The science behind construction is bliss. Imagine piecing together several kinds of materials to make complex structures that potentially make man's daily activities simpler, and life bearable. As chic as this process might look on paper, it requires a lot more in resources, commitment, and mental power to birth into reality.
Construction processes are tough and complicated. Doing one without a written construction contract makes it even more confusing and stressful. Construction is mostly contractual and rightly so, since it involves a lot of parties, each protecting their interests. To avoid hassles with contractors, and promote a good relationship between contractor and client, a contractor contract should be drawn.
In this article, we will be taking a look at what a construction contract is, what should be included in it, why it is essential, and the various types of construction contracts.
Part 1: What is a Construction Contract?
A construction contract is a legally binding document between an employer and a contractor. It defines the project scope, what is to be built, how it is to be built, how compensations are to be made, the duration of the project and its location.
It contains sections and clauses that highlight the obligations and duties of both parties. It also dictates whether there may be alterations or renovations of the structure later in the structure's life cycle. Perhaps, most importantly, it protects both the employer and the contractor.
Truth be told, not everyone can create a construction contract. This is because it is easy to leave out critical details. That is why we recommend trying out any of CocoSign's free construction contract samples. The ideal construction contract should contain fine details like the contract's owner, worksite, work description, price, starting and completion dates, and materials and labor.
Part 2: What should be included in a construction contract?
The details contained in a construction project are critical to the successful completion of such projects. For this reason, it is essential that you draw a contract containing the main details of the project and the finer details. It should contain the fundamental provisions of both parties and list out their roles and responsibilities. Whether you are creating one from scratch or using a free construction contract template, it must contain all of the following sections and even more.
Full Name, Address, and Signature of Both the Employer and the Contract:
This is an often-overlooked part of the contract document. However, it is equally as important as other sections. It is only with the appropriate signatures and clear information that the document can be described as legally binding.
Scope of Work:
This clause should highlight in clear details services to be provided, describe the materials to be used, the quality and grade of such materials and the specifications to be considered in the construction of the structure.
Project Cost and Payment Terms:
This profiles the amount that is due on completion of the project, payment per milestone, and the terms and conditions under which payment is valid or not valid.
This clause in the construction contract document establishes the construction start date, completion date, and the days permissible for workers to take a break. Here, contractors are advised to include that they do not take responsibility for delays caused by permits, easements, and various forms of approvals.
Here, it is clearly stated who has the authority to make a legally binding decision throughout the construction process.
Part 3: Why is A Construction Contract Important?
It has been established that construction contracts are very important documents to draw. But what makes it so? How do they contribute to the project's completion, or are they just curated to make the agreements formal? Let us take a look at some of the reasons why using a construction contract is worthwhile.
Scope of work: Without a scope of work, there is no limit to what a client can ask a contractor to do. A contract document highlights what the client needs to be done and how long he/she expects the project to take.
Intervenes when problems ensue: When problems or issues arise, construction contracts are the only legally-binding documents that highlight the responsibilities and obligations of all the parties involved.
Part 4: Types of Construction Contracts
There are different types of construction contracts, all of which are made available on Cocosign's website. The distinguishing characteristics between the contract types are how the disbursements are made, and other specifications in terms of quality and duration of the project. Each of these major construction contract classes can be customized to meet the specific needs of the project.
Let us take a look at some of the major types of construction contracts
Fixed Price Contract Type:
Also known as a lump sum contract, it involves paying a fixed amount for all construction-related activities. They are the most preferred way to go when the scope is clear, and a defined schedule has been decided upon.
Here, payment is to be made for the actual purchases and other expenses generated from the construction project. Such an agreement must contain a pre-negotiated amount covering the contractor's profits and overhead costs. It is used where the scope is not particularly clear, and the client needs to establish limits on the price the contractor will bill the client.
Unit Pricing Contracts:
This kind of contract is usually employed by clients who want to be sure they are given un-inflated prices for procuring goods and services.
Time and Material Contracts Under Unclear Scope:
It is the popular choice when the project's scope is not defined. Both client and contractor would usually agree on an hourly or daily rate, including extra expenses that might accrue throughout the construction process.
A construction contract simplifies to a great extent, the entire construction process. However, making one isn't that easy. Cocosign is your one-stop access to well-detailed sample contracts. On the platform, you get access to a free sample construction contract and contractor contract template you can adopt.
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