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Understanding contracts for your building projects

A contract is a written or spoken agreement  that is intended to be enforceable by law.
It is a legally binding agreement between two or more parties that outlines the terms and conditions of their mutual obligations. Contracts are used in various contexts, such as business transactions, employment relationships, real estate deals, and more. They serve as a means of formalizing and clarifying the expectations and responsibilities of each party involved in the agreement.

Key elements of a contract typically include:

  1. Offer: One party presents a proposal or offer to the other party, outlining the terms of the agreement.
  2. Acceptance: The other party agrees to the terms of the offer, creating mutual consent.
  3. Consideration: There is an exchange of something of value, such as money, goods, services, or promises, between the parties.
  4. Legal Intent: Both parties intend for the contract to create a legally binding relationship and have the capacity to enter into such an agreement.
  5. Capacity: The parties involved are legally competent and have the legal capacity to enter into a contract. This typically means they are of sound mind and of a certain age (usually 18 or older).
  6. Legality: The contract’s purpose and terms must not involve illegal activities or go against public policy.
  7. Certainty: The terms of the contract must be clear and specific enough for a court to enforce if necessary.
  8. Meeting of the Minds: Both parties have a clear understanding of the terms and agree on the same understanding of what is being contracted.

Contracts can be written, verbal, or implied, depending on the jurisdiction and the nature of the agreement. However, written contracts are generally preferred as they provide clear evidence of the terms and reduce the potential for misunderstandings or disputes. If a party breaches the terms of a contract, legal remedies, such as monetary damages or specific performance, may be pursued to enforce the agreement or compensate for losses.

It’s important to note that contract law can vary between jurisdictions, and the specific requirements for a valid contract may differ based on local laws and regulations.

For your residential building, you may want to have a contract before proceeding to construction works. Typically, a gentleman’s agreement may be okay. In this case, it’s a verbal statement and the deal is based on trust. However, on projects, what is not written does not exist hence we advise even a one page agreement is fine. Some complex contracts for multi-billion Naira projects can be hundreds of pages long. But your a small residential project is doesn’t have to be so. Ensure you are dealing with a trusted team before entering into a contract because no matter the type of contract,once you have a major issue, it will take a toll on your time, money and energy. The mindset of those you are dealing with is of utmost importance… first things first.

We would not be going into different types of contracts for ease of understanding. A basic residential construction contract should outline some information part of which is below:

  1. Project address
  2. Name of owner
  3. Name of contractor
  4. Scope of works to be done
  5. Project schedule
  6. Project cost
  7. Expected quality
  8. Stakeholders’ information
  9. Possible risks and how to mitigate such
  10. Communication plan
  11. Dispute resolution if required
  12. And any other information deemed necessary.

Below is a draft contract for a residential bungalow:

AGREEMENT

between Owner and Contractor
 

This is an agreement between “abc”, hereinafter called Owner and “xyz”, hereinafter called Contractor.

I. PURPOSE & SCOPE

The purpose of this agreement is to

  1. Create a binding Legal Contract between the Owner and Contractor for the Construction of 3 Bedroom Residential Bungalows.

  2. Clearly identify the roles and responsibilities of each party as they relate to the construction of the said two units residential bungalow located in ….., Nigeria.

  3. Define Project Milestones and Payments thereof.

The scope of works is carcass and finishes for 3 bedroom residential bungalows.

II. OWNER RESPONSIBILITIES

The owner shall undertake the following activities:

1. Share and communicate relevant project information with supervisor

2. Resolve government approval and community related issues on the project

3. Review the project status weekly with the contractor.

4. Provide storage, water, water tanks and accessories, security, power and access to the site

5. Attend to project issues in a timely manner to prevent delays

6. Make Milestone Payments on the Project in a Timely Manner.

III. CONTRACTOR RESPONSIBILITIES

The contractor shall undertake the following activities:

1. Ensure the predefined project scope is complete at handover

2. Ensure the project is finished within schedule

3. Review the project status periodically

4. Comply with Nigerian laws during the execution of the project

5. Ensure the project construction quality complies with Nigerian standards.

IV . IT IS MUTUALLY UNDERSTOOD AND AGREED BY AND BETWEEN THE PARTIES THAT:

1. The building construction will be carried out in a workmanlike manner to conform with the Nigerian building codes and standards.

2. The project scope is the building carcass and finishes excluding external works such as gates, fences, paving, soft landscaping, borehole,power connection, septic tank and gate house.

3. The planned project schedule is 8 weeks.

4. The construction cost and payment milestone for the project is as below:

Cost for building carcass:

Cost for building finishes:

Building Carcass payment milestone:

(1) Foundation to DPC =

(2) DPC to Parapet =

(3) Parapet to Roof completion =

Building Finishing payment milestone:

(1) Plastering, POP and MEP =

(2) Doors, windows and tiles =

(3) Painting, kitchen cabinets and wardrobes =

 

5. Contractor will give weekly progress updates to Owner.

6. All project issues will be discussed and resolved in a timely manner between the

Contractor and owner to prevent project delays.

7. Variation in project scope will affect time and cost. This will be discussed and resolved by the owner and Contractor.

V. SCOPE

The project scope is as under listed for the main building

CARCASS: Foundation

1. Setting out of buildings

2. Digging of foundation to about 600mm

3. Casting 50mm thick blinding

4. Laying of blocks

5. Installation of metal bars to columns

6. Casting of columns

7. Filling foundation

8. Ramming of foundation

9. Laying of water proof

10. Installation of side formwork

11. Casting the ground floor slab

Ground floor

1. Setting out of block work

2. Building up block walls leaving space for doors and windows as per drawings

3. Installation of door and window lintels.

4. Installation of formwork to columns and casting of the same

5. Build up of block work above lintel level

6. Mechanical and electrical piping

Roof level

1. Casting of perimeter roof beam

2. Parapet casting

3. Installation of wood truss

4. Installation of roofing sheets and flashing

FINISHES:

1. Plastering

2. Windows installation

3. POP ceilings

4. Screeding

5. Doors installation

6. Windows installation

7. Window trims

8. Wiring

9. Tiling

10. Sanitary wares installtion

11. Cabinets

12. Sockets and switches installation

13. Lighting fittings installtion

14. Painting

External Works

  1. Water Stanchion

  2. Septic Tank, Soakaway and Chambers

  3. Layout Kerbs for Landscaping

* Kindly note that external works are not included in the cost/scope. This can however be added as a separate item.

VI. CONTACT

Owner’s Details

Name:

Phone number: 

Address_

Contractor’s Details

Name:

Phone number:
Address:

VII. GOVERNING LAW AND DISPUTE RESOLUTION

    1. This Agreement and any Dispute shall be governed by and construed in accordance with Nigerian law.

State and dispute resolution procedure if any

VIII. EFFECTIVE DATE AND SIGNATURE

IN WITNESS WHEREOF the Parties have caused this Agreement to be executed and delivered as a deed as of the date first above written.

Owner:                                           Contractor:

Date:                                                         Date:

In The Presence of:

……………………………………………………….. ………………………………………………………………….

Name:

Title

Address

 

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