Practice Manager
MAJOR PROVISIONS OF A CONSTRUCTION CONTRACT
The construction industry in Uganda is one of the fastest growing, contributing about 12%
of GDP.
There are various standard forms of international construction contracts e.g.., FIDIC,
NEC, ICC, ENNA, IChemE, AIA and VOD. Uganda, even East African region, have no
such set standards.
Fundamentally, a construction contract made for Ugandan purposes must consider
compliance with laws provided for physical planning, environment, safety and health of
workers, supply of services, etc.
But after parties have provided for such requirements, by what terms do they then protect
their profits, ensure quality and provide for apportionment of liability amongst themselves?
Construction contracts are not the normal agreements. Terms in a normal agreement may
not have the same or exhaustive meaning for a construction arrangement, hence parties
must seek the services of a construction consultant in order to perfectly lay out the terms
of their dealings. The contract will also take shape depending on the subject of
construction i.e., buildings, roads, dams, bridges, plants etc.
In this episode of Uniqus Construction Law, we provide five of the major clauses of a
construction project contract. These are:
1. SCOPE OF WORK.
This clause must particularize as
much as possible, all of the work that
must be performed by the contractor
in exchange for the agreed contract
price. Many disputes in construction
arrangements occur due to the failure
of parties to understand the scope of
work (SoW).
Parties should make reference to the
project plans and specifications and
use the language, “and all work
related thereto” to cater for the many
components of work which cannot be
enumerated.
The SoW clause is helps owners to
obtain value for their money, and
contractors to avoid incurring losses
for excess work. No party can read
extras out or into this clause!
Poorly drafted scope of work clauses
lead to “disputes over extra work or
less than contracted for work.”
2. CONTRACT PRICE & MODE OF PAYMENT
For a contract to be enforceable, one
of the key elements is exchange of
consideration. However, in construction contracts, exchange of
consideration could have various
modes, which determine the entire
nature of the contract.
This clause determines when
payment is to be made for work done.
A construction contract can be named
according to how the contract price is
to be paid e.g. fixed lump-sum price,
unit price, ad-measurement price,
cost plus and this directly affects flow
of work, payment, profits, and time &
speed.
3. TIME/ SCHEDULING.
This could be the most important
clause in a construction contract.
Payments, handover, liability, profits,
damages, dispute resolution, etc.
hinge on this clause. Deadlines,
commencement, events amounting to
delay and suspension must be clearly
articulated. Parties must be keen as
to how their actions, local or
international laws, other factors in the
contract and acts of god, may affect
the time of completion of the project.
4. VARIATIONS.
Variation to works are the most
inevitable, because events and
circumstances arise which may be
beyond the control of the parties albeit
also being caused by them. Variations
may be necessitated by changes in
natural conditions, quantities,
technological innovations, employer’s
requirements and errors.
The contract must stipulate, who has the
powers to order a variation, the effect of
the variation on the entire contract,
procedures and requirements for
initiating and processing variations.
5. DISPUTE RESOLUTION.
There are various modes of dispute
resolution, the most common being,
mediation, arbitration and court.
Currently, in most transactions,
parties opt for arbitration as a form of
dispute resolution instead of courts of
law because it is a quicker and less
formal process compared to civil
litigation. It involves resolution of
disputes by an informal tribunal.
Arbitration in Uganda is governed by
the Arbitration and Conciliation Act of
2006.
The parties get to choose the
arbitrators who have expertise in the
construction field instead of judges
who may have no knowledge of
construction and offers privacy to the
parties involved. By agreeing to
arbitration, parties waive their right to
a trial by court (there are exceptions
though) and are bound by the
decisions of arbitrators. . Finally,
arbitration offers the parties privacy
as opposed to proceedings in a court
of law which are generally a matter of
public record.