In this post, we are going to discuss what is a construction contract. Upcoming posts will discuss different types of contracts used in the construction industry.
A construction contract document is a core document and is designed in such a way that client, contractor, and consultant will communicate in the same language during the duration of the project. The contract is an agreement between two or more parties that gives rise to rights and obligations which will be enforced according to the system of law applying to the contract. The contract document is generally specific for each project and is dependent on the nature of the project. All of the construction contracts which are prepared are guided by the general principle of law. It is very necessary that the basic concepts of the law are discussed in order to ensure that at the time of preparation of the contract faults can be prevented.
A contract is made between parties when there is an offer from one party and the other party accepts it. The offer is the willingness of the party to accept all the terms and conditions and is prepared to accept it legally. As the project is following the traditional procurement route, the design of the project will be floated in the market for the purpose of tendering. During the tendering stage of the project, many contractors will make an offer for the project which will consist of the price and the validity of the offer. As soon as the offer has reached the offeree it will become effective. As the client of the project, the offers will be reviewed in detail for exceptions or qualifications and if any of the offers are corresponding with the financial and technical needs of the client an acceptance letter will be sent to the tenderer, or a counteroffer can be proposed.
Once an acceptance has been sent it will become a legal relationship between the offeror and acceptor. It is mandatory that the signatory for the acceptance of the offer has the capacity or authority to act on behalf of the company and a letter of intent should be formally sent to the contractor. Any offer made by the contractor can be withdrawn before the acceptance of the client. During the project phase, it will become a legal obligation of the client and contractor to follow the contract, and as far as the contract will be followed no problems should be faced. The problem usually arises when one party or another fails to perform as per the contract this situation is known as breach of contract. In case of a breach of contract, there should be a legal justification that the breach happened unintentionally. If the breach was intentional and cannot be justified legally then proper steps will be taken to ensure the implementation of conditions of the contract. Any breach of the contract by any party will raise a claim for damages. Damages are considered as losses faced by the party.
In conclusion, the contract is an agreement between two or more parties that gives rights and obligations that will be enforced according to the system of law applying to the contract
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