How To Legally Bind Your Contractor

• You have worked hard, attained/purchased your prime land in your dream location where you desire to build and settle or set up a commercial building or estate.

• You perhaps don’t know any trusted company or individual to help you “kick start “your dream on paper, later raise it from the ground until it starts harvesting you the desired pleasure/ comfort and or income.

• Probably you have heard stories of how construction is expensive, how engineers steal cement and other building materials, how someone was sending money to build and when they came on their site, they found a contrary shocking picture from what was presented on the media, among other stories.

• Your mind is certainly racing through puzzling scenarios, and you are at a verge of giving up owing to a sea of uncertainties and associated risks.
• Rhetoric on how to get your engineers committed to execute your dream; how to make them accountable and give you value for money have flooded your mind.
• Maybe you are a Ugandan living in the diaspora, and you desire to invest in real estate or build a house where you will come to in summer instead of using Air B&B, and now wondering where to start from, who to trust and where to start from with your ventures.

• At Gridway Engineering Services Ltd, the engineering hub for all your construction and real estate needs; we strive to give our clients peace of mind, professionalism and value for money and we now bring you ways in which you can get your contractors commit and account for every penny you give to them.

• On the first front, make sure you have a binding contract/Agreement with your site contractors and ensure that the following elements are well emphasized and captured:

1. The Parties: This part captures your names, addresses, phone and email contacts and those of your contractors.

• Description of the property: In this part, the property that is to be constructed on, its ownership, location and size should be described.

• Scope of work: This part is normally avoided by many framers of construction contracts, yet it is very vital. It must stipulate/capture the project summary, deliverables, exclusions, milestones, stakeholders, and estimated costs for labour and materials; in other words, the duties of the contractor are expressly described.

• Consideration. This is where every attention is drawn, the parties agree to the total cost of the services provided. It also specifies where and when it will be paid. It is of utmost importance that you segment the payments to every stage completed and demand report and inspection of works before the next stage starts.

• Usage of Materials and Labor: Under this paragraph of the agreement, the parties should agree about the constructor’s responsibility to provide, supervise and pay for any labor and/or equipment needed to complete the construction as per the Agreement.

The parties can also agree that the materials to be used for the construction are to be new or fit for purpose.

• Termination and Indemnification. This is one of the fundamental sections of the contract where the parties should agree on the procedure and notice periods in case the agreement may be terminated by the innocent party or other occurrences that can warrant the relationship to come to an end.

The agreement can automatically be terminated when both parties complete their obligations.

The contractor must commit to hold harmless as well as indemnify its personnel, employees and others against all liabilities, expenses, claims or other third-party claims. The contractor should also commit to be held responsible for providing a defence against the aforementioned liability, claims and/or demands, if any.

• Alternative Dispute Resolution: Draw your attention to the time when the worst happens or when the relationship is breached by any eventuality or by any of the parties. When a dispute or difference whatsoever arises out of or in connection with your project, where, when and how should you settle or submit your grievances/differences (Arbitration/mediation/negotiation); which law will parties submit to? Don’t be naïve and omit to talk about a conflict resolution mechanism in the eventualities.

• Defects Liability Clause (DLC): Most contractors will omit or dodge or threaten not to take up your works owing to the DLC. The purpose of a defects’ liability clause is to allow contractors the right to return to site to rectify defects till the expiry of an agreed period of time. As a client, insist on retaining a percentage (5-10%) of the contract price for a specified reasonable time (6-12 months) after the site has been handed over to you.

• Governing law and Amendments. Talk about the set of laws that both parties will submit to in case of interpretation and enforcing any of the terms in your engagement. Talk about amendments and how they will arise and the steps to follow for an amendment in the contract. Normally, local laws should apply for small or medium projects unless you feel international laws and jurisdictions will favor you as the client.

1. Signature and witnessing:  Ensure to complete and seal your agreement by appending your signatures and have witnesses who will confirm what you agreed to be bound to in the agreement.

Endeavour to seek the services of a professional/qualified/experienced person to help you prepare and or proof read the agreement to ensure that your interests are captured and catered for.

Unfortunately, most clients just sign without proof reading or allowing a second eye scrutinize the agreement. Like they say, the devil is in the detail. 

In our next episode, we will look at other steps like Standard record keeping, professional indemnity, supervision, segmentation among others in order to commit your contractor for your construction site.

Arthur Ayorekire

Head Corporate Affairs

Grid way Engineering Services Ltd.