (three or more) parties are mutually
bound.
Contract Agreement when signed forms the contract
document which will be the bases for Contract
Administration. A Construction Contract Document
includes:

•Signed and Sealed Form of Contract Agreement

•General and Particular Conditions of Contract,
•Technical Specification and Methods of
Measurement,
•Priced Bill of Quantities, Drawings and General
Notes to drawings if necessary, and
•Forms, Formats and Schedules.
 Contents of Contract Documents
• The Legal Part

• The Contract Agreement;

• The (latest) Minutes of Meeting, if any;

• The Letter of Acceptance(Award);

• The Tender ( NB: Including the Appendix to Tender, if any);

• The Special Conditions of Contract;

• The General Conditions of Contract;

• Others, if any;
 Contents of a Contract Documents
• The Commercial Part

– The Performance Security Form;

– The Payment Security Form;

– The Advance Payment Guarantee Form;

– The Bid Security Form;

– The Insurance Forms;

– The Retention Money Security Form;

– Others, if any
 Tender & Contract Documents
• The Technical Part

– The Technical Specifications;

– The Drawing;
– The Bill of Quantities;
– Others, if any;

• The Contract Agreement shall also declare the priority of the Contract Documents i.e.
which Contract Document shall have precedence or priority over the other in case of
ambiguity or discrepancy between or among the relevant Contract Documents.
 Invalidation of contracts

• Void and voidable contracts

• Reasons to invalidate contract.
 Mistake
 Needs to be fundamental that the plaintiff wouldn’t have
entered the contract had it not been for the mistake. Not a
simple calculation/arithmetic mistakes
 Fraud (Deception)
 principal frauds can lead to invalidation of contract

Duress
 ‘Duress’ is the compelling of a party to consent to a contract by
threats of grave imminent harm to such party or his ascendants,
descendents or spouse
 Duress can have threefold aspect
 A contract aspect leading to invalidation
 A tort aspect leading to compensation for damages
 A penal aspect leading to punishment under the Penal Code
False statement
– false information to another where he knows that the latter
acts upon the information
•Discussion on FIDIC conditions of contract

•FIDIC Condition of Contract

•FIDIC has long been used as Standard Forms of
Contract for use between employers and contractors
on international construction projects.

•FIDIC is the international federation of national

associations of independent consulting engineers

•Founded in 1913 by the national associations of

three European countries, now with membership
from over 60 countries.
FIDIC TYPES

•Conditions of Contract for Works of Civil Engineering

Construction (Red Book) Fourth Edition 1987.

•Conditions of Contract for Electrical and Mechanical

Works including Erection on Site (Yellow Book) 1987.

•Conditions of Contract for Design-Build and Turnkey

(Orange Book) 1995.

•Depending on type of contract we have also silver and

green type of condition of contracts.
 FIDIC TYPES
FEDERATION ENTERNASIONALE DES ENGENIURS - COUSELS
FIDIC TYPES