Construction Contracts
Expert-defined terms from the Undergraduate Certificate in Construction Law and Contracts course at London School of Planning and Management. Free to read, free to share, paired with a globally recognised certification pathway.
Adversarial relationship #
A contractual relationship where parties have conflicting interests and aims to maximize their own benefit, often leading to disputes.
Arbitration #
A form of dispute resolution where a neutral third party, the arbitrator, hears evidence and makes a binding decision.
Backcharges #
Also known as change orders, they are additional charges for work not included in the original contract.
Bid bonds #
A type of surety bond that guarantees the contractor will enter into a contract at the bid price if awarded the job.
Bid shopping #
The practice of soliciting bids from multiple contractors and using the lowest bid as leverage to negotiate a better price from the chosen contractor.
Change directive #
A written order issued by the owner or architect to change the work during construction.
Change order #
A written agreement between the owner and contractor to modify the scope of work or price of the contract.
Claim of right #
A contractor's claim that they are entitled to additional compensation due to unforeseen conditions or changes in the scope of work.
Conditional payment clause #
A clause in a contract that withholds payment until certain conditions are met, such as completion of the work or approval by the owner.
Contingency sum #
An amount of money included in the contract to cover unforeseen expenses or changes in the scope of work.
Contract documents #
All written and graphic documents that form the contract between the owner and contractor, including plans, specifications, and the agreement.
Contract time #
The amount of time allowed for the completion of the work, as specified in the contract.
Cost #
plus contract: A contract where the contractor is reimbursed for the actual costs of the work, plus a fee for their services.
Damages #
The monetary compensation awarded to a party for a breach of contract or other legal wrong.
Defective work #
Work that does not meet the standards specified in the contract or building codes.
Design #
bid-build: A traditional project delivery method where the design and construction phases are separate and the owner contracts with separate entities for each phase.
Design #
build: A project delivery method where the designer and contractor are part of the same entity and the owner contracts with them for both the design and construction phases.
Dispute resolution #
The process of resolving disputes between parties through negotiation, mediation, arbitration, or litigation.
Estoppel certificate #
A document signed by a party, such as a subcontractor, that certifies they have no claims or liens against the project.
Force majeure #
An unforeseeable event, such as a natural disaster, that prevents a party from fulfilling their contractual obligations.
Lien #
A legal claim against property for the payment of a debt or other obligation.
Liquidated damages #
A predetermined amount of damages agreed upon by the parties in the event of a breach of contract.
Mediation #
A form of dispute resolution where a neutral third party, the mediator, facilitates communication and negotiation between the parties to reach a mutually agreeable solution.
No #
damage-for-delay clause: A clause in a contract that prohibits the contractor from recovering damages for delays caused by the owner or other parties.
Notice of claim #
A written notice from the contractor to the owner stating their intention to make a claim for additional compensation.
Notice of completion #
A written notice from the owner to the contractor stating that the work has been completed and the contractor's right to lien has been terminated.
Payment bond #
A type of surety bond that guarantees the contractor will pay their subcontractors, laborers, and material suppliers.
Performance bond #
A type of surety bond that guarantees the contractor will perform the work according to the terms of the contract.
Progress payments #
Payments made to the contractor during the course of construction based on the completion of specific milestones or phases.
Prompt payment act #
A law that requires owners and contractors to make payments in a timely manner and imposes penalties for late payments.
Request for information #
A written request from the contractor to the architect or owner for clarification or additional information about the contract documents.
Scope of work #
The work to be performed by the contractor, as specified in the contract documents.
Surety bond #
A three-party agreement between the surety, the obligee (the owner), and the principal (the contractor), where the surety guarantees the contractor's performance and payment obligations.
Termination for convenience #
The owner's right to terminate the contract for any reason, without cause, and without incurring liability.
Termination for default #
The owner's right to terminate the contract for the contractor's failure to perform their obligations under the contract.
Time is of the essence #
A clause in a contract that requires the parties to perform their obligations within a specified time frame and implies that any delay will result in damages.
Warranty #
A promise or guarantee by the contractor to repair or replace defective work for a specified period of time after completion.