The Importance of the Contract in a Construction Project

Question

Why is the contract important in a construction project?

Answer

A construction project is a complex and costly undertaking which requires a multitude of different disciplines to work together to deliver the Employer/client’s objectives (Walker 2015). The choice of contract is influenced by the nature of the project, the size and complexity of the project as well as the experience that the Employer has in the construction industry. It is also influenced by the risk that the client wishes to assume, the surety of price and programme and the design input (Morledge and Smith 2013).

The contract is important because it sets out the scope of work and assigns specific responsibilities to each part. It also assigns risk within the contract, for example if the project is based on traditional procurement then risk is typically shared between the parties to that contract, however if the project is procured using the design and build option then the contractor is responsible for both designing and constructing the project and therefore assumes the entire risk associated with the development (Hughes et al. 2015). The contract also sets out design responsibility and provides a mechanism for change within the contract (Cousins 2015). It establishes the method of payment, terms of appointment and the conditions under which a contract can be terminated (Eggleston 2015).

References

Eggleston, B., 2015. The NEC3 Engineering and Construction Contract. A commentary. 2nd Edition, Oxford: Blackwell Science.

Hughes, W., Champion, R. and Murdoch, J., 2015. Construction Contracts Law and Management 5th Edition. Oxford: Taylor and Francis.

Morledge, R. and Smith, A., 2013. Building procurement. Chichester: John Wiley & Sons.

Walker, A., 2015. Project management in construction. Chichester: John Wiley & Sons.