Popular contract templates for construction works.
The construction industry is a complex field that involves a multitude of parties and activities, from planning and design to actual execution and completion of works. Construction work can have unpredictable developments, influenced by numerous factors such as weather, differences between anticipated working conditions and those "on-site," delays in material deliveries by various suppliers, or delays in obtaining various permits from the responsible authorities.
A professional contract template can reduce the risks of contractual breach, which may occur for the parties involved in the project development. In more complex construction projects, choosing an appropriate contract template by the general contractor can significantly impact the project’s success and the subcontractors. In this article, we analyze some of the most common contract templates used in the construction field and several contractual clauses you should pay attention to in order to increase your business protection.
Using a main construction works contract template. Contracts lawyer.
A main construction works template is frequently used type of contract, relevant to a variety of industries, from the production of goods to the provision of complex services. This type of contract regulates the relationship between the main contractor (service or works provider) and the beneficiary (client), establishing the responsibilities, rights, and obligations of each party. The main purpose of a general construction works contract is to ensure the execution of the work according to the agreed specifications and conditions, thus protecting the interests of both parties.
What is a construction works contract? Contract lawyer.
One of the most common contract templates in construction is a general construction works contract. In this type of contract, a general contractor is responsible for coordinating and executing the entire construction project, from start to finish.
Art. 1851 Civil Code: Under a general works contract, the contractor undertakes, at their own risk, to perform a specific work, whether material or intellectual, or to provide a specific service for the beneficiary in exchange for a price.
Under the conditions agreed with the construction beneficiary, the general contractor may engage subcontractors to carry out certain parts of the construction work, but generally remains responsible to the beneficiary for completing the project in compliant conditions.
Essential elements of a general construction work contract template. Contract lawyer.
Contracting parties
In a general construction work contract template, the two parties involved are the contractor and the beneficiary. The contractor is the one who undertakes to perform the work or provide the service, and the beneficiary is the one who benefits from the work and agrees to pay the agreed price.
Scope of work
The scope of work of a general construction work contract template consists of the work or service to be performed. It is advisable that the scope of work of the contract be described as detailed as possible in the used template to avoid any ambiguities or misunderstandings between the parties regarding what will be delivered.
Price and payment method
The price of the work or service must be clearly established in the general contractor agreement template you use. The payment method may vary, from full payment upon completion of the work to advance payments or installments, depending on the complexity and duration of the project, hourly rates, or other payment mechanisms agreed upon by the parties.
Performance deadline
A professional general construction work contract template should specify the term within which the work or service must be completed. Strictly determined deadlines are essential in general construction work contract template, especially in industries where delays can generate additional costs or penalties.
Guarantees and penalties
The template used may include guarantee clauses for the quality of the work, as well as penalties for delays or failure to fulfill contractual obligations. These clauses protect the beneficiary and ensure that the contractor meets their commitments.
Force majeure and contract termination
Clauses regarding force majeure and contract termination are particularly important in any contract template, especially in long-term projects. These establish the conditions under which the contract may be suspended, terminated, or continued in the event of unforeseen events.
Types of general construction works contract templates. Contract lawyer.
General contractor agreements can be classified according to the field of application and the type of work or services involved. Some of the most common types of general contractor agreements are:
Buildings construction work agreement
This type of agreement is used in the construction industry for the execution of civil or industrial buildings, or infrastructure works.
Repair or maintenance works contract
These agreements refer to smaller works, such as the repair or maintenance of a building, installations, or equipment.
In this case, the contractor provides a specific service, such as consulting, software development (read more about IT contracts) graphic design, or other professional services.
Works contract for industrial projects
This type of agreement applies to complex industrial projects, such as the construction of a factory, a plant, or a production line.
Is it advisable to use a general construction works agreement template when I am the beneficiary of a construction project? Contract lawyer.
When you are the beneficiary of a construction project, you can have several advantages when using a general construction works agreement template, such as:
The beneficiary usually interacts only with the general contractor / main contractor, not with subcontractors. In this way, communication is simplified, and the coordination of the construction project remains the responsibility of the general contractor.
The general contractor assumes responsibility for coordinating all parties involved in the project, especially subcontractors. In complex construction projects, the main contractor often delegates various responsibilities to third parties (subcontractors), specialized in certain niche services. This practice is favorable for all parties involved in executing a general contractor agreement / construction works agreement, ensuring quality services for all aspects of the construction project.
Increased guarantees regarding the observance of deadlines and the quality of works. By using a general contractor agreement template / construction works agreement template, the beneficiary and the general contractor agree on general execution deadlines, requirements for the delivery of the work, and other essential elements of the project as a whole, regardless of the actual progress of the various construction stages or the manner in which other parties involved in the project perform the construction services for which they are responsible.
There is also the other side of the coin. A general construction works agreement template may bring some disadvantages to the beneficiary of the construction project:
The costs involved in executing the general contractor agreement can be higher because the general contractor may include a profit margin in contracts with subcontractors.
In some general contractor agreements / construction works agreements, the beneficiary may have limited control over the choice of subcontractors by the general contractor.
What are the responsibilities of a general contractor in a general contractor agreement? Contract lawyer.
The responsibilities of the general contractor may vary depending on the construction works agreement template used by the parties.
In general, the general contractor is responsible for managing the entire construction works project, including planning, material procurement, hiring and supervising subcontractors, meeting work completion deadlines, ensuring work quality, and coordinating all activities necessary for the completion of the project.
There are also cases where the parties agree through the general contractor agreement template / construction works agreement template to a different distribution of responsibilities, either between the general contractor and subcontractors (for example, you can use a general contractor agreement where the responsibility of the subcontractors differs from that of the general contractor) or between the general contractor and the beneficiary (for example, the latter may assume the execution of some parts of the works).
How are project modifications managed in a construction works agreement? Contracts lawyer.
Variations that may arise in the construction project are managed through addendums or annexes to the initial constructions work contract template. Generally, any contractual change requested by the beneficiary must be discussed and agreed upon by both parties, and any additional costs or delays must be reflected in the modified general contractor agreement template / construction works agreement template.
Sometimes one of the parties has the right to unilaterally modify certain aspects of the execution of a construction works agreement, such as the quantity of materials or labor delivered to achieve a certain result or price adjustments based on market developments. There are also situations where the parties may enter into framework agreements for construction works, agreeing on the price and volume of deliverables at a later date, through individual orders.
What happens if the general contractor does not meet the agreed completion deadline in the general contractor agreement? Contract lawyer.
If the general contractor does not meet the completion deadline established in the construction works agreement / general contractor agreement, they may be subject to penalties for delay, which are usually stipulated in the template used. In severe cases, failure to meet the deadline may lead to the termination of the general contractor agreement and the obligation of the general contractor to compensate the beneficiary for any losses and damages suffered.
Frequent challenges in a general contractor agreement in construction. Contract lawyer.
Delays in executing the works contracted through the construction work contract template.
Delays are a common problem in construction projects. They can occur for various reasons, from unfavorable weather conditions to the lack of materials or labor. The contract should provide solutions for such situations.
Project variations during performance of the construction work contract. Use a professional template contract.
During execution, the beneficiary may request modifications to the initial project or they may become necessary due to objective conditions unknown to the parties at the time of signing the general contractor agreement. These can lead to additional execution costs and delays in project execution, and the natural question arising from such a situation is: who will bear the risks?
A professional construction work contract template, drafted by experienced lawyers, often provides for how the parties will manage such contractual modifications.
Quality standards under the construction work contract template.
Ensuring the quality of works through specific clauses inserted in the general contractor agreement template used is essential for both parties. On one hand, the beneficiary wants to receive works at the standards they had in mind, while the contractor is interested in knowing the requirements based on which their work is evaluated to avoid being held responsible for any contractual non-performance.
A professional construction work contract template includes mechanisms through which the parties can ensure quality standards for the construction works, favorable to both parties involved. Often, they are ensured through special clauses in the general contractor agreement template used, such as:
Contractual clauses granting the beneficiary the right to inspect the works during execution and to request remediation of any non-conformities.
Contractual clauses through which the parties agree on various specific quality standards or refer to standards commonly applied in the industry.
Contractual clauses regarding the acceptance of works and the possibility of raising any objections.
Contractual clauses regarding the warranty for products or works performed by the contractor.
The role of a commercial lawyer in drafting a general construction works agreement template.
Drafting a works agreement template, especially in construction, requires special attention and specialized legal expertise more than other contract templates, precisely because the execution incidents that may arise are numerous.
Lawyers specializing in commercial and construction law can ensure that you use a correctly drafted contract that protects your rights regardless of the project's development. A contract lawyer can identify and address potential problems or risks before they become applicable to your situation, thus saving significant costs associated with non-performance or disputes that may arise during the project's execution. Schedule a consultation with a contract lawyer.
Subcontracting agreement (order template contract). Contracts lawyer.
The subcontracting agreement is used when the general contractor delegates certain parts of the construction work to specialized subcontractors. Subcontractors can be hired through service contracts, framework agreements, or other types of contracts, for specific works. For example, subcontractors can take over the responsibilities for the delivery of:
Electrical installations: the general contractor can conclude a subcontracting agreement template / service contract template with a company specialized in the design and installation of electrical systems, including wiring, lighting, outlets, security systems, etc.
Sanitary and thermal installations: another subcontractor can be responsible for the installation of water, sewerage, and heating systems, installation of pipes, radiators, boilers, and other necessary equipment, based on a service contract.
Structural works: in some cases, the execution of structural works, such as foundations, retaining walls, columns, and beams, can be subcontracted to a company specialized in structural works.
Roof and facade installation: the installation of the roof and facade of the building can be subcontracted to specialized companies experienced in this type of work, including thermal insulation, exterior cladding, carpentry installation, and covering. Subcontracting can be done based on a subcontracting agreement.
Art. 1852 Civil Code: By the subcontracting agreement, the contractor may entrust one or more subcontractors with the execution of certain parts or elements of the work or services, except when the general contractor agreement has been concluded considering the contractor’s person.
Is it advisable to use a subcontracting agreement template when I am a general contractor? Contracts lawyer.
A subcontracting agreement template can be extremely useful in large-scale projects where each stage of construction requires specialized expertise. Often, the general contractor may execute most of the construction works required by the beneficiary but does not have expertise in all related fields, needing to contract it from third parties through subcontracting agreements.
A subcontracting agreement template can allow the use of specialized expertise for different parts of the work.
Furthermore, a professionally drafted subcontracting agreement template offers flexibility in choosing subcontractors based on the project's needs.
What disadvantages do I have as a general contractor if I use a subcontracting agreement template? Contracts lawyer.
According to most subcontracting agreement templates used on the market, the general contractor must manage and coordinate the activities of multiple subcontractors. The general contractor must ensure that the delivery deadlines in each subcontract are correlated and that the designated subcontractors execute the works appropriately; otherwise, they are liable for the damages caused to the beneficiary.
The possibility of conflicts between subcontractors, which may affect the execution timeline of the works, is another aspect that the general contractor who uses subcontracting agreement templates must consider.
What are the differences between a subcontracting agreement template and a goods supply contract template? Contracts lawyer.
A subcontracting agreement involves the provision of services and the execution of specific works within a construction project. The subcontractor is hired by the general contractor to carry out a particular part of the project, such as electrical installation, structural construction, or other specialized activities. The responsibilities of the subcontractor include completing the works according to quality standards, within the established timeframe, and ensuring compliance with safety regulations on the site, not just delivering materials or products.
The goods supply contract focuses on delivering products or materials necessary for the construction project. In this case, through the supply contract, the supplier is obligated to deliver the ordered goods, ensuring they meet the agreed technical specifications and quality.
Unlike the subcontractor, who actively participates in the execution of the works, the supplier has a more passive role, limited to ensuring the availability of materials or products necessary at the place and time agreed with the beneficiary. The goods supply contract is more akin to a sales contract.
Therefore, the major difference between the two types of contracts lies in the fact that a subcontracting agreement involves an active contribution to the construction process, while a goods supply contract involves only the delivery of the material resources necessary for the execution of the works.
How are subcontractors paid in a construction project? Contracts lawyer.
Subcontractors are paid according to the terms agreed in the subcontracting agreement (order contract template). According to certain subcontracting agreement templates, subcontractors can be paid independently of when the general contractor receives the payment from the work’s beneficiary. However, a more popular situation is where the payment by the work’s beneficiary to the general contractor is correlated with the payment to the subcontractors.
Payments under a subcontracting agreement template can be made as work stages are completed and approved by the main contractor or the beneficiary, either based on a work estimate or upon the full completion of the task. Payment methods may include advance payments, partial payments by stages, or a final payment after the work’s acceptance.
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