Construction Contracts

Adjudication #

A process in which disputes arising under a construction contract are resolved by an independent third party known as an adjudicator. Adjudication is a common method for resolving disputes quickly and cost-effectively to keep construction projects on track.

Architect's Instruction #

Directions given by the architect to the contractor during the construction process. These instructions may relate to changes in the work, variations, or other matters that affect the scope of the project.

Arbitration #

A method of dispute resolution where parties submit their dispute to an arbitrator or panel of arbitrators for a binding decision. Arbitration is often chosen as a dispute resolution mechanism in construction contracts due to its confidentiality and finality.

Assignment #

The transfer of rights or obligations under a construction contract from one party to another. Assignments are common in construction contracts when a contractor subcontracts work to a third party.

Breach of Contract #

Occurs when one party fails to fulfill its obligations under a construction contract. A breach of contract may result in legal action and damages being awarded to the non-breaching party.

Change Order #

A written document that modifies the scope of work, contract price, or contract time in a construction contract. Change orders are used to address changes to the project that were not originally included in the contract.

Compensation Event #

Events that entitle a contractor to claim additional time or money under the terms of a construction contract. Compensation events may include unforeseen circumstances, changes in scope, or delays caused by the client.

Concurrent Delay #

A situation where multiple delays occur simultaneously, impacting the construction project timeline. Determining liability for concurrent delays can be complex and may require expert analysis.

Consequential Loss #

Losses that result indirectly from a breach of contract, rather than directly from the breach itself. Consequential losses may include lost profits, business interruption, or reputational damage.

Contract Administrator #

The individual responsible for administering the terms of a construction contract on behalf of the client. The contract administrator ensures that both parties comply with their obligations and that the project progresses according to the contract terms.

Contractor #

The party responsible for carrying out the construction work under a construction contract. Contractors may be individuals, companies, or joint ventures, depending on the size and complexity of the project.

Defects Liability Period #

A specified period after completion of the construction work during which the contractor is responsible for rectifying any defects that arise. The defects liability period is typically outlined in the construction contract.

Delay Damages #

Damages awarded to compensate a party for losses incurred due to delays in the construction project. Delay damages may include additional costs, lost revenue, or liquidated damages specified in the contract.

Dispute Resolution #

The process of resolving disagreements or conflicts that arise during the construction project. Dispute resolution mechanisms may include negotiation, mediation, adjudication, arbitration, or litigation.

Employer #

The party who engages the contractor to carry out the construction work under a construction contract. The employer is also known as the client or the owner of the project.

Force Majeure #

Unforeseen events or circumstances that are beyond the control of the parties and prevent them from fulfilling their obligations under the construction contract. Force majeure events may include natural disasters, wars, or epidemics.

Liquidated Damages #

Pre-determined damages specified in the construction contract that the parties agree will be payable in the event of a specific breach, such as delays in completion. Liquidated damages provide certainty and avoid the need to prove actual losses.

Nomination #

The process of selecting a subcontractor, supplier, or consultant for a specific role in the construction project. Nominations are typically made by the employer or the contractor, depending on the terms of the contract.

Performance Bond #

A financial guarantee provided by the contractor to the employer to ensure that the construction work will be completed according to the contract terms. Performance bonds protect the employer in case of default by the contractor.

Retention #

A percentage of the contract sum that is retained by the employer until the completion of the construction work. Retentions are used as security to ensure that the contractor fulfills its obligations and rectifies any defects.

Subcontractor #

A party engaged by the main contractor to carry out specific portions of the construction work. Subcontractors may be responsible for specialized tasks or trades within the project.

Surety #

A third party, such as a bank or insurance company, that guarantees the performance or payment obligations of a contractor under a construction contract. Sureties provide financial security to the employer in case of default by the contractor.

Variation #

Changes to the scope of work, contract price, or contract time in a construction contract. Variations may be instructed by the architect, engineer, or employer and can impact the overall project cost and schedule.

Withholding Notice #

A formal notice issued by one party to another to withhold payment or take other actions specified in the construction contract. Withholding notices are used to address non-performance or breaches by the other party.