Standard Form of Contract in Construction

If the agreement contains the most important and essential terms of the transaction between the owner and the contractor, the “General Conditions of the Construction Contract” will set out in detail the procedural rights of the parties and their interaction during the project. The Terms and Conditions are a separate document and must be read in accordance with the Agreement. Many of the most important contractual terms are not found in the agreement, but in the terms and conditions, including changes to the work, the one-year correction period (also known as the “guarantee”) and the progressive payment procedures. The terms and conditions also explain how the contractor and architect will interact with each other on important issues such as reviewing and certifying the contractor`s salary claims and rejecting the work. Since the contractor and architect usually do not have a direct contract with each other, the terms and conditions are the primary law that determines how they should work together. Unit price contracts are likely a different type of contract that is commonly used by builders and federal agencies. Unit prices can also be set during the auction process, as the owner asks for certain quantities and prices for a predetermined number of plain items. This type of contract includes a fixed total price for all construction-related activities. Lump sum contracts may contain incentives or benefits in the event of early termination or may also contain penalties, called lump sum damages, in the event of late termination. Flat-rate contracts are preferred when a clear scope and a defined timetable have been reviewed and agreed.

A standard-shaped construction contract is a whole greater than the sum of its parts. Each of the contractual documents plays its own role in determining the rights and obligations of the contractor and the owner. Some focus on the business relationship between the parties, while others define the scope of the work, but together they form a single, unified contract. Understanding how these parts fit together is crucial for development or litigation through a standard agreement. Construction contracts provided or drafted by contractor organizations such as the Associated General Contractors of America (AGC) tend to favor the contractor, while contracts signed by the American Institute of Architects (AIA) offer more favorable terms for homeowners. However, both will describe the correct details of the project, which will make the project easier for everyone involved. Reserved or adapted contracts are often considered discouraged because there is a risk that they will not adequately or fairly take into account all the circumstances and will not be supported by a history of jurisprudence. However, their continued use reflects how some parts of the industry perceive standard contract forms as inflexible. A lack of documentation is bad for both parties – the contractor may not be paid for the work done and the client may not get the work they paid for. In addition, without clear terms and conditions set out from the outset, there is a greater risk that small claims will become more important, or even lawsuits.

In standard form, business-to-consumer contracts play an important role in efficiency in the mass distribution of goods and services. These contracts have the potential to reduce transaction costs by eliminating the need to negotiate the many details of a contract for each case where a product is sold or a service is used. However, these contracts also have the potential to deceive or abuse consumers due to the unequal bargaining power between the parties. The benefits of standard form contracts include reduced costs, quick tenders, easy knowledge of contractual terms, greater confidence in contractual terms, less leeway for deviations, and established jurisdiction for future references. Read 4 min One of the main problems with standard contracts is pricing. If certain product prices are specified in a contract, there is a pricing risk. Model agreements are usually drafted and promoted by one of the major industry groups such as the American Institute of Architects (AIA), the Associated General Contractors of America (AGC) or the Engineers Joint Contract Document Committee, composed of the National Society of Professional Engineers, the American Society of Civil Engineers and the American Council of Engineering Companies (EJCDC). These industry groups design entire sets of contracts covering general contractors, planning services, construction management, subcontracting, subcontracting, joint adventure, etc. (Collect them all!) Model documents are given a number to identify them in their series (e.B. AIA A101-2017, ConsensusDocs 200, EJCDC C-625). The AIA, MCO and EJCDC also each have their own forms for payment requests, change orders, payment guarantees and other documents used for a construction project. However, for the sake of simplicity, this article focuses mainly on the AEOI model contracts between owners and contractors and, where appropriate, highlights the differences from other sets of documents.

While the agreement, terms and conditions and, if applicable, additional terms establish the business relationship between the owner and the contractor, the “drawings” and “specifications” describe exactly what the contractor is to build, that is, the scope of the contractor`s services. In many ways, other contractual documents are only the prerequisites for the successful completion of the scope of work defined by the drawings and specifications. Drawings – also informally referred to as “plans” – are the “graphic and pictorial parts of the contractual documents that show the design, location and dimensions” of the work. Specifications are “written requirements for materials, equipment, systems, standards and manufacturing”. Each component of the work – earthworks, concrete, electricity, plumbing, etc. – has its own section in the specifications. The drawings show you the work, while the specifications tell you how to do it. Often, drawings and specifications collide with each other (if they didn`t, we construction lawyers would have much less to do). .