What About Contracts?

 

Note:  Please read the disclaimer.  We offer this information to be helpful in attaining an overview of all that is involved in a well run project.                                                         We cannot offer or intend this information as any form of actual advice.  Consult a professional before actually entering a contract.

 

What is a contract?

A contract is simply a legally binding agreement between two or more parties for a particular purpose.  There are several requirements of Law which must be met for a contract to be legitimate.  In brief they are:

Mutual Agreement: There must be a definite offer and a positive acceptance.  This agreement must create a clear “meeting of minds” such that a promise —
– is exchanged both ways concerning a certain and complete scope, nature, value, and/or intent.
Capacity: All parties to a contract must have the legal status to enter into a contract, as well as the ability (mental, physical, financial) to carry out their part of
– the bargain.
Genuine Intention: All parties must intend to be bound by the contract and understand legal consequences may ensue from any breach.
Lawful Object: The object of the contract must be lawful:  contracts for anything illegal are void in all jurisdictions.
Consideration: This means that to be valid a contract must involve an exchange of value.  The Law does not require the value of each part exchanged be equal
– or adequate.

All parties to a contract are bound by law to make good on their promise.  If they fail, the other parties are free to either force them to comply or seek compensation through a legal action in a court. Only the actual parties to a contract can seek to enforce it.

Do I need a contract?

Yes.  Some people do business without contracts, feeling that they don’t need one or that they are too adversarial.  We think it is quite the opposite.  Contracts are about a fair exchange freely agreed to.  If done properly, a contract simply defines the relationship clearly and protects the interests of all parties.  A proper construction contract will protect your interests, will allow us to protect your interests, and will specify the complete work you expect for the payment you offer.

While the construction contract/contracts are the big ones, we also use a contract to ensure the fairness of our working relationship with you.  Defining things leads to smooth and happy operations.

Is a verbal contract enough?

No.  In this day and age, verbal contracts are little more than recipes for dispute.

Who might I need to contract with?

A typical scenario would see you contract with your Design Consultant, Direct Consultants (engineers, surveyors, etc.), your Prime/General Contractor, and sometimes a Project Manager.

Is there anything special about construction contracts?

In simple terms, construction contracts contain the kind of legal clauses one might expect.  Something important to note is that the design documents, the drawings, plans, schedules, specifications, and so forth become actual proper parts of the contract.  Once a design is complete, the documents used to record that design are further developed until complete.  They then become the contract documents, determining bidding and defining what contractual value you expect (and the contractor promises) in exchange for the price you are willing to pay.

Are there choices within Construction Contracts?

There a number of choices within construction contracts.  In Canada, the Canadian Construction Documents Committee (CCDC) develops, produces and reviews standardized Canadian construction contracts, forms and guides.  Two relevant CCDC contracts are:

–  Stipulated Price Contract (CCDC2):  This is a contract between you as owner and your prime contractor in which they pledge to perform all required work for a pre-determined fixed price, regardless of their costs.
–  Cost Plus Contract (CCDC3):  This is a contract between you as owner and your prime contractor in which they pledge to perform all required work on an actual-cost basis, plus an applied percentage or fixed fee for the contractor.  There are a number of versions concerning different forms the ‘Plus” component of the contract.

It should be noted that the CCDC document catalogue is extensive and includes a guide to construction insurance, rules for construction mediation and arbitration.