Term Paper on "What Is a Construction Contract?"

Term Paper 9 pages (2830 words) Sources: 5

[EXCERPT] . . . .

Construction Contract

Composing a contract is an important part of any project. The terms within that contract determine what exactly needs to be done, how much time is available for work to be done, who is liable for any damages, and all information about payment and payment schedules. This information needs to e clearly laid out as to avoid disputes and complications later on after the project is under way. Along with the General Provisions of a contract, which include speculation information, agreements, grantees and warrantees, resolution of disputes, references to standards and codes; there are also specific provisions which will differ to each construction project. These include, but are not limited to time schedules and how to handle delays, how to handle changes in the original orders, payment and payment schedules, specific information about insurance and bonds, project plan and exact final speculations, addenda, and if necessary a subcontractor clause. All these parts are necessary for the solidification of the whole contract. Both parties must also agree to follow the provisions of the contract in question, or else the fate of the entire project is at stake.

Contract formation plays a key role in the understanding and acceptance of any contract. There are key elements which must always be addressed within any contract to make it legally binding and functional. The contract must show that both parties involve are in full cooperation with each other. In any contract, there are basic general conditions which lay out the formation of the contract and the project in question. There must be a section which reviews current standards and codes by which both parties promise to adhere to completely. These standards and codes may vary from state to state and project to project, which is why it is important to know the rules and regulations of each state one begins work on a certain project in. There must also be a section which includes how to handle any disputes, whether they are legal or not. This section will include various methods by which disputes between the contractor and the owner can be handled in a timely manner, as to not delay the time line of the project any further than necessary. By agreeing to this section of the contract, both parties pledge to handle disputes in the manner which is specifically laid out in the contract.

Another basic element of any contract is a laid out plan on how to deal with any unforeseen events or conditions which might hinder the commencement of the project in any way. During a construction build, any numbers of unforeseen events are bound to occur. Many of these surprise events can be dealt with properly if there is a specific way laid out in the contract. Spelling out exactly how to handle these types of events and the existence of a change clause, which will be discussed more later in accordance with special provisions of a contract, will help eradicate any chances of a huge and nonnegotiable conflict arising from unforeseen events which delay construction. By acknowledging that these types of events occur, and preparing for them ahead of time, tie and effort is saved in the long run.

There must also be a specific agreement and contractor grantee, or warranty, laid out in the contract. This shows that both parties agree to the terms at hand and will not knowingly violate those terms without legal or monetary penalties, "This agreement is often analogous to a marriage, and everyone knows that for a marriage to be successful there must be an understanding and communication of the rules between both parties," (Weeks 2002). The legal ramifications of breaking this agreement are also spelled out in this section of the contract. Both parties promise to adhere to owner-contractor agreement and promise to undertake the work needed to complete a project in the manner determined by the contract as a whole. The exact terms of an agreement will vary from contract to contract, but the essentials are always there. The agreement includes drawings and plans of the project and acknowledges that both parties will abide by the General and Specific Provisions of that particular contract. Both parties' signature solidifies the contract and therefore puts a green light on beginning construction of the specific project. Also necessary for any contract, is a guarantee from the contractor stating that he or she will complete the project in a timely manner as to not delay further construction. A timeline is usually included in the Special Provisions of a specific contract, and failing to adhere to that timeline is a breach of the contractor's guarantee. This guarantee also promises the best possible performance both of the contractors' workers during the building of a project, and the durability of that project upon completion. Safety regulations concerning each specific site must also be laid out in any successful construction contract. Without proper safety provisions, the law suits are simply waiting to pile up. Payment is also an important provision of any contract, which is usually planned out in the special provisions portion of the contract, due to the various pay rates and schedules depending on the type and longevity of each individual contract.

At the end of each contract there should be a section dedicated to solving the many issues if the project is cancelled or terminated. This section shows how either party can successfully terminate the contract in a legal way. Termination usually only occurs if there is a serious and non-fixable situation which occurs either before construction begins, or after the project has already begun. In the case of an event which would terminate the contract, both parties are protected from legal action in this section of the agreement. This section also contains clauses which would suspend the contract until a further date when the event which caused its suspension can be resolved.

Groups like the American Institute of Architects (AIA) and the Associated General Contractors of America (AGCA) are currently publishing over one hundred contract and administrative documents which can be used to cover the general provisions of construction contracts. These documents can be taken from these organizations and placed directly into a contract, or used as examples for writing up individual contracts. These documents come in handy when forming a good and thorough construction contract, for they cover the basic conditions and there are options for more special provisions coverage. These documents ad a sense of security in knowing that the General Terms of the contract are viable and legally binding, and then one can focus on writing the more unique and individualized special provisions of one's construction contract.

Each contract has a purpose to solidify the terms and conditions of each project so that construction can begin. The purpose of a contract is to legally solidify the agreement between the contractor and the owner of each individual project. Each party is then obligated by law to uphold their end of the contract in the manner to which they promised it to be done. The contract is a document of cooperation, to which both the owner and the contractor feel satisfied in what they promised to do, and what is promised to them. In the article "Constructing Contracting -- Building Principles," Michael Weeks lays out the purpose of the binding document. He says that a contract is necessary for entering into "an agreement formalizing the scope of work, cost for services, and the time frame for completion," (Weeks, 2002). Without these terms laid out specifically, any project will be completely delayed by arguments concerning these basic principles.

The organization of these basic principles is also important. With all the necessary elements involved in the formation of a contract, it is important to break them up properly into sections which will then lay out the specific structure and goal of any particular contract. The General Provisions must always be present in any contract. The next important piece is the owner and contractor agreement. Also necessary for the organization are the various special provisions, which include but are not limited to things such as changes in the work, time schedules, payment and payment schedules, insurance and protection of both those involved and property, and a clause for the termination or suspension of the contract. Each contract must contain an agreement, any bid documents involved in the project, general and special provisions, as well as drawings and plan proposals. Without these necessary documents, the project is vulnerable to future disputes and delays.

The Specific Provisions of each individual contract will very from project to project. These are the conditions and terms which lay out specifics concerning time delays, order changes, specifics about insurance, project plans, and payments. The basic contract provisions will also vary depending on the individual project. These include information regarding the names of both parties, the date the contract will become valid, the scope of the work involved in the project, and signatures of both parties. As part of the minimum… READ MORE

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