The construction industry is big business. Millions of pounds, and sometimes billions, change hands in this industry. As such, it is only natural that contracts are part of the work. Such large amounts of money just can’t change hands through a handshake. That would be taking on too many unnecessary risks. However, besides the aspect of trust, which is fairly obvious, why are construction contracts so important? To give you a better understanding of this market, here are 4 reasons construction contracts are so important to the construction industry.
- They set the price and commit the concerned parties
One of the reasons why construction projects are so important is that, they set the price, and bind the contractor and the project owner to commit to payments. This is beneficial to both parties because, the contractor is legally assured that the project owner will pay. On their part, the project owner is guaranteed that the contractor will not increase the cost midway, and risk the project’s prospects of completion. That’s why construction solicitors are so important in this industry. The contracts they facilitate are a safety net for all the players involved, from project owners to the contractors.
- They set out the parameters for changes in scope
One unwritten rule in the construction industry is that there will always be changes in the scope of work. It may be a change in cost, the time to deliver among others. For instance, if construction material prices rise mid-project, the total cost would have to change. In such a scenario, the construction contract sets out the procedure for such changes, and clearly spells out reasons why such changes would need to be enforced. The goal is to protect the project owner from arbitrary cost increases by the contractor, as well as protect the contractor from losses in such scenarios.
- There are unforeseeable risks in the construction business
The construction business carries some risks that are difficult to account for, beforehand. For instance, how do you account for an environmental event that causes major damage to an incomplete project? Well, that’s where construction contracts come into play. These contracts clearly spell out these risks, and the parties that bear them. This makes it easier for the project to continue, with all the parties involved fully aware of their liability, in case of any adverse unforeseen events.
- The time-bound nature of construction projects
Construction projects have time limits. If the project goes on for so long, the project owner may lose revenues, especially if it’s a commercial property. The contractor may also lose money in case the project goes on for so long, due to increased overheads. That’s why construction contracts are so important. With these contracts, there is time-limit set on a project. This means that from the very beginning, concerned parties are aware of the project’s starting and ending date. Any changes to the set timelines are also clearly spelled out in the contract terms. It’s a major protective shield to all those involved.
