Comparison of Provision for Escalation in Various Indian Construction Contract Forms

Abstract

Contracts provide technical assistance for implementation of works. Disputes occur between the parties involved in the contract due to number of factors. Interpretation of escalation clause is one of the reasons for disputes which necessitate proper drafting of contract terms and conditions and its extensive study. There are various construction contract formats prevalent in India which differs from one another in their provisions. Uncertainty in the cost of works executed arises due to fluctuations in the costs of labor and materials which prevail due to changing economy. Therefore budgeting for cost escalation in the planning phase of projects is very important. This paper studies contracts, claims and disputes with special reference to escalation and compares the provisions for escalation in various construction contract forms. Legal cases of escalation related disputes and their respective awards given by the arbitrators have been studied. An attempt has been made to suggest policies in existing structure of clauses to improve the price escalation system and minimize occurrence of escalation disputes at the contract drafting phase in a construction contract.

Keywords: Construction contracts, contract conditions, escalation, price indices