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CVE 4603 Construction Contract Management - Lecture #1

This document provides an introduction to construction contracts, including what constitutes a contract, how it differs from an agreement, the key elements of a contract, and typical contents of a construction contract document. It notes that construction contracts are normally between clients and representatives, general contractors and subcontractors. Finally, it outlines four common types of construction contracts: lump sum, cost plus, time and material, and unit pricing.

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119 views2 pages

CVE 4603 Construction Contract Management - Lecture #1

This document provides an introduction to construction contracts, including what constitutes a contract, how it differs from an agreement, the key elements of a contract, and typical contents of a construction contract document. It notes that construction contracts are normally between clients and representatives, general contractors and subcontractors. Finally, it outlines four common types of construction contracts: lump sum, cost plus, time and material, and unit pricing.

Uploaded by

habtemichael habtemariam
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CVE 4603 Construction Contract Management

Spring 2022
10 January 2022

Lecture #1: Construction Contracts – An Introduction

1. What is a Contract?
A Contract is a LEGALLY binding (normally written) agreement between two or more
entities. Normally one entity performs services to another entity for a compensation.

2. How does a Contract differ from an Agreement?


A Contract is legally binding.
An Agreement is a mutual “agreement” that is not binding in the court of law.

3. Elements of a Contract
 Legality
 Offer
 Acceptance
 Intention
 Capacity: means that each contracting parties understands his/her obligations.

4. Contents of a TYPICAL Contract Document


 The Type of Contract
 Description of the services to be conducted (the Scope of the Contract)
 The Contract parties (entities involved in the Contract)
 The Monetary value of the Contract ($$$)
 The Duration of the Contract
 Appendices
- The Governing Authority of the Contract (like the Municipality, the judicial
department, etc.)
- Any special forms related to the Contract.

5. Construction Contracts
Construction Contracts are normally between; a Client and His representative (like an
Engineering firm or company), a general Contractor (GC) and a Subcontractor, etc.

6. Types of Construction Contracts


1) Lump Sum Contract: here the Client pays the Contractor (for example) fixe amount
of money that is agreed on and the contractor is obligated to complete the
construction for that single amount of money.

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2) Cost Plus Contract: here the Client will pay for the required materials and/or
equipment needed for the construction PLUS any shortage in such materials or
equipment as needed for a justified reason. This is considered to be the least
popular type of Construction Contracts.
3) Time and Material Contract: is normally used when the scope of the construction is
not well defined because (for example) the client keeps changing his mind during
construction as to what he wants in his building.
4) Unit Pricing Contract: here the Client will only pay for EXACTLY what is required for
the project, unit by unit. If an item is not required or is ordered by the Contractor as
an extra item, then the Client will not pay for it. This is usually popular in public
construction projects.

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