CONSTRUCTION CONTRACT

 

1. Contract Price

i. How has it been arrived at and what does it cover?

ii. Mode of Payment:

a) Lump Sum

§ The Contractor charges a fixed lump sum cost.

§ This is overall the easiest mode of payment to administer.

§ The Contractor takes the risk for change in cost of building materials and fluctuations in foreign exchange.

b) Unit Price

§ The cost is based on an agreed bill of quantities based on quantity and type of materials used.

§ The employer should watch out to ensure that there’s no abuse as the employer’s consultants may collude with the contractor to inflate the cost.

c) Cost Reimbursable

§ The contractor charges for cost of the works plus a predetermined margin, which may be fixed, fluctuating or a percentage of costs.

§ An incentive mechanism should be built into this method as there’s no incentive for the contractor to work quickly or economically.

2. Commencement and Completion

§ Time usually starts running on receipt of the 1st instalment but the site should be handed over to the Contractor as early as possible to enable him prepare the site in readiness for commencement of the works.

§ Completion must be stated clearly for the avoidance of doubt (e.g. within 18 months from the date of the execution of the Construction Contract).

3. Extension of Time

The completion date will be extended if the architect evaluates the information supplied by the Contractor and finds that completion of works will delay beyond the date for practical completion contemplated in the agreement due to any of the following reasons:

i. Force majeure

ii. Exceptionally adverse weather conditions

iii. Civil commotion, strike or lock out

iv. Delay by service providers/ statutory agents engaged directly by the employer

v. Suspension of works by the contractor due to delay by the employer in payment of fees

vi. Delay in delivery of goods due to reasons beyond the contractor’s control and which he could not reasonably have foreseen

vii. Delay in receiving possession of or access to the site.

4. Party Status (Relationship between Employer & Contractor)

§ The contractor is not an employee of the employer but works in his capacity as an independent contractor.

§ The contractor shall hold the employer harmless and thereby indemnify the employer against any claims including but not limited to liability insurance, worker’s compensation and withholding tax for the contractor’s employees.

5. Employer’s Representative

The employer should appoint a representative whose powers and duties shall be deemed to be the same as those of the employer, to carry out a supervisory role over the works on his behalf.

6. Subcontractors

§ These are normally appointed by the Contractor to render professional services under the Contract and are deemed to be rendering such services under the delegated authority of the Contractor.

§ The Contractor is liable for their fees and for any breaches on their part.

7. Indemnity/ Insurance

The Contractor should take out insurance to cover his liability in respect of:

i. Injury to persons and property

ii. The works

8. Obligations of Employer

a) Clearly identify the site upon which the works will be carried out and provide access thereto

b) Make adequate financial arrangements to ensure that all payments are made within the periods and in the manner stipulated in the contract.

9. Obligations of Contractor

a) Carry out and complete the works in accordance with the contract, the drawings and the approvals granted, in accordance with applicable building codes and laws, in a timely manner and to the reasonable satisfaction of the architect and the employer

b) Insure the works

c) Supply information required by the employer in respect of the progress on the works.

10. Defects Liability

The Contractor should undertake that any patent defect or other faults which may appear within Six (6) months of completion of the Works due to materials or workmanship shall within a reasonable time after receipt of the employer’s written instruction be made good by the Contractor and (unless otherwise mutually agreed upon) at its own cost.

11. Representation & Warranties by Contractor

Although due diligence should be carried out by the employer to the extent possible, there should be built into the contract some warranties by the contractor such as:

i. He’s in compliance with all the laws and regulations applicable to his organisation’s existence and transaction of business

ii. There are no claims, actions, suits or proceedings pending against him which would have any material adverse change in the contractor’s financial condition.

 

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Wood Avenue

P.O Box 17829 - 00100

Nairobi, Kenya

 

Contacts

t: + 254 20 386 0438

f: + 254 20 386 0439

c: + 254 722 816 617

e: info@mionkiadvocates.com

w: www.mionkiadvocates.com

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