A construction project is a resource-intensive undertaking for pretty much everyone involved. As such, it’s understandable that these projects also come with enormous amounts of risks, such as financial, safety and project delay risks.
To help address the effects of such risks and ensure that your construction project runs as smoothly as possible, you need to draft a construction contract. Besides mitigating potential risks that may arise from your construction project, a well-drafted construction contract also define the relationships between the parties involved. But what provisions should you include in a construction contract?
Here are critical provisions that you should never leave out when drafting a contract for your construction project.
The scope of the work
It is extremely important that everyone is on the same page with regard to the scope of work. Failing to define the scope of work in the contract, or giving ambiguous definitions, can lead to misunderstandings. Consequently, this can lead to unnecessary conflicts between the parties down the road.
Project cost
A lack of clarity about the cost of the project can cause disputes down the road. To avoid this, it helps to be clear as far as the project cost is concerned. The project owner deserves to know what they are paying for. Likewise, the contractor deserves to know what they are working for.
Terms of payment
A clear stipulation of the payment terms and process will not only help prevent delays in payments but also ensure that there is adequate cash flow during the project’s life cycle. The payments clause should clearly define the dates as to when the payments shall be made. This is especially important if the payments will be made in installments.
A construction project is a complex undertaking. Working out a clear construction contract can help prevent disputes while ensuring that the project runs as successfully as possible.