Construction Contract Management
“Ref to the Syllabus”
Lec 1
What do you think, who all wants to build a
particular construction type? (Think for Minute or
so)
• Me (Average Person) wants to have house
• Business man wants to have factories, storage places, roads, tower,
offices, hotels, colleges, Universities, commercial Malls, Hospitals etc
• Government/Public wants to have highways, street roads, hospitals,
schools, colleges, railways tracks etc
• Organizations (UN, NGOs etc) wants to have hospitals, schools,
universities, roads etc
• Etc
• We Call them OWNERS Or CLIENTS OR CUSTOMERS OR EMPLOYER
What do you think, the role of the Owner
would be then?
• Needs
• Explaining ASSISSTORS needs
• Land acquisition
• Capability for Construction
• Mostly don’t
• Need ASSISSTANCE
• PROVIDING MONEY: ?????
Imagine you are the owner for any
construction, you want to construct
something, how you go about?
• Why to construct
• What to Construct
• How to Construct
Initiation and
• Business Goals aligned Conceptualizing
• Money and Resources
• Decision
Decision made to Construct. What next?
• I have no idea, how my construction should look like ?
• ARCHITECTS – Plan
• Designer – Technical
• Estimation
• Scheduling
Planning
• Revised Scope of Work
Plans into Reality
• Nothing in reality
• Who will make plans into reality
• CONTRACTOR - GC, Specialty
• Sub contractor
• Workers Procurement
• Cost
• Time
• Terms and Conditions
Execution
• Here we go
• CONSTRUCTION STARTS
• What Owner should do
now
• Monitor and Control
• Quality
Monitoring and
• Time
Control
• Cost
Construction, a complex and
dynamic phenomenon?
• The building industry is chaotic, unpredictable, constantly changing
and becoming more complex every day.
• Here, decisions happen in a nonlinear way.
• The chaos of the industry needs to be looked at from a legal and
contractual point of view.
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Why do we need a contract?
• Contracts provide a description of responsibilities.
• Contracts bind parties to their duties.
• Contracts can establish a timeframe for duties.
• Contracts can secure payment.
• Contracts provide recourse when the relationship weakens.
Now, doesn’t that sound better than dealing with the chaos
that can erupt when a handshake deal falls apart!
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Need of a contract for construction
works
• The business world of construction industry is structured by
contractual relationships, and the business aspects of construction
require the establishment of legally binding relationships with a wide
range of parties.
• In addition to the contractual relationship with the owner/client,
construction managers supervise contracts with subcontractors,
specialty firms such as scheduling services, labor unions, as well as
equipment and materials vendors.
Need of a contract for construction
works
• The Importance of Understanding Engineering and
Construction Law and Contracts
• It is crucial that engineers and constructors understand
contracts, how construction contracts are used in the
engineering and construction industry, and how the legal
system interprets contracts because they are the ones that will
either write or interpret contracts for construction projects.
• In case of a default, the non defaulting party may be legally
entitled to compensation to reimburse them for not fulfilling
the obligations under the contract.
Litigation
• Issues that cannot be resolved by the parties in the contract –
common for one to file a lawsuit – the start of formal litigation
• Court interprets the contract clauses and gives decision within the
contract law boundaries
• While pursued in court, court will rely on what is considered -
Common law - it is not statutory but based on precedence
• Our common law system has roots back to Great Britain
• Judges (and the attorneys) will look to past cases decided in the legal
system for guidance on current decisions. Lower court appeals cases
tend to form the foundation of our common law system.
• Reviewing case law is helpful to understanding contract interpretation.
Need of a contract for construction
works
• How Contracts are Used in the Engineering and
Construction Industry
• Set forth the terms and conditions of agreements,
• Protect whoever is a party to a contract from being taken
advantage of by the other signatories to the contract, and
protect parties in case the other signatories to a contract default
on their legal obligations, as set forth in the contract.
• From a legal perspective, the party who understands the terms
and conditions of their contract has a better chance of prevailing
in a court of law should issues arise related to terms of a
contract.
• If a contract is fulfilled by all the parties to the contract, then the
terms and conditions of the contract are used only to specify the
requirements for performance of the contract.
• In case the contract is not successfully completed, then the
conditions of the contract are used to determine who is
Need of a contract for construction
works
• Laws that Influence the Engineering and Construction
Professionals
• In addition to contract law, engineers and constructors have to
comply with labor laws, environmental laws, safety regulations and
others.
• Building codes (example: structural designing) also have to be
followed along with any local laws and ordinances that affect the
engineering and construction.
• Most engineering and construction firms either write their own
contracts or they purchase standard engineering and construction
contracts through professional organizations such as American
Institute of Architects (AIA), FIDIC (International Federation of
Consulting Engineers), etc.
Construction is all about contracts
• The contract is the single most important
part of a construction project. It spells
out in detail all the possible scenarios
that may be encountered on a project.
• The contract defines the responsibilities
for each participant and the rights and
obligations associated with the parties.
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Construction is all about contracts
• It comes as no surprise that when there is a problem, everybody
refers to the contract to see how to handle it. While everybody wants
a fair or concise contract, this does not always happen.
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