Importance Of Good Contract Document In Construction Projects
RISKS RELATED TO A PROJECT AND MITIGATION THROUGH A CONTRACT
It is advisable that parties entering into any significant financial transaction should have a written contract. When we consider a Construction project, it involves various stakeholders / parties like Owner, Architect, Consultants, Contractors, and Suppliers etc.
Each stakeholder has defined roles & responsibilities and performance of the stakeholders results into realization of the Construction Project. The performance of these stakeholders depends on various internal as well as external factors, which in turn, result into success or failure of the project. Thus, a construction project is a complex system formed by various stakeholders and their respective deliverables involving a fair amount of responsibilities coupled with financial and performance-related risks.
Once two parties agree to have construction work performed and the contractor commences the work, there is a construction contract that comes into being, regardless of whether the agreement has been formed in writing and signed by both parties. But imagine the amount of risk that the individual parties to the contract carry in the absence of any clear outline of the roles, responsibilities, and their contractual rights.
If we assume and agree that the performance of individual stakeholder is going to affect the success / failure of the project, isn’t it necessary to clearly define the roles, responsibilities, and expectations of each stakeholder? Therefore, the first risk is not to have a good contract agreement!!
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