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Risks Implied By Conditions of Contract And Specifications

Prof. M.S Balwani, Khiyati Balwani


The construction industry is one of the most dynamic, risky and challenging businesses and the contract documents serve as a tool to manage risk by allocating risks to the parties of contract. In construction, when bidding for any tender, the contractor is in a situation wherein he has to make efforts to be the lowest bidder in order to get the contract. The time frame for bidding is generally not sufficient for studying all the clauses and understanding the risks implied in them. Also, the amount of awareness of risks is generally less because of which all the risks are generally not perceived, and hence no provision is made for dealing with these risk events. It is very important for all the agencies that they are aware at all times of the extent of risk exposure or the risks that they have to manage else there could be disputes, disagreements, and disruptions. To avoid these, the risks in a contract have to be first identified to manage or allocate them rationally. A study of two contract documents was undertaken with the risk perspective. Risks to the contractors are identified and are analysed qualitatively. The study involved comparison of few conditions of contract of the contract documents studied and those of FIDIC documents to understand how the different contracts draft a particular condition of contract differently, making it essential for the contractor, to perform risk assessment, afresh for each contract

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