Wednesday 21 July 2021

Most Common Mistakes In Creating A Construction Contract

Most Common Mistakes In Creating A Construction Contract

The construction contract is the most important starting part of a construction project, which is often not given sufficient attention. This can lead to various mistakes and omissions, often turning into lengthy legal battles, the winner of which is not always the bona fide side.

In this article, we will try to consider individual provisions of the construction contract in order to help the parties avoid typical mistakes when concluding contracts and minimise the risks associated with them.

What you should know when signing a construction contract

If you take a standard construction contract, then it must provide for all the important conditions that the law considers essential. The coordination of these basic issues allows us to assert that the parties have come to an agreement on cooperation. Problems may arise when the agreement uses extremely vague wording, which leads to discrepancies, or the parties leave “for later” clarification of some conditions, but never return to them later (until the disagreement arises).

Execution of a construction contract

We would like to point out two critical mistakes that contractors make in the execution of a contract:

  1. Incorrectly handing over the work performed (acts are handed over to the hands, and not sent officially, so then it is impossible to blame the customer’s refusal to accept);
  2. In the event of any problems, the contractor does not notify the customer in a timely manner, as a result of which he loses the right to refer to any objectively existing circumstances that impede the proper performance of the work.

That is, the problems lie not in the contract itself, but in the actions of the parties during its execution. Whatever is written in the agreement, the contractor must have evidence not only of the performance of the work but also of the transfer of the results to the customer. Whether it is required to carry out additional work or suspend the execution of the contract, remove obstacles or prevent damage to the result of the work – in all cases, it is necessary to immediately notify the customer. Otherwise, the contractor risks getting colossal losses and still owes the customer an impressive penalty.

What conditions should be clearly and unambiguously spelled out in the construction contract?

WHAT – what work needs to be done (content, scope, type of work);

WHEN – deadlines for each stage of work;

HOW MUCH – the cost of all work (and materials).

As a general rule, if the parties could not agree on these issues, then the execution of such a transaction is considered impossible, the contract is recognised as not concluded. Unscrupulous customers often try to take advantage of this feature in order not to pay under the contract. When considering disputes within the framework of a construction contract, the courts apply the principle: inconsistency of the will of the parties when concluding a transaction is healed by real execution. If translated from legal language into “human”, it means the following: the transaction is recognised as completed when the contractor has completed the work and duly handed them over to the customer, and he accepted them.

In this case, the customer is obliged to pay for the accepted work, even if there are defects in the form and content of the contract (when the subject is not defined in the agreement, technical documentation is not attached indicating the scope and content of the work, requirements for them, etc.). The basis for transferring the amount in payment for the contract will be the acceptance certificate signed by the parties.

But what about a situation when the contractor went beyond the agreed terms of cooperation, for example, performed additional work? This is where the behaviour (actions) of each side will be of paramount importance. If the contractor informed the customer about the need to carry out work in excess of the estimate, and he agreed or accepted them in fact, then the contractor has every right to claim payment for these additions. Otherwise, we can talk about the shortsightedness and arrogance of the performer. 

What to do?

Before signing and drawing up a construction contract, be sure to contact experienced construction lawyers. They will help you avoid all the above mistakes and future problems.

And if you’ve already felt all the mistakes we’ve listed on your skin, it is no time to panic. No matter how hopeless your situation may seem to you, do not rush to despair until you consult with an experienced practising lawyer. Even with the most “poorest” agreement, it is quite possible to replay the situation and emerge victoriously. You just need to correctly assess the situation, calculate all possible options and choose the most favourable one.

Conclusion

As you can see, a construction contract is not a routine thing, and you have to be careful when concluding it. The best solution is to always consult with experts so that you can sleep peacefully.

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