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Introduction - Contract Administration
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The study includes general principles of contract laws from the view of the contract administrator that has been appointed by the contractor. Along with this, types of payment methods and procurement approaches have been mentioned. The role of a standard contract document is also discussed elaborately.
In the contemporary world, the legal system in the construction industry plays a vital role in order to secure the interest of the clients and promote a harmonious relationship between contractors and clients. There are different principles of contract law in regard to Australia’s construction industry which are mainly Agreement, Consideration, and Intention, capacity, genuine consent and Legality. An Agreement is a must in making any contract as it is the basic proof of making the contract and contract agreement can be done without proper consideration. Intention is another important aspect of the contract law of Australia as with proper intend to bound by the contract by both the parties, a proper contract cannot be done. Moreover, both the parties need to have a proper mental capacity of understanding what is to be done in the contract which is one of the most important aspects or principles of the contract agreement. Legality of a contract and genuine consent from both the sides must be there for a successful agreement without which the contract cannot be done. It can be easily seen that various companies of the world that have been involved in the construction industry have been facing various problems reducing the conflict in the contracts (peacefulpath.com.au, 2022). According to the legal system of the country, in case of any conflict between the interest of the contractors and the client, the parties can go to court in order to resolve such conflicts. Sometimes it can be seen that some contractors around the world are involved in an invalid contract and this kind of contract can lead to conflict among the clients (Ashworth and Perera, 2018). In these scenarios, some contemporary scholars of the world suggest that in case a construction company has not involved in the construction business according to the law of the country then the trust of stakeholders in the contractors can be affected negatively (Wang et al. 2018). It is an obvious fact that in case the contractors are not following the legal framework that has been provided by the parliament of the country then there are quite possibilities that the brand image of that company can be affected and it can lead to deterioration of market profit.
Recent studies suggest that consumers as well as stakeholders that are involved in various business activities of the world, especially in this industry are not trusting the companies in case of the companies are not following proper legal framework for contracts. In order to devise contract laws, contractor administrators, need to focus on some key principles such as agreement, capacity, consideration, intention, genuine consent and legality (Macaulay, 2018).
Chevron (Tapl) Pty Ltd v Pilbara Iron Company (Services) Pty Ltd  WASCA 193 is a real case law example that shows the application of the contract law in the construction industry in Australia (lexology.com, 2022). In the application of this law, the appellants and the respondents have reached to an agreement in a contract in which the gas would be supplied by the appellants to the first respondents for the first few years. In the next few years, both the parties will review the price of the gas till the notice is to be issued after 90 days. Hence, this is the case law example which shows the application of the contract law in the construction industry.
Sometimes, it can be seen that the administrators are failed to provide an agreement to the parties that are compatible with the interest of clients and so clients deny the contract. In this regard, it can be said that administrators need to make a contract that is compatible with the interest of the clients and that focus on the general acceptability principle (Lee et al. 2021). Along with this, it can be also seen that for a contract, some companies are using manipulated words in the contract documents and after signing by the clients, they used it in their own interest. On the other hand, it can be also seen that due to misunderstanding of language or words that have been used in contract documents conflict among the parties has occurred (proctors.com.au, 2022). In order to reduce such conflicts, contract administrators need to focus on language that has been used in the contract documents and they need to clearly define and describe any vague words that have been mentioned in such documents.
Recent studies on the procurement process of the construction companies of the world have been suggesting that it is an approach, which brings construction parties together, to assist in the construction process. Various companies around the world that have been involved in such an industry have been following various approaches to procurement, they define risk, and responsibilities according to their selected procurement approach (Jafari et al. 2021). In this regard, it cannot be exaggerated to say that the risks and responsibilities of those parties that have been involved in the procurement process depend on their procurement approaches. It is an obvious fact that the organisation that has been involved in the procuring of building materials has different risk from the organisation that has been involved in the health and safety of the employees. Some contemporary scholars around the world have been suggesting that the involved companies need to select an appropriate and effective procurement approach in order to deliver the construction project without a delay (Boadu et al. 2021). Along with this, it is an obvious fact that if case companies are selecting an appropriate approach for procurement then there is quite possible to reduce some expected risks regarding the completion of construction projects. In this regard, it can be said that the involved companies need to select their approaches by analysing various expected risks and the impacts of those risks on the completion of such projects.
In the contemporary world, traditional, management contracting, design and construction, and construction management have been considered types of procurement approaches.
Features of traditional approaches
- The design process is monitored and controlled by clients
- Two separate parties have been involved in the design and construction
- This method prevails among construction companies of the world
Advantages of traditional approaches
- Satiate intent demand of clients because they involved in the designing process
- Clients know the financial requirement to construct such a design
Disadvantages of traditional approaches
- Can be cause delays in project completion
- This can create incompatibility in design and construction because the involvement of two separate parties (Olowosile et al. 2019)
Designs and construction approaches
- Clients involved in both process construction as well as design
- The contractors offer various designs of buildings along with the cost of construction
- One party is responsible for design as well as construction so conflicts do not occur as it occurs in the traditional method
- Contractors are able to reduce the time of construction and deliver the project on the time
- Does not provide full control of design to the clients so it can is possible that clients cannot be satisfied
- Does not provide a high quality
Management contracting approaches
- Suitable for complex as well as a large project
- Clients are free to appoint a team for design
- Provide a better quality
- Assist in time management
- Uncertainty about the cost of the project
- Requirement for an effective and experienced project team
The clients are using various methods in order to pay the contractors for the construction as well as designing activities. It can be seen that some clients of the world have been paying their contractors on a monthly basis. On a monthly basis of payment, the clients are paying the contractor for those parts that have been done in a month. For instance, in case the contractors completed 33 per cent of the total job in a month then the clients are paying only 33 per cent of the money that has been estimated at the time of project planning. In this method, the risk of financial conflicts between the contractors and clients regarding payment has been reduced (Rugina, 2021). Along with this, it can be also seen that some clients around the world have been paying their contractors after some intervals. Like the monthly payment method, in this payment method, the clients are liable to pay the contractors for those works that have been completed by them at the time of the payments. Along with this, some clients of the world are involved in paying their contractors at the time of delivery. In the other words, it can be also said that some clients have been selecting or following the completion of whole projects. In this scenario, there is quite a possibility that the risk among the contractors regarding financial payment is high (Faraji, 2019). In this regard, some contemporary scholars suggest that sometimes it can be seen that due to this method clients are involved in bargaining or reducing the cost of the project after the completion of construction work.
In order to make payment to the construction company, the progress claims play a vital role because in case the contractors failed to prove the progress claim then they fail to get their payment from the clients. Progress valuation depends on various components such as advance payments, recovery, completion of total works and variation in building materials, design, and quality. Sometimes it can be seen that in some contracts the advance payment has been applicable before starting a project. In this regard, some contemporary scholars of the company have been a suggestion that sometimes it can be seen that in case the clients are not involved in such kinds of contracts then they pay their contractors for their parts and offer contracts to another company (Ballesteros-Lintao and Ameer Ali, 2022). In order to reduce such kinds of contracts, some contemporary companies of the world have been involved in making such kinds of contracts. It is an obvious fact that in case clients are paying contractors in advance then there is less possibility that the clients offer another contractor and look for another option.
In the contemporary world, contractor administrators are selecting various types of contracts in order to satisfy the interest of clients as well as contractors. Along with this, the risk and responsibilities of various types of contracts depend on their types. Some scholars suggest that administrators need to select carefully the types of contracts according to their evaluation of risks and compatibility with the construction project (Hazem and Breesam, 2019). sometimes it can be also seen that in order to complete construction work some contractor companies are involved in various contracts such as contracts with the clients, contractors with building materials provider companies, contracts with involved employees and many more. In this regard, recent studies suggest that contractors need to select the type of contracts according to the procurement approaches that have been selected for them (Qian and Papadonikolaki, 2020). Sometimes it can be seen that due to the incompatibility between procurement approaches and the selection of the types of contracts, the contractor's administrators are facing various difficulties and risks regarding the completion of such construction projects. In this regard, it cannot be exaggerated to say that in order to select an appropriate type of contract, the contractor's administrators need to focus on the nature of the projects, the demand of consumers, selected procurement approaches, and risks in such construction projects.
Some recent scholars of the world think that contracts provide legal guidelines for the contractor's companies to do their work in a way. It is an obvious fact that in the case of contractors involved in construction activities without a contract between the parties then they do not understand the intent of the client in an effective manner. It encourages the possibility of risk regarding the insatiability of the demands of clients. Along with this, there are quite possibilities that in case of contractors are not involved in contracts, the clients offer another contractor without any concerns from the previous companies that have been already involved in such activities (Hansen, 2020). In order to devise provisions in the contract, the administrators need to define the rights of the companies as well as clients to reduce the possibilities of conflicts regarding the rights. Along with this, it can be seen that some complex words in the documents can create a misunderstanding and lead to conflicts between clients and companies. In order to reduce such conflicts, the administrators need to define clearly and concisely the rights and obligations, method of payment, managing quality, way of managing time and many more. The administrators also need to focus on standard forms of construction contracts because they have been developed over decades and are free from some general limitations. They also need to check whether developed standard contracts are compatible according to the legal framework of the company.
The study concludes that in order to develop contract forms for the construction industry, a contract administrator has to focus on the legislation of the government. In order to reduce conflicts between the contractors and clients, the contractor needs to mention the rights and obligations of the clients. They also need to mention the payment method in the document for the contract.
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