INDIA Law and Practice Contributed by: Vivek Chandy, Archana Tewary, Kumarmanglam Vijay and Brijita Prakash, JSA
7.2 Assigning Responsibility for the Design and Construction of a Project Split structures and design-and-build structures are commonly used for risk allocation and rewards for construction projects. Split structure (owners appoint an architect for design and a separate contractor for construction) is preva - lent for construction of real estate or manufacturing units. Under this arrangement, the owner bears the sole responsibility for design risks, while the con - tractor is responsible for executing the construction. Contractors may seek to shift responsibility for con - struction failures onto design issues, leading to coun - terclaims. For design-and-build structures, the owner enters into a lump-sum turnkey contract for the entire project. Owners have a right to review and certify the con - tractors’ compliance. Contractors are often responsi - ble even after completion, during an agreed defects liability period. 7.3 Management of Construction Risk Warranties as to quality, workmanship, structural sta - bility, fitness for purpose and adherence to applica - ble laws, technical specifications and prudent industry practices are undertaken by contractors, subject to normal wear and tear, industry-specific and technical exceptions. Contractors may be required to provide the owner with a corporate guarantee or a fund-based performance guarantee. The retention of payments is also common, and such guarantee/retention amount is released after completion of the defects liability period. Indemnity for claims due to breach of contract/law, bodily injury, death, loss of property, gross negligence, wilful misconduct and fraud are prevalent in construc - tion contracts. The overall limitation of liability typically varies between 50% and 100% of the contract price. Contractors are also required to obtain and maintain adequate insurance, including contractor’s all-risk insurance, third-party liability insurance and workman insurance.
the property will vest with the governmental authority concerned. Compensation for such acquisition is typi - cally paid to the owner of the property unless the shar - ing of compensation is contractually agreed between the owner and lessee. 6.23 Remedies/Damages for Breach Remedies in the event of a tenant breach and lease termination are typically limited to the landlord claim - ing remaining rent and mesne profits. Such claims are also subject to limitation laws; claims may be made within three years of the breach pursuant to which the claim has arisen. In India, only direct damages can be claimed unless a party has undertaken to indem - nify the counterparty for any specific kinds of losses. Typically, landlords collect an IFRSD to ensure that landlords have adequate remedies in case of the ten - ant’s breach. Landlords may also pursue arbitration or court proceedings depending on the terms of the lease deed. 7. Construction 7.1 Common Structures Used to Price Construction Projects Construction contracts are typically categorised as lump-sum turnkey fixed-price contracts, bill of quan - tities-based contracts (item-rate contracts), and work package-based contracts. For projects where a detailed bill of quantities is pos - sible, owners opt for an item-rate contract. For large infrastructure construction projects, lump-sum turn - key contracts and work package-based contracts are common. Regardless of pricing structure, construction contracts incorporate detailed clauses to address eventuali - ties which may impact completion time and contract price, including change in law, force majeure, change in scope/variation and suspension. Contracts typically provide for mechanisms to adjust contract price upon the occurrence of such eventualities. Contractually agreed price escalation clauses with thresholds are also negotiated, eg, escalation on account of change in price of a specified raw material.
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