How to write a construction contract?

A construction contract can be described as a legal document between the general contractor and a client detailing the scope of the construction project. The purpose of this contract is to offer protection to both the general contractor and the client, outlining their obligations and rights. This article will simplify the process of writing a construction contract.

What is typically included in a construction contract?

There are various clauses in terms that can be added to a construction contract in Australia. However, the actual content depends upon your project. Some elements are common across all construction projects. These main elements include:

• Contact information: The construction contract should include the full name, appropriate signature and proper information of both the general contractor and the client, as it forms the basic information, neglecting which could lead to legal consequences. The lack of this essential information would not make the contract legally binding.
• Project scope: The scope of the project should be described in detail, including the exact deliverables, description of materials, quality of materials, grade and schedule of work. A detailed scope allows both parties to understand what is included and excluded in the project and helps estimate an expected project timeline.
• Change orders: No contract is permanent, and adjustments can be made to the scope of the initial contents of the contract. These changes should be mutually agreed upon. A separate section for these “change orders” should be made in the contract.
• Cost and payment schedule: It is critical for the client and the general contractor to be on the same page regarding finances. Not only should the cost estimate be approved by both parties, but the actual amount should also be signed in the contract. It is often recommended that general contractors should specify the non-refundable deposit.
• Warranty: The client is highly reassured when a warranty period is added to the construction contract, helping to guarantee quality in the event of an unforeseen issue. The warranty also helps allocate responsibility to those who will help in business continuity in natural disasters or adverse events.

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How to write a construction contract?

It is always recommended to consult with the legal counsel or construction lawyer to draft your construction contract effectively. However, the initial draft can be written by the client or the contractor, which can later be modified per the construction lawyer’slawyer’s recommendations. The following steps are involved in writing an effective construction contract in Australia:

1. Describing the purpose of the contract in the preamble and the title: This section should also contain the names of the parties involved and stipulate the project location, scope, and start and end date.
2. Project scope: In addition to the elements described above, the draft should include the project scope, financial information, project timeline and insurance coverage information. This is a limited example of what should be included in this section and can be modified according to individual circumstances.
3. Research: As the contract will reference various standards, it is necessary to research the standard clauses you are utilising. Using these clauses, you can include severability, assigns, successors and foreseeable contingencies.
4. Researching industry standards: There would be some prevalent standards in your industry, and it will always be beneficial to research industry standards and local laws to add suitable clauses to your contract. Not only will this ensure that you are adhering to the best practices of your industry, but it will also help you consider regional, federal or state requirements to make your contract effective and enforceable. Additionally, adhering to these industry standards will ensure that you have accounted for all the potential risks in the project.
5. Acquire expert advice: Although you can technically draft your construction contract, and it might be decent, getting a second opinion from a construction lawyer is always advisable. Such individuals are well-versed in the federal, state and local laws that can increase the potency of your contract and can protect your rights in the future.

Essential clauses to include in the construction contract

Clauses always vary based on the different laws of the region. However, specific important clauses should be included in your contract, such as:

• Insurance and indemnification clause: This clause aims to protect the client or the property owner from damages caused during the construction project’s duration.
• Liability clause: It allows for the risk to be shared by both parties in the project.
• Arbitration clause: This clause will help you decide how parties can reach a settlement or a judgement in case of a dispute.
• Force majeure clause: In cases of the project becoming commercially impossible, illegal or impractical, this clause helps to relieve all parties involved from any contractual obligations.

If you want to know more about the construction contract, we suggest you also read the “what is A construction contract?” article from Edara App blog.

Conclusion

To write a construction contract, begin by describing the purpose of the contract, its project scope, and research clauses, including industry standards and finally acquire expert advice.