Let’s face it: construction projects rarely involve small amounts of money. We’ve all heard the nightmare stories where things go wrong, and matters quickly escalate. If the terms and conditions of the contract aren’t set in place at the beginning, it can be hard to be protected or to enforce broken verbal agreements.
The contract documents are also known as agreement contract templates or standard contract forms. This article explains the basics and benefits of contract documents for construction projects.
Precise Information
There are so many factors involved in setting up a business contract, it can be really hard to think of everything. It’s possible to save yourself some time by looking at helpful websites which set out these provisions. The key elements include having a project description, and a time schedule from start to finish. There are also financial considerations, including payment details, expenses, and invoice information. The contract document provides a link between all these things.
It is strongly advisable to seek legal approval when formulating the first contract document. Any omissions or vague terminology could have financial implications long term. Some companies perform the same task for all their clients, so there is no need to ‘reinvent the wheel’ and draft a brand new contract every time.
When contracts are about to be signed, time is of the essence. Future contract documents may need little amendment, although this is always possible if required.
Contract documents always include the drawings provided by the architects, consultants, and experts. There’s also a bill of quantities.
Construction Insurance
Insurance information also has to feature. Construction insurance secures the fact that the company has the material and financial means to complete the job. Risk insurance confirms that all the equipment and the staff are covered.
A health and safety plan is also essential. This is not just for the benefit of the construction company employees. It’s for anyone, including the customer, who attends the site for inspection purposes. The process of building work can generate toxic substances that are released into the air. These have to be controlled and monitored in the interests of personal safety.
Some miscellaneous provisions relate to the measure of autonomy the contractor will have over working hours and methods. There’s also the issue of confidentiality and the disclosure of information. A paragraph will also exist saying that when the contract ceases or has been completed, all the customer’s property will be returned.
Why Contract Documents are Important
An agreement or understanding doesn’t carry the same weight as a legal contract. If something has been drawn up, but with no place for the parties to sign, it carries little weight in law.
There must be no shocks or surprises once the work has commenced. Imagine how a customer would feel if they thought they were paying one fixed sum for the work, but then discovered they were actually paying an hourly or daily rate. If the work ran over time, the total bill could be more than the customer had budgeted for.
Sometimes customers pull out of contracts. If the legal document includes an ‘opt-out’ clause, there could be compensation provisions for the construction company, to help with their financial losses.
The currency of payment and the payment schedule form part of the contract document. There could also be additional terms regarding the event of late payment. You may have read the words ‘rights to the intellectual property’ online. When they feature in a contract document, they are saying the construction work does not belong to the customer until the fees are paid in full.
Different Documents Serve Different Scenarios
More and more work is being done online these days. Because of this, many companies opt for contracts that are stored in the cloud. Businesses often want their new contract to be downloadable, and to be sent as an e-contract to potential customers. The benefit here is that the contract can be created anywhere, at any time. It will be received by the client quicker, too.
There are fixed-price or hourly rate contracts, blank versions, contracts for the self-employed, and so on. Construction businesses benefit from having standardized contracts that have greater uniformity. Any auditing process would be simpler, with no scrabbling around to find different provisions in the deeds.
Construction companies want both parties to be clear beforehand about the work that is to be done. They are recommended to seek legal approval over their contracts when they are new, or largely different. When the documentation process is quick and easy, the company is freed up to do what it does best: the construction work.
If everything goes to plan on the project, further business may be generated by happy customers. If things go wrong, the contract document will define and contain the contingencies.
