Construction is a work space that requires everyone on the job to be as responsible as possible. Every construction contract is there to keep every party safe, secure, and legally covered. However, failing to understand these contracts can lead to numerous unwanted situations.
When it comes to construction contracts, the most common issues are misinterpretation or overlooking of important clauses. If this happens, disputes, delays, and financial loss are just some of the possible outcomes.
To avoid any of these inconsistencies, make sure to read through your contract and understand it properly. This is essential for contractors, subcontractors, and employers.
Payment Terms and Mechanisms
The first thing you need to pay special attention to when reading a contract is the payment section. These clauses are there to outline a timeline for payments. Not only that, but they should also cover the way applications for payment need to be made.
For instance, here, you’ll find information about the initial deposit, progress payments, and final payment, as well as scheduling for all of these payments. The point of such a clause is to protect all parties involved.
That is exactly why this clause should have provisions for withholding payment and a retention clause. This will keep you covered if inspections fail or if work doesn’t meet specifications the way it should.
Variations and Change Control
In every construction project, a change might occur. This usually happens for two reasons: unforeseen site conditions or special client requests. Thankfully, a well-written variation clause can be pretty helpful when something like this happens.
A variation clause should cover how important factors such as scope, time, and cost are managed. For instance, it should include the process for approving these variations and documentation requirements. Adjustments to payment or schedule should also be included here.
Both contractors and subcontractors need to ensure that all changes are properly authorized and documented. If a client verbally requests additional work, there could be an issue arising unless there is written confirmation too.
Timeframes and Delay Provisions
In construction, everything is about deadlines. With such strict deadlines, the possibility of delays can be pretty bad for all parties in the contract. That is why having everything related to deadlines and timeframes needs to be written out in a separate clause.
With the right contract administration services, this clause should cover all key project milestones and their completion dates. Having this clause as clear as possible will ensure for a smooth and easy cooperation until the project is finished.
Another thing that should be found in this clause is the potential extension of time and all the possible conditions for granting it. Furthermore, this clause should include penalties for delays, which are typically liquidated damages.
Defects Liability Period
It isn’t unusual for a defect to arise during a construction project. That is why there is a clause that refers to the defect liability period.
Here, the first thing to be discussed is the length of this period. After that, the clause should include the process for reporting and rectifying the defects in question. Thanks to this clause, both clients and builders should be aware of their obligations after completion.
Termination Clause
If either of the parties wishes to terminate the contract early, there should be a set of conditions to allow for this. All of this should be a part of a separate clause.
Everything about the breach of contract, insolvency, or prolonged delays should be featured in this part of the contract. Not just the reasoning, but the consequences of the termination should be discussed here as well.
Dispute Resolution
Finally, there should be a clause that covers possible dispute resolution. Nobody likes it, but disagreements do occur in some cases.
When they do, there are several ways to go. Negotiation, arbitration, and mediation are some of the most common methods for resolving disputes. They are mostly efficient and cost effective. Resolving the disputes as soon as possible is always the priority and having a lawyer by your side couldn’t hurt in these situations.
Conclusion
Working in construction comes with a lot of paperwork. However, having all terms and conditions written out clearly can be a literal life-saver. Make sure to understand each clause in your contract and be free to work with no headaches or worries whatsoever.
