When starting a construction project, it's important to have contract templates that cover the rights of all involved.
This blog provides the top eleven tips for writing a project contract that will protect everyone - from contractor to owner, subcontractors to the general contractor, and lots more!
Following these eleven tips will help make sure that your contract is compliant with all legal requirements.
Note: if you need a project contract template that covers, try Bonsai. Our templates are easily customizable and are legally reviewed by attorneys. Not to mention you'll get full access to all of our other contract, invoice, proposal, and project brief templates. Claim your 14-day free trial here.
What is in a project contract?
A project contact is a binding agreement that exists between two parties in the process of executing a particular work. This type of contract also exists in freelancing. Based on its definition, it plays a functional role with legal back up while both parties fulfill their terms and conditions, payment, liability, and obligation. There are two main types of project contracts that a freelancer might find interest in signing with clients.
These project contracts are the fix price contract and a reimbursable contract. The reimbursable contract is also known as the cost plus fee contract. These types of project contracts apply to the freelance business, and it is worthy of note that the fix price contract includes:
- fixed-price contract
- lump-sum contract
- lump sum turnkey
- progressive LSTK contract.
The reimbursable contract includes cost plus fixed fee contract, cost-plus incentive fee, cost plus award fee, cost plus a percentage of value. And cost plus with a guaranteed maximum price.
Creating a project contract is essential for a successful project. A contract ensures that two or more parties are on the same page and understand each other's expectations. Make sure to include all the necessary details like timelines, service agreement, rental agreement, payment schedule, costs, and rewards.
It offers legal protections for two parties by including language that prevents project works delays or disputes.
Specify the timeline and milestones
The project management team should finalize the detailed timeline as much as possible before the deadline. Specifying a specific date can help plan and organize work more efficiently while avoiding last-minute surprises. It also guarantees that both parties are on track.
Outline the responsibilities of both parties.
A legally binding document must specify the responsibilities and expectations of both parties. The document includes defining who is responsible for what, when bills are due, and other key details related to project completion.
It is also important to specify who will be in charge during troubling times or emergencies. Contracts can help ensure that both sides understand each other's expectations and avoid misunderstandings.
Include payment terms and conditions
It is always important to list any payment details in the contract. This will ensure that everyone involved (the customer, sub-contractors, and suppliers) are clear about what they're getting themselves into. The agreements also manage late payments, account banks, Etc.
A termination clause.
A termination clause in your project contract is essential, so both parties are happy with the project's outcome.
Having a termination clause in your contract will help avoid any disputes or problems in the future.
Why do you need a project contract?
Projects can be a lot of work, and sometimes things can go wrong. That's why it's crucial to have a project contract template ready in advance. By having clear expectations between the different parties involved, the process will help avoid any surprises.
A project contract is a legal document that outlines what should happen during a project.
If there are any disputes or disagreements, a legal contract can help to resolve them smoothly.
Proper Project Management
Project management is a 3-step process: Planning, Execution, and Monitoring. It ensures that all stakeholders know their responsibilities and expectations, preventing disputes after completing the project.
Allocating Resources Properly
Allocate resources properly to achieve a construction project's desired goals. From the beginning, both parties must be on the same page and understand each other's role. This way, there will be minimal disputes, and everyone can work together harmoniously towards a common goal.
Protecting the Rights of all Parties involved
By carefully crafting a timeline and specifying each party's obligations and rights, you can avoid any misunderstandings or disputes later.
Establishing milestones and deadlines
Milestones and deadlines can be extremely helpful tools for effective project management. They help you track what needs to be done and when it should be done and provide a document showing that the project has been completed per your expectations.
Establishing specific dates for each milestone or task helps avoid any delays or confusion on the part of team members/affected parties.
How to write a contract that covers all the details?
When writing a contract, it's essential to be specific and clear about the expectation or targets of both parties. Use bold print for key points, and include a date at the beginning of each section.
Also, review your contract template to ensure it is correct and accurate. Changes may need to be made before you start to write the contract.
Eleven tips for writing effective project contracts
Always keep a copy of your contract template handy, so you can quickly and easily reference it when working on projects. In addition, include deadlines, cost estimates, and payment terms in your contract template.
1.Define the scope of work
When working on a construction project, clearly defining the scope of work from the beginning is essential. The SoW will help avoid misunderstandings and delays in the project.
2.Specify who will be responsible for what tasks
Always specify who will be responsible for what tasks in a project contract is important. This way, there are no misunderstandings or disputes later on.
Furthermore, setting specific dates, milestones, and deadlines is essential, so everything runs smoothly.
It's essential to allocate responsibility for every aspect of the project so that everyone involved knows their respective duties and deadlines. This way, no person or entity can blame anyone else if the project falls short of expectations.
3.Define project objectives
Project objectives are essential for two reasons: First, they help define the project's end goal. Second, they provide a guide for how work should be progressing to achieve this goal.
After everyone knows the objectives, it is easier to determine how much effort needs to make the project completion.
4.Set deadlines for completion of tasks
Setting deadlines for tasks is an essential part of any project that wants to be successful. Doing this ensures that the entire process runs smoothly and that everyone involved knows what to expect.
5.Verify that all requirements
Before starting any project, it is crucial to ensure all the client's requirements are deliverable. This prevents any problems in the future. Include a clause for termination if required, and make sure payments are clear and concise.
6.Include a clause for dispute resolution
All parties involved in a contract must know its terms and what they need to do to comply with them.
Contracts can effectively ensure that everyone involved knows their obligations and follows them.
Including a clause for dispute resolution will help avoid any misunderstandings or disagreements between the two sides, ultimately leading to conflict.
7.All parties understand their rights and obligations.
All parties know and understand who will be responsible for what, when things will happen, and, more importantly - how the project management team will handle everything in case of any complications.
8.Make sure all parties understand the contract.
Property owners, sub-contractors, and suppliers to independent contractor understand and agree to the terms and conditions. To ensure this happens, use standard contract language, clarify who is responsible for what, when the client will make payment, and list objectives and deliverables.
9.Duration of the Contract
Advisable to have a contract that specifies the duration of the agreement. This clarity will help avoid any misunderstandings or disputes in the future.
All parties can include a clause for the termination of a contract if one side is not meeting its obligations.
10.Budget and Timeline
Budgeting and timeline planning are two essential subjects in the construction contract. Without a set budget, it's difficult to know how much the property owner is willing to invest, and without a specific timeline, measuring progress or adjusting accordingly is hard.
Both sides need to be on the same page. Setting dates for all parties involved to complete each task helps ensure everyone knows what needs to happen. And, of course, there will always be required revisions if things don't go as planned!
Quality control is an essential element in ensuring that the quality of work meets the required standards. Quality control includes specifying the quality of work and ensuring that all deliverables are accurate and meet agreed-upon specifications.
It is also essential to agree on penalties for late delivery or poor quality work and payment terms.
Knowing how to write an effective project contract templates can make the whole process more organized. In case you have not yet drafted a contract, consider the tips above and create a well-structured document for better chances of a project success.