CONSTRUCTION CONTRACTS

Engr. Kristine Joy A. Caalam, RMP

Instructor
CONSTRUCTION CONTRACTS
A construction contract is a legal document between a client
and a general contractor outlining the scope, cost, and terms
of a construction project. This type of contract details the
contractor's scope of work, including their right to
subcontract any of the work, how and what they will charge
for the work, and any applicable plans or work orders.

In simple terms, construction contracts are legally binding

agreements that explain the work that a general contractor
will perform and the payment that a project owner will
make.
WHO ARE INVOLVED?
Construction contracts involve two parties; owners and
contractors. Owners need a job outsourced and the
contractor executes the job. The two parties work together to
draw up a contract and agree on the terms of completion
and payment.
AGREEMENT AND CONTRACT
Agreement includes any agreement or understanding
between two or more parties about their rights and
responsibilities with respect to one another.

Contract is a specific type of agreement that meets certain

requirements designed to create legally binding obligations
between parties that are enforceable by a court of law.
TYPES OF CONSTRUCTION CONTRACT
LUMP SUM CONTRACT
It is the traditional means of procuring construction, and still
the most common form of construction contract. Under a
lump sum contract, a single 'lump sum' price for all of the
works is agreed before the works begin.
ITEM RATE CONTRACT /SCHEDULE CONTRACT
It is a type of contract which is undertaken on per piece or
item basis. Simply, it is a type of contract where the
contractor works and gets paid on 'per item basis'. The quote
rate is based on the quantity manufactured or work done by
them.
TYPES OF CONSTRUCTION CONTRACT
LUMP SUM & SCHEDULE/FIXED FEE CONTRACT
It is often used in engineering contracts. A Fixed Fee or
Lump Sum Contract is suitable if the scope and schedule of
the project are sufficiently defined to allow the consulting
engineer to estimate project costs.
COST PLUS FIXED FREE CONTRACT
It is a cost-reimbursement contract that provides for
payment to the contractor of a negotiated fee that is fixed at
the inception of the contract . The fixed fee does not vary
with actual cost, but may be adjusted as a result of changes
in the work to be performed under the contract.
TYPES OF CONSTRUCTION CONTRACT
COST PLUS PERCENTAGE OF COST CONTRACT
In construction, a method of payment to a contractor in
which an additional amount of money, expressed as a
percentage, is paid by the client that is designated to cover
the contractor's overhead costs.
STAGES OF CONTRACT
PREPARATION
The period of negotiation and bargaining, ending at the
moment of agreement of the parties.
PERFECTION OR BIRTH OF THE CONTRACT
It is when the parties come to agree on the terms of the
contract.
CONSUMMATION OR DEATH
It is the fulfillment or performance of the terms agreed upon
in any contract.
CONTRACT REQUIREMENTS
Mutual Agreement
It is the point in time when a buyer and seller reach agreement,
in writing, on all terms of a contract. When a buyer makes an offer
to purchase a home, the seller may sign the offer and return it to
the buyer. If the signed offer is unaltered, the contract is
“mutually accepted.”
Offer Acceptance
Offer and acceptance are elements required for the formation of
a legally binding contract: the expression of an offer to contract
on certain terms by one person (the "offeror") to another person
(the "offeree"), and an indication by the offeree of its acceptance
of those terms.
CONTRACT REQUIREMENTS
Contract Price
This area describe the type of contract price awarded and
the total amount of money being contracted.
Payment Basis
The payment method of accounting records revenue when
payment from customers is received, and records expenses
when payment is made.
CONTRACT REQUIREMENTS
Construction Schedule
The total days of how the project schedule will be divided. It
should describe either calendar days or business days.
Contract Document List
A list of all contract documents that form part of the contract
agreement.
CONTRACT REQUIREMENTS
Contract Document List
DOCUMENTS ATTACHED TO THE AGREEMENT IDENTIFIED THEREIN AS
CONTRACT DOCUMENTS, INCLUDING ALL ADDITIONS, DELETIONS AND
MODIFICATIONS INCORPORATED THEREIN. THESE GENERALLY INCLUDE
THE FOLLOWING DOCUMENTS WHICH SHALL FORM PART OF THIS
CONTRACT AND CONSTITUTE INTEGRAL PARTS HEREOF:
(A) SPECIAL PROVISIONS OR CONDITIONS;
(B) GENERAL CONDITIONS;
(C) SPECIFICATIONS;
(D) DRAWINGS;
(E) CONTRACTOR’S PERFORMANCE AND PAYMENT BONDS
(F) CONTRACTOR’S GUARANTEE BOND
(G) OTHER BID DOCUMENTS
CONTRACT REQUIREMENTS
Construction Scope
It includes the description activities including some
descriptions of things that will form part of the project.
CONTRACT REQUIREMENTS
Construction Conditions and Responsibilities
The section of conditions and responsibilities is the one that
set responsibilities for the owner and the contractor, and the
extents of who is responsible for providing documents and
information.
Contract Laws
Governing laws, liens requirements, claims procedures,
arbitration procedures, insurances, substantial completion
requirements, final completion, liquidated damages. It can
also provide procedures on how to terminate or suspended
the work and the agreement with the contractor.
GENERAL CONDITIONS OF CONTRACT
EXAMPLE COMPOSITION OF AN ADAPTED GENERAL CONDITIONS OF A CONTRACT:
I. CONTRACT DOCUMENT LIST
II. SCOPE OF WORK DESCRIPTION
III. CONTRACT PRICE CONDITIONS
IV. CONDITIONS IN CASE OF FAILURE TO COMPLETE WORK
V. BONDS & INSURANCES
VI. COMPLETION & FINAL ACCEPTANCE
VII. DEFAULT OF CONTRACTOR
VIII. EMPLOYER/EMPLOYEE RELATION
IX. TITLE OF WORK
X. ASSIGNMENT
XI. SETTLEMENT OF DISPUTE
XII. GENERAL PROVISIONS