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Contracts and Specification

This document discusses various aspects of construction contracts and specifications. It defines what a contract is, lists the six key elements of a valid contract, and describes different types of construction contracts including lump sum, unit price, cost plus, time and materials, and guaranteed maximum price contracts. It also discusses specifications, noting there are prescriptive, performance, and proprietary types of specifications. The document provides information on the history of contract law and why contracts are used in construction to define obligations, costs, timelines and minimize disputes between parties.

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lorraine atienza
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106 views

Contracts and Specification

This document discusses various aspects of construction contracts and specifications. It defines what a contract is, lists the six key elements of a valid contract, and describes different types of construction contracts including lump sum, unit price, cost plus, time and materials, and guaranteed maximum price contracts. It also discusses specifications, noting there are prescriptive, performance, and proprietary types of specifications. The document provides information on the history of contract law and why contracts are used in construction to define obligations, costs, timelines and minimize disputes between parties.

Uploaded by

lorraine atienza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CONTRACTS AND SPECIFICATIONS

(CONSTRUCTION METHODS AND PROJECT MANAGEMENT)


WHAT IS CONTRACT?

- A bid offer that can be accepted is a Contract.

- The importance is that if the person who made the bid offer fails
to enter into a Contract with compliant bid, they are in breach of
Contract.
HISTORY OF CONTRACT LAW

• September 1, 1872

• BARTER

• Law of Contracts
WHY DO WE USE CONTRACT IN CONSTRUCTION?

• Describe scope of work


• Establish time frame
• Establish cost and payment provision
• Set fourth obligations and relationship
• Minimize disputes
FORMS OF CONTRACT
• Written
- Written contracts provide more certainty for both parties than
verbal contracts. They clearly set out the details of what was agreed.

• Oral
- A handshake agreement may still be a contract and may (though
often with difficulty) be enforced by a court. However, verbal contracts
can lead to uncertainty about each party's rights and obligations.
FORMS OF CONTRACT
• Purchase Orders
- contractual agreement between a purchaser and a supplier.

• Standard Form Contracts


- A standard form contract is a pre-prepared contract
where:
• most of the terms are set in advance
• little or no negotiation between the parties occurs.
6 ELEMENTS OF A CONTRACT
• Offer
- An offer is a key element because without it, there can be
no contract.

- It is a promise by one party to enter into a bargain


contingent on the performance of another party.
ELEMENTS OF A CONTRACT
• Acceptance
- Acceptance is the agreement to the specific conditions of an offer.
It must be unequivocal and must correspond with the contract terms of
the offer, denoting that the offeree cannot change the terms of the
offer.
ELEMENTS OF A CONTRACT
• Consideration
- Consideration is what each party to the contract gives up, or
promises to do, to form the contract.

- It can be something of value, such as money, goods, services,


or property.
ELEMENTS OF A CONTRACT
• Intention to create legal relations
- To be legally binding, a contract must show an intention to create
legal relations. This can be shown by the use of formal language, such
as “I agree to…” or “This contract is binding on the parties”.
ELEMENTS OF A CONTRACT

• Authority and capacity


- Contract law judges the circumstances for a party to contract.
Each party to the contract must have the legal capacity to enter
into the mutual assent.
ELEMENTS OF A CONTRACT

• Certainty
- To be enforceable, a contract must include certain terms, and the
ability to fulfill the essential terms of an agreement must be guaranteed.
These terms must be clear and unambiguous.
CONSTRUCTION CONTRACT

• A construction contract is
an agreement between a
client and a contractor that
specifies the details of a
construction project.
COMMON TYPES OF CONSTRUCTION CONTRACT

• Lump Sum/Fixed Price Contract


• Unit Price Contract
• Cost-Plus Contract
• Time & Materials Contract
• Guaranteed Maximum Price (GMP) Contract
TYPES OF CONSTRUCTION CONTRACT

Lump sum contract


- In a lump sum contract an owner agrees to pay a contractor a
specified lump sum after the completion of work without a cost
breakdown. After work no detailed measurements is required.
LUMP SUM CONTRACT

Advantages:
• 'Fixed' construction cost.
• Minimize change orders.
• Owner supervision is reduced when compared to Time and
Material Contract.
• Bidding analysis and selection process is relatively easily. Lump
Sum Contract.
LUMP SUM CONTRACT

Disadvantages:
• It presents the highest risk to the contractor.
• The Owner might reject change order requests.
• The project needs to be designed completely before the
commencement of activities.
• The contractor will select its own means and methods.
TYPES OF CONSTRUCTION CONTRACT

Unit Price Contracts


- Unit price contracts are an arrangement where the customer pays a
fixed, agreed-upon amount for completion of each unit of work. Instead
of pricing the entire project, the contractor is based on individual
“chunks” of work.
UNIT PRICE CONTRACT

Advantage
Great for work dependent on default rates, more equal risk between
two parties, bidding can be quick and relatively painless, the unit
process is competitive, and it is easier to adjust prices for changing
scope of work .
UNIT PRICE CONTRACT

Disadvantage
More difficult for projects with a high volume of materials and tasks,
the total cost is unknown, reporting and managing is more difficult, and
some delay in payments can happen.
TYPES OF CONSTRUCTION CONTRACT

COST PLUS PERCENTAGE OF COST CONTRACT


- In construction, a method of payment to a contractor in
which an additional amount of money, expressed as a
percentage, is paid by the client that is designated to cover
the contractor's overhead costs.
TYPES OF CONSTRUCTION CONTRACT

Time & Materials Contracts


- This is an agreement where the contractor is paid an hourly rate
for labor, the actual cost of materials and equipment, and an additional
amount to cover overhead and profit
TYPES OF CONSTRUCTION CONTRACT

Guaranteed Maximum Price (GMP) Contracts


- This is a cost-type contract, where there is an agreed-upon limit to
how much the customer will be obligated to pay. These types of
contracts will typically include a contingency fund as a safety valve in
case unforeseen costs increase the contract price.
CONSTRUCTION SPECIFICATION

• Construction specifications are a part of the construction


contract.
• They detail the work, materials, and installation required to
complete a project.
TYPES OF CONSTRUCTION CONTRACT
SPECIFICATION

• Prescriptive Specifications
• Performance Specifications
• Proprietary Specifications
TYPES OF CONSTRUCTION CONTRACT
SPECIFICATION
Prescriptive Specifications
- Provide step-by-step details and instructions on how the
types of materials to be used and the desired installation
methods.
TYPES OF CONSTRUCTION CONTRACT
SPECIFICATION
Performance Specifications
- Will provide all of the operations requirements to
complete a project. Instead of giving detailed instructions on
how to achieve the desired final product, performance specs
will describe the anticipated result.
TYPES OF CONSTRUCTION CONTRACT
SPECIFICATION

Proprietary Specifications
- These third types of specifications are the rarest of the
breed. They are used when a specific type of product or
material is required for installation.
REFERENCES:
Jennifer Bridges (2020). How to Write a Scope of Work
(Plus, How to Write One).
Joseph Clancey (2021). Lump Sum Contracts: Advantages,
Disadvantages & When to Use.
Kingsley Martin (2022). 7 Essential Elements of A Contract.
Rea Regan (2021). What Does A Contractor Do? Your Guide On
The Roles And Responsibilities Of Contractors.
Yam Kumar Yonjan (2019). An Analysis on Major Elements of a
Valid Contract Under Muluki Civil Code, 2074.
THANK YOU! 

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