Contract analysis methods and considerations

Contract Analysis

Analyzing a Construction Contract

The contract chosen for analysis in this study is a construction contract. This contract would be used for example in the construction of an office building. The parties involved in this contract are John Smith, contractor, and Tom Brown, owner. This contract is being used for the construction of an office building for Tom Brown.

Laws Governing the Contract

The laws that govern this contract are those of the State of Alabama. The contractor agrees to furnish all labor and materials needed to construct the office building for Tom Brown and furthermore, the owner, Tom Brown, states that the properly is free from debts, liens, and other encumbrances.

In Section Two, the contractor agrees to construct the office building so that it conforms to the plans and specifications, breakdown, and binder receipt that has been signed by both the owner and contractor. The contract state that the contractor will not be responsible for any improvements to the structure including such as landscaping, grading, laying walkways, installing water, sewer, steps, driveways, patios and so forth unless these are stated in the breakdown of the contract construction specifications.

III. Payments Specified in the Contract

In this specific scenario, the contractor will be paid the amount of $44,000.00 for his work and this is to be paid in four installments of $11,000.00 each. Each payment will be made on the first day of the month for a period of four months beginning September 1, 2012 and ending December 1, 2012. The contract states that if the payment is not made that the contractor may stop his work until the payment is made and then for an additional five days after the payment is not made. If the installment payment is not made within ten days after that installment payment is due the contractor may take such action as he deem necessary and this includes legal proceedings to enforce his rights to be paid.

IV. Responsibilities of the Owner

Before the construction on the office building begins, the owner is responsible for providing the following:

(1) A "clear accessible building site" that has been properly excavated and correctly zoned for the structure and that the boundaries of the owner's property by all stakes at all corners.

(2) The owner is responsible for maintaining the stakes in proper position throughout the duration of the construction project.

(3) If the owner is unable to obtain a building permit within thirty days from the date the contract agreement is signed the contractor has the right to declare the agreement null and void.

(4) Before construction and throughout the construction project, the owner is responsible for providing and maintaining, at his expense, an all weather roadway to the building site and water and electricity to include a 220-amp outlet.

(5) The owner, at his own expense may connect a permanent electrical line as well as gas and oil service and the tanks and lines to the building upon cover inspection and before wall covering is added to the building.

(6) The owner also may connect sewage disposal and water lines to the building within fifteen days after the rough plumbing has been completed.

V. Owner to Hold Contractor Harmless from Certain Events

The contractor is not responsible for any claims that arise due to the boundary or house stakes being positioned wrong. The contractor is also not responsible for any damages to persons or property that arise by the owner, his agents, or any third parties. Neither is the contractor responsible for any acts of God or other events that are beyond the control of the contractor. The owner is to hold the contractor completely harmless from all costs, damages, losses and expenses to include judgments and any attorney fees due to any claims that arise such as are stated in the contract.

VI. Possession of the Property

The owner will not have possession of the structure until all payments and obligations have been fulfilled as stated in the contract agreement. If for some reason the owner assumes possession of the property before the obligations of the contract agreement are met, then the owner signals acceptance of the structure 'as is'.

VII. Financing and Site Preparation Requirements

The owner must take the necessary steps to obtaining financing and to make sure the site is construction ready.

VIII. Other General Provisions

There are no agreements or understandings between the contractor and the owner except for those specified in the contract agreement and this includes any other verbal or written agreements. The contract terms cannot be amended or modified unless the owner and contractor enter into a written agreement modifying or amending the contract.