A construction contract is legally binding or a mutual agreement between two independent parties based on mutually agreed terms and conditions stated in legal form. Both the parties involved in a construction contract are either one or more professional land owners and one or more construction contractors. If the project involves some industrial activity, then a separate contract is entered into between the contractor and owner to work out the details of the construction work. While each contractor or owner has a responsibility to his client for reasonable rates and charges, construction contract also gives them an opportunity to negotiate the price according to their own preference and to make the best out of a deal. Therefore, even if a construction contract has already been drawn up by the contractor and owner, it is extremely important for both of them to work out an agreement about the price so that they are in line with each other’s respective capacity and financial constraints. Get the facts about What to include in construction contract see this.
The need for construction contracts arises when one contractor wishes to hire another contractor to work on a project which is still under construction. In this case, the first contractor prepares a detailed budget specifying all expenses required for the project, while the second contractor tries to prepare a comparable estimate for his project from various reliable sources. In this case, both the parties enter into a construction contract to assign mutual responsibilities and agree upon the price to be charged for the job. While such cases occur very rarely, construction contracts are also used in the case when two or more construction companies are working together on a project. Construction contracts help minimize confusion and misunderstanding during the completion of a construction project.
When a construction contract is initiated and completed, there is a fixed time period for completing the construction work. Once the contract comes into force, both the contractor and the owner have to stick to it for the duration of the contract period to avoid any penalty or legal action. Some construction contracts contain certain clause which provides for termination of a contract early if either party feels that there has been a breach of contract by the other party. Since construction contracts are usually drawn up between professionals, they are highly structured and specific and may not be easily changed in the future.