Importance Of Construction Contract
If initiating a construction work for someone, you are required by law to sign a legal contract with other party. Construction contract like any other contract contains details of whole deal and comes to rescue you in case of any dispute. To protect your interest fully and avoid endless vicious cycle of alterations to the original design, a legal contract is a mandatory requirement. From contracting party's point of view the legal contract is equally important. As they can take the legal route, whenever they feel the actual work is not according to the terms decided. So in short, it can be said, that construction contract is important for all the stakeholders involved in a construction deal.
Drafting, understanding and comprehending a construction contract is not easy, especially if you are new comer to the field and not so expert with legal matters. Contract can be read as many times as you want, but once signed there is no way back, so make sure you understand the contract fully. Try reading the contract yourself to understand. If not possible take legal help to make sure there are no clauses that are not acceptable to you. Make sure that no such clause gets inserted in the contract that can come back and haunt you later on.
Similarly, make sure that neither you over commit nor under commit, as you have to make your reputation as well, so taking wrong advantage of the contract is also not beneficial for you in the long run. Most important thing in any construction contract is the amount that is finalized to do the certain task. Amount must be as per the mutual consent and also make sure there are no hidden charges and no additional cost is written to be paid by you, later on.
For instance, if you are responsible for construction work and contract contains a clause that after construction electric cable installations should also be your responsibility, then you are in trouble, to say the least. Generally dividing the payment in certain milestones is a good idea, though exceptions may be there.
Project completion date is also very important area, open ended projects can also bring in trouble so having an end date is not the worst thing in the world. You have to commit to a completion date of course, however, make sure that the "ifs" are inserted that can move the date further, for instance late arrival of supplies, any exceptional scenario etc. Try to mention as much detail as possible regarding the work that needs to be done and most importantly what needs not to be done by you. The cabling example that we discussed earlier can also be applied here.
Finally the contract needs to mention clearly about the out of pocket expense to be paid by the contracting party and any hike in the prices of raw material may force the contract to be revised. There can be limit of hike that you can afford, but unexpected and extraordinary rise like gasoline prices in 2008, may force you to bring this clause into action.