Based on our experience of advising in hundreds of construction contracts in India from draft project reports to dispute resolution across fora, we have observed that following are the top five contract modifications in India-
- The current contracts in India are based on public private partnership, whereby government is inviting private parties to come and invest and earn from such investments. Hence, instead of EPC contracts, parties are preferring, concession agreements. In such kind of contracts the contractor invests the entire amount of construction from its own sources and the employer either allows the contractor to collect the user fee, in case of road construction contracts or pays a fixed amount every year as “annuity” for a fixed period.
- In a concession agreement usually there is a standard clause whereby the employer agrees to pay the amount of “annuity” to the contractor irrespective of any dispute between the parties, and such amount can later be adjusted subject to outcome of disputes between the parties either through arbitration proceedings or through regular civil proceedings.
- The concession agreements also contain provisions for compensating the contractors for eventualities such as change in law and variations, so that contractors do not suffer unforeseen losses.
- Majority of the construction contracts in India, either EPC contracts or concession agreements contain an arbitration clause whereby parties express their intention to refer the disputes to arbitration. However as per Indian law mere reference of arbitration in a contract will not make such clause a valid clause, but the intention to arbitrate should be clear and unambiguous.
5. If there is a construction loan financing the project, the contract must contain all the necessary details such as the name and address of the lender