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Construction law and Contractual requirements

Construction of any structure is determined by the legal compliances which may be imposed by either a statuary body or a federal body (Collins, 2002). Generally, the federal government have implications over construction standards and employment. Further, a statuary body may levy additional regulations to regulate construction Environmental practices and safety regulations. Apart from that, cities regulate the noise and zoning criteria for constructional activities. Fencing laws imposed by cities regulate the criteria for fencing for one’s entitled property.

Contracts hold its importance in any construction to secure the legal rights of both the parties undergoing in contract with each other (Hughes, Champion & Murdoch, 2015). For carrying any construction activity, enforceable agreements or contracts are to be made between the owner and the contractor as it provides clarity in the amount that is going to be charged, expectations of the quality of material used and practical work that is done by the contractor.

Time, quality and cost, which are the three necessary scopes of project management. Procurement management that is another subsidiary of the project management holds its importance in providing clarity between contractors and the clients (QC, 2010). Being the head of the contracts management division of ‘Anyway construction limited’, it’s my duty to ensure that the type of contract that is to be enforced between the client and the company for creating a workable and a fair deal. In order to do so, the type of contracts that both the parties can consider are as following-

Fixed Price Contracts- The fixed-price contracts are legal agreements that are to be made between the owner and the contractor. In this type of contract, the price of the services and goods are estimated prior to any construction. Fixed-price contracts are of different types, and in the case, the price of a project crosses the settled amount, the contractor may request a price change order. The fixed-price contracts hold the details of the quality of the materials to be used in a project.  Even if the price change is requested by the contractor, the total amount of the project is going to cost more to the contractor (Wallace, 1986). The fixed-price contract is a risk for the contractor in some instances where there is a probability of high price change in any commodity as the risk is transferred to the contractor. This risk transfer enforces contractors to finish the project on the prior settled cost.

In order to undergo a fixed price contract, it is essential for the contractor to have a minimum of two or more suppliers having a clean history of supplying materials. Further, the project scope is required by the contractor to ensure the project requirements are met. This is required in order to meet the project requirement. If contractors meet all the requirements and agree to the profit included in the settled price, that type of contract is called ‘Fixed total price contract’. Another two types of fixed-price contracts are ‘fixed-price contracts with price adjustment’ and ‘fixed-price contract with incentive fee’. The former is used in long-span projects where the prices of the commodities may affect the cost of the construction and later is used to get incentives on the completion of a milestone.

Cost reimbursable contracts- These types of contracts are used when the cost of the projects cannot be determined prior to work. In this type of contract, the contractor is paid for his work done and the additional services that are offered by the contractor in any construction. There are four types of reimbursable cost contracts which are cost-reimbursable contract: (fixed fee, percentage fee, incentive fee and award fee). In these types of the contractor, a contractor gets the corresponding reward of completing the project.

T&M contracts – The time and materials contracts are used in the projects that are having a smaller scope. In these types of projects, the projects hold its risk rather than the contractors. T&M contract cost lower than the other two contracts as the contracts hold the quality of material and the time taken to complete the project only. In this type of contracts, a contractor can include an amount which he cannot exceed.

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