SIMPLIFIED INDUSTRY MODEL OF PARTIES AND BASIC

BUSINESS LAWS OF RELATIONS

PARTIES TO A CONTRACT

Generally, the nature and size of a construction project will to a large

extent determine the parties to the contract for the project and the
responsibilities. The main parties involved in a construction contract are:

Employer/Client

The employer/client is the party procuring the work. He conceives the

idea and employs the contractors and consultants to undertake the works
for the project. He is responsible for procuring funding and obtaining
relevant permits for the project. The employer is obliged to ensure that
the Contractor is qualified.

Contractor

The Contractor in a construction project undertakes and completes the

works in accordance with statutory requirements, the contract drawings
and contract bills and may engage with sub-contractors for separate parts
of the works. The contractor is independent and not under the control of
the employer.

The Architect

The Architect is the party responsible for the preparation of the designs
or drawings for the construction project and supervising the
implementation on the employer’s behalf.

The Quantity Surveyor

The Quantity Surveyor is responsible for costing (Bill of Quantities) and

adjustments to the pricing in the course of the construction work.
Civil/Structural Engineers

They are engaged in the designing of the projects working closely with
the Architect to ensure structural integrity of the construction project.

Other Subcontractors

Other subcontractors and Suppliers of specific services under the

supervision and control of the Contractor.

BASICS OF CONSTRUCTION CONTRACTS

01 Contract Documents

A so-called "construction contract" is often a combination of individual

documents detailing different aspect of the project, or it can be a
complex, multi-page document with many sections that offer details on
different aspects of the agreement.

02 Contract Types

Different types of construction contracts are used within the building

industry, but professionals generally prefer certain ones. Construction
contract types are usually defined by the manner in which the
disbursement is going to be made, but they may also specify other terms,
such as duration, quality, specifications, and other issues of similar
importance.

03 Successful Contract Negotiations

When the time comes for a builder to sit down with union
representatives or project stakeholders, he or she needs to be prepared. A
good negotiator should have the characteristics and skills that allow for
the right deal to be struck—one that achieves set goals while leaving
both parties satisfied. Face-to-face negotiations, although rare, can
sometimes make things even worse. Certain tricks and methods can
ensure that everyone leaves the table feeling that they have a good deal.
04 Direct Hire or Subcontract

Builders have two options for completing work on a project: directly

hiring their own employees or subcontracting the work to independent
contractors. It is not an easy decision.

Subcontracting can offer warranties that can make your work easier
while hiring someone directly requires additional efforts as far as
oversight and management. But direct hiring often gives the builder
more control over costs and quality. How does a contractor decide
between the two? Based on the scope of the project and existing
relationships with subcontractors, the project manager will make the
decision based on what is most cost-effective and timely.

05 Construction Contract Agreements

A construction contract agreement is a principal document that sets a

date and specifies which parties are going to participate in the
construction process. Usually, the contract agreement is executed
between the owner of the project and the contractor (or supplier) that is
providing the requested service. The contract generally contains several
sections or clauses (or sometimes appended documents) that define the
scope, terms, and conditions of the agreement. The legal writing can be
heavy, and both parties often involve a lawyer when dealing with these
specific documents.

06 Differing Site Conditions

Differing site conditions can increase construction costs and can delay
breaking ground on the project. A contractor developing contracts needs
to know how to handle this possibility and include language that protects
against unforeseen circumstances. Normally, differing site conditions
surface during the first weeks of the project, potentially affecting the
schedule and causing unforeseen delays. Considering the
repercussions of delays, it's crucial to document how such impediments
affect the general contract.
07 Construction Contracting Escalation Clause

Escalation clauses are often written into construction contracts. They are
more typically included on large construction projects, where the job
might require more than one year to complete and where it carries
substantial financial backing and risk. For example, the potential for
economic changes such as a gas shortage or oil glut may require contract
escalation clauses, even on small and medium-size projects. If executed
properly, escalation clauses protect the contractor
from unpredicted charges.

ELEMENTS OF A CONTRACT

The contract itself must include the following:

1. Offer
2. Acceptance
3. Consideration
4. Parties who have legal capacity
5. Lawful subject matter
6. Mutual agreement among both parties
7. Mutual understanding of the obligation

When it comes to the key three elements that make up the beginning
stages of the contract, you’ll need to ensure that there is an offer,
acceptance, and consideration. First, an offer must be made by one
party to another party. Next, the party receiving the offer must accept
it. Then, there must be consideration exchanged between the parties.
This could be a monetary amount or a simple promise to act under the
contract.

When it comes to the legal capacity of a party, keep in mind that

those under the age of 18 or those who are mentally incompetent
don’t have the legal capacity required to enter into a contract.
While all contracts are unique, there are certain terms that are
commonly used in all contracts, particularly business contracts. These
are generally referred to as the terms and conditions of a contract.