Chapter III
CONTRACTS
Article 46 Principles for formulation of contracts
1. Contracts must comply with the provisions of this Law and other relevant laws.
2. In the case of a partnership tender, the contract signed with the investor must contain the signatures of all partners.
3. The contract sum shall not exceed the winning tender price, except for the case stipulated in clause 4 of this article.
4. In cases where a volume of works or a quantity of goods arises which exceeds the scope of the tender invitation documents leading to the contract sum exceeding the winning tender price, then the authorized person shall consider and make a decision thereon.
Article 47 Contents of contracts
1. Subject of the contract.
2. Quantity or volume of the contract.3. Specifications, quality and other technical requirements.
4. Contract sum.
5. Form of contract.
6. Duration of and schedule for implementation.
7. Terms and conditions on, and method of payment.
8. Terms and conditions on check and acceptance, and on hand-over.
9. Warranty applicable to goods to be procured, or to items to be constructed and installed.
10. Rights and obligations of the parties.
11. Liability for breach of contract.
12. Term of validity of the contract.
13. Other items depending on each form of contract.
Article 48 Forms of contract
1. Lump-sum contract.
2. Unit price contract.
3. Time based contract.
4. Percentage based contract.
Article 49 Lump-sum contract
1. The form of lump-sum contract shall apply to items of works which are clearly definable in terms of quantity or volume.
2. The contract sum shall not be altered throughout the entire duration for implementation of the contract. The investor shall pay the contractor the correct amount being the sum stated in the contract, after the contractor has discharged all his contractual obligations.
Article 50 Form of unit price contract
1. The form of unit price contract shall apply to those items of works which cannot yet be clearly defined in terms of quantity or volume.
2. The investor shall pay the contractor in accordance with the actual quantity or volume of work completed on the basis of the unit price stipulated in the contract or on the basis of the unit price adjusted and approved in accordance with article 57 of this Law.
Article 51 Form of time based contract
1. The form of time based contract shall apply to those items of works being complex research, design consultancy, supervision of execution of building, training and capacity building.
2. The investor shall pay the contractor in accordance with the actual time worked calculated in months, weeks, days and hours on the basis of the expert remuneration rates stipulated in the contract or on the basis of remuneration rates adjusted and approved in accordance with article 57 of this Law.
Article 52 Form of percentage based contract
1. The form of percentage based contract shall apply to common and simple consultancy work.
2. The contract sum shall not be altered throughout the entire duration for implementation of the contract. The contract sum shall be calculated as a percentage of the value of the works or of the volume of works. The investor shall pay the contractor the correct amount being the sum stated in the contract, after the contractor has discharged all his contractual obligations.
Article 53 Multiple contractual forms within the one contract
1. If any one contract contains one or more components being forms of contract stipulated in articles 49 to 52 inclusive of this Law, then the payment principles stipulated in the corresponding articles shall apply.
Article 54 Signing of contract
1. The signing of the contract shall be based on the following documents:
(a) Results of negotiation and finalization of the contract;
(b) Decision on approval and notice of results of selection of contractor;
(c) Tender and any documents clarifying the tender provided by the selected contractor;
(d) Tender.
2. The signing of the contract must ensure compliance with the following conditions:
(a) The tender of the selected contractor still remains valid;
(b) The information on the technical and financial capability of the contractor has been updated as at the date of signing the contract and satisfies the requirements set out in the tender invitation documents.
Article 55 Contract performance guarantee
1. The winning tenderer must provide a contract performance guarantee prior to the date on which the contract takes effect, except in the case of tendering for the provision of consultancy services and except in the case of self-implementation of a contract.
2. The value of a contract performance guarantee shall be stipulated in the tender invitation documents and shall be a maximum of ten (10) per cent of the contract sum; in cases where there is a need to guard against high risks, then the value of the contract performance guarantee shall be higher but shall not exceed thirty (30) per cent of the contract sum and in such case there must be permission from the authorized person.
3. The term of validity of a contract performance guarantee must extend until the date of transfer of warranty obligations (if any).
4. The contractor shall not be entitled to the return of the contract performance guarantee if the contractor refuses to perform the contract after the date the contract takes effect.
Article 56 Warranty
Any contract containing contents being goods to be procured or items to be constructed and installed must contain a warranty provision. The term of the warranty, the amounts payable pursuant to the warranty, and other clauses and conditions of the warranty shall be set out in the contract and must be based on provisions of law.
The Government shall provide detailed regulations on the warranty applicable to contractual contents being goods to be procured or items to be constructed and installed.
Article 57 Adjustment to contracts
1. Adjustment to contracts shall only apply to unit price contracts and time based contracts, and shall be carried out as follows:
(a) When there is a change in State policy in relation to tax or wages which directly impacts on the contract sum, the contract shall be adjusted in accordance with such policy as from the date the policy take effect;
(b) When there are increases or decreases in the volume or quantity of works throughout the process of contractual performance, but such changes are within the scope of the tender invitation documents and are not caused by the fault of the tenderer, then the calculation of the value of such increases or decreases shall be based on the unit price of the contract;
(c) When there are major fluctuations in State controlled prices of fuel, supplies and equipment as set out in the contract and such fluctuations directly impact on contractual performance, then such situation must be reported to the authorized person for his consideration and decision.
2. Adjustments to a contract shall only be applied within the period for implementation of the contract as set out in the signed contract and the authorized person must consider and make a decision on any adjustment. The adjusted contract sum shall not exceed the total estimated budget, estimated budget or tender package price set out in the approved tendering plan, unless the authorized person otherwise permits.
3. Where additional work beyond the scope of the tendering invitation documents reasonably arises, the investor shall reach agreement with the contractor who signed the contract on calculation of such additional work and shall report to the authorized person for his consideration and decision. If discussions between the investor and the contractor are unsuccessful, the additional items of work shall be treated as a new tender package for which selection of a contractor shall be conducted in accordance with the provisions in this Law.
Article 58 Contract payment
The contract sum and the specific terms and conditions on payment as set out in the contract shall be the basis on which the investor shall make payment to the contractor.
Article 59 Supervision of implementation of contract, check and acceptance, and liquidation of the contract
1. Supervision of implementation of the contract shall be carried out in accordance with the following provisions:
(a) The investor shall be responsible to supervise the contractor throughout performance of the contract;
(b) Any individual assigned the task of supervision of implementation of the contract must ensure that he or she is disinterested, honest, objective, capable, experienced and has the professional knowledge necessary to carry out such supervision, and such individual shall be liable before the investor and the law for carrying out the tasks;
(c) If any consultant supervising execution of building is irresponsible or colludes with the construction contractor to certify an incorrect quantity or quality of works, then both the consultancy contractor and the construction contractor must pay compensation for loss and damage and shall be dealt with in accordance with article 75 of this Law and other relevant laws;
(d) The community of citizens shall participate in supervision of tendering activities in accordance with regulations of the Government.
2. Check and acceptance of the contract shall be implemented in accordance with the following provisions:
(a) The acceptance of each part of the contract or of the entire contract must be conducted in accordance with the terms and conditions set out in the signed contract;
(b) Any individual assigned the task of supervision of implementation of the contract must ensure that he or she is disinterested, honest, objective, capable, experienced and has the professional knowledge necessary to carry out such supervision, and such individual shall be liable before the investor and the law for carrying out the tasks;
3. Liquidation of the contract shall be completed within a time-limit of forty five (45) days from the date on which the investor and the contractor fully discharge their contractual obligations; in the case of a very complex tender package, it shall be permissible to extend the time-limit for liquidation of the contract but not in excess of ninety (90) days.
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