Basic Contract Documents Every Contract Must Include
Contract management is an extensive process from the initiation of the project to its completion and hand over to the client. The purpose of contract management is to make sure that the objectives of the contract are met on time and value for money is earned. The civil works contracts are probably the most complex contracts throughout the world. Thus they require the most challenging practices of contract management. In this article, we will discuss the basic contract documents that every construction contract must include.
Construction Contract Types & Construction Contract Documents
A construction contract is a legal agreement between the client and the contractor in the construction industry. Each construction project should have a contract and each contract should include basic contract documents. There are a lot of construction contract types used in the construction industry.
Below are some of the most common types of construction contracts;
- Lump Sum/Fixed Price Contracts
- Cost Plus Contracts
- Unit Price Contracts
- Time and Material Contracts
Selecting the construction contract type depends on the scope of work and the owner’s risk tolerance.
Basically, contract management includes preparation, analysis, and execution of contracts by the parties to those contracts to guarantee functional and economical performance is increased, and risks are decreased. Therefore, preparation of an effective contract is the first step of successful contract management.
Standard Forms of Construction Contracts
Using standardized forms of construction contracts enables to use the same conditions for different projects. Standardized forms also create a framework for the content of the contract. Thus they prevent you to forget adding basic contract documents and essential information.
Contract managers in the construction industry generally use one of the following standard forms in below;
- FIDIC– Fédération Internationale Des Ingénieurs-Conseils
- General Conditions of Contract for Construction Works (GCC).
- JBCC Series 2000
- New Engineering Contract (NEC3)
What are the Basic Contract Documents ?
Typically, contract documents are listed and numbered in the contract. They are the reference documents that describe the conditions of work to be performed. From this aspect, they are a legal part of the contract which describes the work such as performing services, furnishing labor, and supplying materials and equipment for the construction.
Contract documents include both written and graphic elements. Below are some of the basic contract documents that should be included in every solid contract.
- 1. Contract Agreement
Contract agreement defines the agreement between the client and the contractor in which the parties are specified and their responsibilities are defined in the construction process. It is the essential document to which other contract documents attach or reference.
- 2. Scope of Work Definition
Scope of work should describe the project, the project deliverables and the statement of work. It must specify all tasks, duties, and limitations to get anticipated results in accordance with the project objective.
- 3. General Conditions
General conditions define all general terms and items such as utilities, vehicles, organizational structure, mobilization, and demobilization. But these items are not directly related to the construction activities. Obligations of both parties, general conditions, overhead costs, bonus, and some other conditions are included in this portion.
- 4. Special Conditions
Special conditions describe specific requirements and instructions for the work. Mostly they are addendums to the general conditions.
- 5. Bill of Quantities
Bill of Quantities is a document used for tendering itemizes all work to enable the contractor to price the work for which he or she is bidding. It includes quantity and price for each work and after bidding phase, it will be an attachment of the contract document.
- 6. Work Schedule
Work schedule is very important for both parties. Because a project cannot be performed without a proper plan. A project schedule shows site delivery date, start and finish milestones, project duration, and other useful information. Tasks are listed and grouped under specific Work Breakdown Structure levels such as civil, electrical and mechanical works within a project schedule.
- 7. Drawings
All contracts should involve drawings that form part of the work to be done. Drawings illustrate quantities, locations, dimensions, sizes, shapes, and forms of the elements. These drawings can be architectural, statical, electrical, mechanical, landscape. They must include adequate information for the entire project that’s being contracted.
Construction drawings include elevations, sections, and profiles for the building to be constructed.
- 8. Technical Specifications
Technical Specifications describe the materials, workmanship, and equipment required for a task. Typically technical specifications describe the end product, therefore, the client should describe them clearly before the tendering stage. Every little task should be specified and deviation limits should be determined in technical specifications.
- 9. List of Common Types of Construction Insurance
Construction insurance provide coverage for material, risks, natural disasters, employees.
Performance bonds, specific types of coverages and all risk insurance should be determined clearly in the contract in order to protect both parties and avoid disputes.
Contract is one of the most important documents for any construction project. All the rights and responsibilities of the parties are detailed in the contract. Therefore a construction contract must include supplementary documents. These basic contract documents have different forms such as written specifications, drawings, and charts. For a successful contract and project management, basic contract documents should be created effectively. Additional documents can be added to the main contract document depending on trade specification. The purpose of these documents is to develop a system to solve claims and potential problems in the case of any legal action.