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What are the standard clauses for a Construction Contract?

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Standard Clauses in a Construction Contract in Kenya

Construction contracts are legally binding agreements between an employer and a contractor, outlining the terms and conditions for the construction, repair, modification, renovation, or demolition of a project. These contracts are crucial for ensuring a smooth and successful project, protecting the interests of both parties, and providing a framework for resolving any disputes that may arise.

In Kenya, the Joint Building Construction Council (JBCC) has developed a standard construction contract known as the "Agreement and Condition of Contract for Building Works" (The Green Book). This standard contract is widely used in Kenya for private construction projects.

Introduction
Standard Clauses in a Construction Contract
1. Parties
2. Scope of Work
3. Contract Price and Payment
4. Time for Completion
5. Variations
6. Termination
7. Defects Liability Period
8. Insurance
9. Dispute Resolution
10. Force Majeure
11. Governing Law and Jurisdiction
Case Laws
Sample Construction Contract
Conclusion
TLDR

Standard Clauses in a Construction Contract

Here are some of the standard clauses that are typically included in a construction contract in Kenya:

1. Parties

Identification of Parties: The contract should clearly identify the parties involved, including the full legal names and addresses of the employer and the contractor.
Capacity to Contract: The contract should confirm that both parties have the legal capacity to enter into a binding agreement. This means that they are of legal age, have the mental capacity to understand the terms of the contract, and are not acting under duress or undue influence.

2. Scope of Work

Detailed Description: The contract should provide a detailed description of the work to be performed, including the specific materials, specifications, and standards to be used.
Drawings and Specifications: The contract should reference any relevant drawings, specifications, and other documents that form part of the agreement.
Site Visit: It is advisable for the contractor to conduct a site visit before signing the contract to ensure that they understand the site conditions and any potential challenges.

3. Contract Price and Payment

Contract Sum: The contract should specify the total contract price for the work, which may be a fixed sum or a cost-plus arrangement.
Payment Schedule: The contract should outline a clear payment schedule, including the milestones to be achieved and the corresponding payment amounts.
Retention: The contract may include a retention clause, which allows the employer to withhold a percentage of the contract price until the completion of the project and the rectification of any defects.
Currency: The contract should specify the currency in which payments will be made.

4. Time for Completion

Completion Date: The contract should specify a clear completion date for the project.
Extension of Time: The contract should outline the circumstances under which the completion date may be extended, such as delays caused by unforeseen circumstances or variations to the work.
Liquidated Damages: The contract may include a liquidated damages clause, which specifies the amount of compensation payable by the contractor for each day of delay beyond the completion date.

5. Variations

Variations to the Work: The contract should outline the process for making variations to the work, including the procedures for obtaining approval from the employer and the method for calculating any additional costs or time.
Variation Orders: Any variations to the work should be documented in writing through variation orders, which should be signed by both parties.

6. Termination

Termination for Convenience: The contract may include a termination for convenience clause, which allows the employer to terminate the contract for reasons unrelated to the contractor's performance, such as a change in the employer's requirements or financial constraints.
Termination for Breach: The contract should outline the circumstances under which either party may terminate the contract for breach of its terms, such as failure to perform the work in accordance with the specifications or failure to make timely payments.
Consequences of Termination: The contract should specify the consequences of termination, including the rights and obligations of each party, such as the payment of outstanding invoices, the return of materials, and the disposal of incomplete work.

7. Defects Liability Period

Defect Liability Period: The contract should specify a defects liability period, which is a period of time after the completion of the project during which the contractor is responsible for rectifying any defects in the work.
Notice of Defects: The contract should outline the process for the employer to notify the contractor of any defects within the defects liability period.
Remedies for Defects: The contract should specify the remedies available to the employer if the contractor fails to rectify defects within a reasonable time.

8. Insurance

Contractor's Insurance: The contract should require the contractor to maintain adequate insurance coverage, such as public liability insurance, workers' compensation insurance, and property damage insurance.
Employer's Insurance: The contract may also require the employer to maintain certain insurance coverage, such as property insurance for the project site.

9. Dispute Resolution

Dispute Resolution Clause: The contract should include a dispute resolution clause, which outlines the process for resolving any disputes that may arise between the parties.
Negotiation: The contract may require the parties to attempt to resolve disputes through negotiation before resorting to other methods.
Arbitration: The contract may specify that disputes will be resolved through arbitration, which is a private and confidential process where a neutral third party makes a binding decision.
Litigation: The contract may allow for disputes to be resolved through litigation in the courts, but this is generally a less desirable option due to the time and expense involved.

10. Force Majeure

Force Majeure Events: The contract should define force majeure events, which are events beyond the control of either party, such as natural disasters, acts of war, or government regulations.
Exemption from Liability: The contract may exempt the parties from liability for delays or non-performance caused by force majeure events.
Notice Requirements: The contract should outline the notice requirements for parties to notify each other of force majeure events.

11. Governing Law and Jurisdiction

Governing Law: The contract should specify the law that will govern the interpretation and enforcement of the agreement. In Kenya, this is typically Kenyan law.
Jurisdiction: The contract should specify the jurisdiction in which any disputes will be resolved. This is usually the courts or arbitration tribunals in Kenya.

Case Laws

Mombasa Municipal Council v. E.A. Building Materials Ltd. (1969) EA 405: This case established the principle that a contractor is entitled to be paid for work done in accordance with the contract, even if the work is not completed due to the employer's breach of contract.
Kenya Power & Lighting Co. Ltd. v. M/S. Patel & Co. Ltd. (1998) 1 EA 1: This case highlighted the importance of clear and unambiguous contract terms, particularly in relation to the scope of work and the payment schedule.
Kenya Commercial Bank Ltd. v. Trust Bank Ltd. (2003) 1 EA 1: This case emphasized the importance of adhering to the agreed-upon dispute resolution process, as outlined in the contract.

Sample Construction Contract

Agreement and Condition of Contract for Building Works

This Agreement is made and entered into this [Date] day of [Month], [Year], by and between:

[Employer Full Name], a [Type of Entity] duly incorporated and existing under the laws of [Country], with its registered office at [Employer Address] (hereinafter referred to as "Employer"),

and

[Contractor Full Name], a [Type of Entity] duly incorporated and existing under the laws of [Country], with its registered office at [Contractor Address] (hereinafter referred to as "Contractor").

WHEREAS, the Employer desires to have certain building works constructed at [Project Address] (hereinafter referred to as "the Works") and the Contractor desires to undertake the construction of the Works.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

1. Definitions

"Contract" means this Agreement and all Schedules, Drawings, Specifications, and other documents referred to herein.
"Works" means the building works to be constructed by the Contractor as described in the Drawings and Specifications.
"Contract Price" means the total sum payable by the Employer to the Contractor for the execution of the Works.
"Completion Date" means the date specified in the Contract for the completion of the Works.
"Defects Liability Period" means the period of time specified in the Contract during which the Contractor is responsible for rectifying any defects in the Works.

2. Scope of Work

The Contractor shall execute the Works in accordance with the Drawings and Specifications.

3. Contract Price and Payment

The Contract Price for the Works shall be [Contract Price] ([Currency]).

4. Time for Completion

The Contractor shall complete the Works on or before the Completion Date, which is [Completion Date].

5. Variations

Any variations to the Works shall be made in accordance with the procedures set out in the Contract.

6. Termination

The Contract may be terminated by either party for breach of its terms or for convenience.

7. Defects Liability Period

The Defects Liability Period shall be [Defects Liability Period].

8. Insurance

The Contractor shall maintain adequate insurance coverage as specified in the Contract.

9. Dispute Resolution

Any disputes arising out of or in connection with the Contract shall be resolved in accordance with the procedures set out in the Contract.

10. Force Majeure

Neither party shall be liable for any delay or non-performance caused by force majeure events.

11. Governing Law and Jurisdiction

The Contract shall be governed by and construed in accordance with the laws of Kenya. Any disputes arising out of or in connection with the Contract shall be subject to the exclusive jurisdiction of the courts of Kenya.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

[Employer Signature]

[Contractor Signature]

Conclusion

Construction contracts are essential for any construction project in Kenya. They provide a clear framework for the rights and obligations of the parties involved, ensuring a smooth and successful project. It is crucial to have a well-drafted contract that addresses all relevant aspects of the project, including the scope of work, payment terms, time for completion, variations, termination, defects liability period, insurance, dispute resolution, force majeure, and governing law and jurisdiction.

TLDR

Construction contracts in Kenya are governed by the Joint Building Construction Council's "Agreement and Condition of Contract for Building Works" (The Green Book). Standard clauses include defining the parties, scope of work, contract price and payment, time for completion, variations, termination, defects liability period, insurance, dispute resolution, force majeure, and governing law and jurisdiction.

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