In construction management, the client and the construction manager often enter into contracts. Contracts in this field are generally understood to be the settlement, between the construction manager and the client, which states the terms of the construction job and the subsequent payment upon the job’s completion. Often, the contract will include supplemental documents that help further define and outline the agreement.
Some typical construction contracts include Target Cost contracts, Item Rate contracts, and Percentage Rate contracts, along with combination contracts, such as Cost and Percentage Rate contracts or Cost and Fixed Fee contracts. Included here are a few basics of the legal aspects involved in contracts.
To begin with, there are certain requirements that contracts must meet to be valid in the first place:
1. Capable and sane parties. This may seem obvious, but it is a major factor. All of the parties have to be able, by law, to make this kind of agreement and to legally pay. The contract could become invalid if any of the people involved is found incapable due to age, illness, inebriation, or due to being in another binding agreement that interferes.
2. Legal material in contract. A violation here might happen if the terms infringe on local codes or regulations.
3. Acceptance by both parties. The unquestionable agreement must be clearly documented for it to be legal.
4. Unforced agreement. The contract participants must not be involved by force.
A contract is brought to termination when one of the following happens:
1. Everyone fulfills his contractual duties.
2. The contract is breached.*
3. Everyone agrees to end the contract.
4. Something happens that makes the contract impossible to fulfill.
5. The contract is rendered void by legal means.
*A breach in contract occurs when a party breaks the contract without good reason. When this happens, the breaching party will have to compensate the other party for the failure and resulting losses.