Before you finalise your contract deal with a builder, it is important to get a written contract. A written contract agreement is the document that contains the duties of the parties with dates in the construction process. A written construction contract agreement is a legal document between the project owner and the contractor (who is the builder), and it contains different sections or clauses that give detailed information about the project including the scope, terms and conditions of such contract agreement.
A contract agreement usually has different sections as explained below:
1. Project Description
This section contains the extract or summary of what the project is about – what must be done.
2. Contract Price
It includes the contract price, and the total amount of money agreed on, possible additions or deductions to the contract.
3. Payment Basis
The payment schedule agreed on, it may be monthly or any payment method specified.
4. Construction Calendar
The number of days and how the project will be executed. The breakdown of the project to be carried out each day and will be presented by a bar chart, Gantt Chart or CPM.
5. Construction Scope
The detailed description of all activities involved in the project.
6. Contract Document List
A list of relevant documents to the contract agreement such as drawings, specs, exhibits and other documents.
7. Construction Conditions and Responsibility
This section outlines the responsibilities of each party to the contract agreement, who is responsible for providing information and documents. It includes terms for penalties, liens, withholding and a lot more.
8. Contract Laws
The liens requirements, governing laws, insurance, claims procedures, procedures of arbitration, liquidated damages, final completion, and information guiding termination or suspension of the project.
The Importance of the Contract Agreement
1. A contract agreement defines the scope of work and binds the builder and the project owner the terms of the contract.
2. It provides against potential loss of deposit over overcharging.
3. It protects against poor quality or substandard work.
4. It prevents legal or financial liabilities not stated in the contract agreement
5. It ensures that you get value for money from the project.
6. It allows risk shifting as each party knows what they are responsible for in the course of the project.
7. The project duration is determined to help both parties make projections regarding other business.
It is very crucial to demand a contract agreement, as it serves as your power or right should anything contrary happen when the project is in progress.
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