A contract can be termed as the lump sum contract in case the contract agrees to sign an agreement with the building owner to undertake a particular work for a fixed amount of money. In case of the lump sum contract a single price is provided in the tender by the owner of the building with respect to the amount and the type of work that has to be carried out by a contractor (Wren and Davidson, 2011). A particular time frame is also provided by the client to complete the task. The payment is done by the client after the completion of the task or after the different phases of the construction is completed.
A contract can be termed as the lump sum contract subjected to rise and fall, if the payment that is associated with the project is subjected to rise and fall as per the risk that are related to the different stages of construction.
A contract can be termed as the cost plus a percentage contract if the contractor associated with the construction of the project gets a certain percentage of the total cost of the project over the total cost of the project (Oulahen, 2014). The payment that has been made to the contractor over the total cost of the project can be taken as a pure profit by the contractor and are basically used to meet the other expenses like the overhead charges, phone bills, payments made to the clerical staffs and other administrative staffs or for paying premium of the insurance.
In the project management the client seeks to utilize the services of the professional project managers so that the professional contract managers can look after the various processes related to the contract and give them advice to select the most appropriate contract that will be suitable to achieve their goals.
In case of the schedule of rate contract the client produces the schedule of the work that has to be carried out without taking into consideration the quantities. The contractor rates the different tasks and the contractor the freedom to quote different prices that are related to the different price for the labour, different prices for the materials and the separate costs for the equipments which are associated with the project.
The contract that takes place between the main contractor and the sub-contractor is called the sub-contract. A sub-contract comprise of the agreement between the main contractor and the sub-contractor, order for the purchase and/or a legal document which explains the type of work that has to be carried out by the contractor.
One of the best contract systems that will be suitable for the completion of the project 1 will be the lump sum contract system. The main benefit of the lump sum contract system is that the prices of the contract are known to the owner of the building beforehand. This contract also provides an opportunity to the contractor to find out ways to reduce the cost associated with the contract (Oulahen, 2014). Further the contract will provide a timeline to the contractor to complete the task and within a fixed budget.
The term variation can be explained as the various changes or alterations or modifications that are made in the scope of the work that is mentioned in the contract of a particular construction project.
The prime cost item may be explained as the allowance that is associated with the contract so that the other important items which are not added into the contract like the taps, door knobs, parts of the windows etc.
A provisional sum can be explained as the additional sum of money whose provision is made in the contract such that it covers the cost of the additional work that is needed to be carried out in the project but whose details are not included into the actual contract, like the work related to the joining the parts and the connections.
In certain contracts there are provisions for the extension in the time for the completion of the project tasks in certain conditions and only is the extension in the time of the project is not caused due to the fault of the contractor (Nyce and Maroney, 2011). The time period for which the project is extended is called as the extension of time (EOT) as per the contract.
The liquidity damages may be termed as the amount of money that is mentioned in writing in the contract and has to be paid by the party breaching the terms and condition of the contract, to the other party which has suffered losses due to the breach in the contract.
The words” Possession of the site” is generally written in the contract to point out the right of the contractor to enter the site of construction so that he is able to carry out the activities related to the construction of the project 1.
The cooling of period can be explained as the time period which are generally explained in the contract and points out the duration within which the client has the right to cancel the contract.
The defects liability period may be explained as the time that is mentioned as per the contract, in which the client has the right to report about any defects in the work that is associated with the contractor. In the general practices the issues related to the defecst in the work doen by the contractor is raised in front of the contract administrator, who in turn takes a decision that whether a particular defect has been caused due to the negligence of the contractor or the defect is caused due to the improper use or lack of maintenance of the house. In general practice the defects liability period is generally spanned from six to twelve months.
The retention time period may be expressed as the time period which has been prescribed as per the law, that the owner of the project has to retain the documents that are related to the project before the files are disposed (Nyce and Maroney, 2011). In general there are several documents that are retained by the owner of the building, which are illustrated as follows:
iii) Different administrative records that is associated with the maintenance, repair and the reconstruction of the various parts of project.
The progress claim can be defined as the amount of the money that is claimed by the contractor for the owner of the project after a certain amount of task is completed. In the documents that are related to the progress claim the various works for which the claims are generally made is mentioned. Along with this the claim documents also covers the information related to the time duration in which claimed money has to be recovered, the due payment, the date of payment of the claimed amount and the process that has been adopted by the contractor to calculate the amount claimed.
The five essential features of building contract are illustrated as follows:
iii) Guarantee of Workmanship: The guarantee of the workmanship refers to the guarantee of the work that is provided by the contractor in writing and is mentioned in the contract properly. The guarantee of the work can be related to both the services and the equipments that are supplied by the contractor and the guarantee of the workmanship is applicable only for a fixed time period which is also mentioned in the contract.
The different documents that form an important part of the contract are illustrated as follows:
iii) Agreement: The documents which is identified by all the stakeholders as part of the agreement is very important for the construction of the building contract. The documents related to the agreement describe the timeline of the construction of the building and the schedule of payments of the construction work carried out by the contractor (Kumar and Mishra, 2015).
The contract that has been selected for the construction of the Project 1 will be the cost plus percentage contract system
The XYZ developers, Elizabeth road, NSW and the Tony Johnson, Lenin street, NSW have come together hereby to agree that a house will be constructed at the property that is situated as 14, Lenin street and are legally defined as the lots 6,7 and the south1/2 Lot 3, West 60 feet, south ½ of lot 4, west 50 foot of lot 5 and lot 8, block no. 31, 14 Lenin street, NSW.
The contract terms and condition comprise of the various documents that are illustrated below and comprise of the complete terms of the agreement that is made between both the parties. The terms and condition will be prevailing over any conflicting provision in the documents which are incorporated as a reference:
iii) Building Plans:
The contractor has agreed to construct that the building will be constructed in accordance with the specifications and the designs which have to be supplied by the client and are added as a reference in the paragraph III ‘Contract documents’. The sole owner of the plans and the designs of the building is the buyer and only he has the legal right to use the plans and designs. Hereby the owner of the building declares that the builder is harmless to the any copyright issues which might crop up die to the application of the building plans.
After taking into consideration the different conditions and factors, it has been agreed upon by both the parties that is the weather conditions permits than the building shall be constructed completely a time period of no less than 200 days. After the possession of all the permits that are required to start the construction activity, the process of construction has to begin within thirty days.
This contract is contingent upon the buyer obtaining a construction loan in the amount of $ 275,000. The total fees and the expenses that are related to obtaining the loan has to borne by the owner of the building. There is no requirement for the builder to start the construction activity is there is no proper confirmation in writing provided by the owner about the confirmation of the loan from the lender.
Hereby the owner of the project declares to pay a total of $ 275,000 to the builder on the successful of the building as per the terms and the conditions that has been mentioned in the contract and the builder agrees to provide all the labor, materials, equipment, tools, and other services necessary to construct the house. After the successful completion of the project 65% of the total cost of the project will be paid while remaining will be paid after the final inspection and acceptance.
vii) Access to the property site:
It is the responsibility of the owner of the property to provide safe access to the builder to the site.
After the final inspection the owner will provide the builder the deficiencies if there are any, in the building. the final occupation will provided to the owner only after the final inspection is over and the final payment is completed.
This contract shall become effective on the date it is signed by both parties.
We, the undersigned, have read, understood, and agree to each of the provisions of this contract and hereby acknowledge receipt of a copy of this contract.
By: ______________________ on behalf of ________________________
Title: _________________________________ Date : ___________
By: ____________ Date : ______________
By: ____________ Date : _________________
Attached Contract Documents:
Final Contract
The value of margin= 12% and GST = 10%. Total= 22%
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