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Comparison of the Payment Terms and Conditions

of FIDIC, AIA, EJCDC, CSI and Consensus Docs Contracts with an actual contract

 

STUDENT PAPER

By Yasmine Laraki

SKEMA Business School

Paris, France and Morocco

 


 
ABSTRACT

A contract is an agreement by which parties undertake and bind themselves to respect certain things. It usually includes several clauses, and we will mainly focus on the payment clause. Nowadays, a payment clause is often included in a contract, and present several terms and conditions which help the two parties to define exactly what they are expecting. Terms and Conditions help the contractor and the owner to avoid conflicts, thus they need to be as detailed as possible in order to make the situation clear between the two parties.

Our problem is that the payment terms and conditions is a delicate clause and it is a major source of disputes. This paper allows us to realize how complex this clause can be, and how we should pay attention to the details we write on it. In fact, millions of contracts are written daily and the terms and conditions differ from one contract to another. This paper aims to analyze the differences that we can find in the payment clause by the comparison of an actual contract and five scientific documents and find which is the best alternative to help us improve our baseline contract. By using the Multi-Attribute Decision Making (MADM method), we easily eliminate two alternatives, and then the additive weighting technique helped us to choose Engineers’ Joint Contract Document Committee (EJCDC) document as the best alternative. This document is the most suitable alternative and helps us improve our baseline document, it shows us how to perfectly write the payments terms and conditions and the level of details the clause should contain.

Keywords: Payment, owner/contractor, refund, contract, conflict, claims, milestones, clause, dispute, conditions.

INTRODUCTION

Every time we use the internet, we end up signing contracts meaning that we agree to some very long terms and conditions. In today’s world, when signing a contract, a conflict often occur between the contractor and the owner. Most of the time, the conflict arises regarding the method of payment clause which seems to be the main cause of the conflict. A contract is a voluntary commitment, formal or informal, between two or several parties. It is recognized and therefore sanctioned by the law and needs to be the more specific as possible. The clause of Terms and Conditions is mandatory in all contracts in order to make the situation clear between the two parties but in practices, several misunderstandings, missing elements, and ambiguity from the contract can cause disputes.

In order to avoid any potential conflict, contractors and owners should use the terms and conditions clause properly. Indeed, with complete and detailed contracts addressing specific conditions, the two parties can define clearly the responsibilities regarding a contractor payment issue. In fact, it can be about a default in payment from the contractor but it can also concern the owner.  To address, and mostly avoid, these potential conflicts, several new processes of payment have been created.

This paper addresses Requirements Agreement With Eligible Independent Providers/ Agencies for the Provision of Related Services to Students With Disabilities. The scope of the paper is the integrality of the information related to payment terms and conditions.  In fact, it is a comparison between the subject chosen contract’s payment term & conditions clause, compared to the four following documents: “the American Institute of Architects (AIA)”[1] , “the Engineers’ Joint Contract DocumentCommittee (EJCDC) “[2]the document, “the International Federation of Consulting Engineers (FIDIC) “[3] , the “CSI documents [4]”  and “the Consensus Docs” [5] . Regarding the scope of this paper, it will address first the analysis and comparisons of the payment terms, then the evaluation process of the conflict and lastly the potential ways to avoid it.

Disputes and conflicts arise inevitably in any type of projects and understand how to resolve them correctly is very important. It is very crucial to know how to write properly the payment terms and condition as it is an important cause of dispute in a contract of any type of projects.

Here we are going to compare the diverse ways to write payment terms and conditions and how to manage a conflict during a project and to choose the right way to write it according to the different comparative documents. Project Management help to deal with conflict and to avoid them it is also about paying attention to the possible risks and resolving conflicts in order that the payment terms and conditions are respected.

Studying here what is the best alternative for a conflict resolution in the payment terms and conditions, will afford us the needed tools, in order to best write payment terms and conditions, whatever type of market the contracts belongs to.

Step 1 Problem statement:

This Fishbone Diagram [6]below illustrates the problem and its main causes:

 

More…

To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper: Laraki, Y. (2019). Comparison of the Payment Terms and Conditions of FIDIC, AIA, EJCDC, CSI and Consensus Docs Contracts with an actual contract, PM World Journal, Vol. VIII, Issue II (February).  Available online at https://pmworldjournal.net/wp-content/uploads/2019/02/pmwj79-Feb2019-Laraki-comparison-of-contract-terms-and-conditions.pdf

 



About the Author


Yasmine Laraki

Paris, France

 

 

Yasmine Laraki is an enthusiastic student in SKEMA Business School. Born in Morocco in 1994, she studied Economics in Montreal, Canada where she gratuated in 2016. She gained significant strategic consulting experience in a large consulting firm in Morocco in 2017. This experience consists in large consulting project as a development regional plan. Yasmine also worked as a community manager in the biggest mall of morocco and for a Canadian brand in New York City. She entered SKEMA Business School in 2018 for a one year Msc in Project and Programme Management and Business Development. During this master she is studying mainly project management and attending the following courses: portfolio management, leadership skills, sustainability, global project management and international contract management.

She can be contacted at [email protected] or [email protected]

 

[1] American Institute of Architects. (2009). The American Institute of Architects official guide to the 2007 AIA contract documents. Hoboken, NJ: John Wiley & Sons. General Conditions of the Contract for construction

[2] Engineers’ Joint Contract Documents Committee, Professional Engineers in Private Practice, American Consulting Engineers Council, American Society of Civil Engineers, & Construction Specifications Institute. (1996).

[3] International Federation of Consulting Engineers (1999). The Global Voice of Consulting Engineers.

[4] Construction Specifications Institute. (2005). The project resource manual: CSI manual of practice. New York: McGraw-Hill.

[5] Consensus Docs Standard Agreement and General Conditions Between owner and constructor Retrieved from https://www.consensusdocs.org/Downloads/Preview/629d61cb-ff79-494c-9b10-d7f231761e01?Initials=yl

[6] By author