Construction Contracts

Construction Contract

1 .0 Background

The construction industry has the characteristic feature of being an industry which is prone to disputes and conflicts . In the industry there are certain special and unique factors which make the delivery of each project a challenging one . The unique features can be enumerated as below

Each new project will be reacting as if it is a prototype getting attended to for the first time . There will be challenges being posed by the soil conditions of the site and the weather conditions prevailing at the

time when the construction work is undertaken . In those occasions there may be issues to be solved even with the design has previously been approved (HK Institution of Engineers

The industry requires the execution of the various projects involving a variety of skills and expertise which may not be available with s single organization . This requires gathering of skills in an efficient process management . However the problems of meeting the varied expertise can be countered by appointing able subcontractors . But still this may pose a problem in the Hong Kong context where either the services are rare to get or they will be much expensive

Traditionally the industry is working on large sums of cash requirements but used to trade with a very thin margin . This leaves very little or no scope for any errors . The cash flow is considered as the life line of the industry and any obstruction there would delay the execution of the project considerably

There are obstacles to entry into the market at certain levels resulting in higher prices and in some other areas there is excess capacity which acts as a barrier to the new entrants

In view of the number of stakeholders involved in a project there are bound to be interfaces and conflicts of interest . These conflicts have a tendency to multiply and hence the construction management should be performed with utmost care and diligence

The formal and a versatile mechanism that can be used to mitigate the above issues is a `construction contract . The construction contract in fact can take varied forms depending on the nature and size of the project . All these different kinds of forms of contract have a common objective of allocating the risk in respect of the project among the various parties involved in the contract

With this background this analyses the relative merits and demerits of adopting either

a ) General conditions of contract for Design and Build contract (1999 Edition ) or

b ) Building Contract (Agreement Schedule of Conditions of Building Contract for use in Hong Kong 1986 Edition by RICS HK Branch

in the matter of a large resort development involving a 5-star hotel luxury SPA center and a small casino in the Chap Lap Kok by Well Man The envisages advising the company

on the issues covering the performance of the contract , risk sharing principles , dispute resolution , administration of the contract including nomination , variation , delay and the costs and expenses involves , while adopting...