Creating a Construction Management Contract

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

The importance of a construction management contract cannot be underestimated. It lays the foundation for a successful project, by setting out the roles, responsibilities and rules that all parties must adhere to. Not only does it protect all involved from potential legal liabilities, but also helps to ensure that payments are made in a timely manner and any potential disputes are avoided.

The Genie AI team understand the key elements that need to be included in order to make sure a construction management contract is legally binding and compliant with local laws. All parties involved in a construction project should have access to our free open source legal template library - so they have access to best practice contracts and resources - without having to pay for expert advice.

Our step-by-step guidance provides an overview of what each party needs to consider when creating their own contract and how they can ensure it will provide everyone with necessary protection. We also provide information on how users can access our extensive template library today, so they can review existing industry standards from experienced professionals across various sectors of the construction industry.

In conclusion, using this guide does not require you to have a Genie AI account; we simply want to help those involved in projects understand why having an appropriate contract is essential for success, before entering into any agreement or signing any documents. Read on below for further details on how you can benefit from our extensive collection of templates today!

Definitions (feel free to skip)

Lump sum contract: A contract in which a fixed amount of money is agreed upon for the completion of a project, regardless of how much it costs to complete the work.

Cost plus contract: A contract in which the contractor is reimbursed for the costs of completing the project, plus an additional fee for their services.

Design-build contract: A contract in which a single entity is responsible for both the design and construction of a project.

Unit price contract: A contract in which the contractor is paid a unit price for each task they complete.

Binding arbitration: A legal process by which a neutral third party makes a binding decision on a dispute between two parties.

Liability: Legal responsibility for the consequences of an action or inaction.

Contents

• Introduction to the Construction Management Contract
• Researching best practices
• Identifying common industry terms
• Understanding the Different Types of Construction Management Contracts
• Exploring the various options available
• Identifying which type fits the project’s needs
• Negotiating the Terms of a Construction Management Contract
• Gathering input from all stakeholders
• Addressing each party’s needs
• Outlining the Responsibilities of Each Party
• Defining roles and expectations
• Specifying which party is responsible for each task
• Establishing Payment Terms
• Setting the payment schedule
• Establishing the payment amount
• Determining the payment method
• Incorporating Binding Arbitration
• Exploring the advantages and disadvantages
• Drafting a binding arbitration clause
• Addressing Liability Concerns
• Identifying the risks associated with the project
• Outlining which party is responsible for each risk
• Drafting the Final Contract
• Gathering all input from stakeholders
• Writing the contract using legal language
• Ensuring the contract is in compliance with relevant laws
• Signing and Finalizing the Contract
• Verifying all parties have signed the contract
• Distributing copies of the contract to all parties
• Securing Insurance
• Researching insurance options
• Purchasing insurance to cover the project

Get started

Introduction to the Construction Management Contract

• Understand what a construction management contract is, its purpose, and how it differs from other types of contracts
• Familiarize yourself with the legal requirements and laws that are applicable to the contract
• Analyze the project scope and determine which parties will be involved in the contract
• Determine what is expected of each party involved in the contract
• When you have a thorough understanding of the construction management contract, you can move onto the next step.

Researching best practices

• Gather information regarding the industry standards for construction management contracts.
• Look into local and national laws that relate to construction management contracts.
• Research the legal terminology used in construction management contracts.
• Familiarize yourself with the different clauses that are commonly used in these contracts.
• Identify any potential risks associated with the project and make sure they are addressed in the contract.

You can check off this step and move on to the next step when you have a comprehensive understanding of the common practices, legal terminology, and clauses used in construction management contracts.

Identifying common industry terms

• Research common construction management terms used in contracts
• Look for resources online, such as industry magazines, articles, and websites
• Ask colleagues or mentors in the construction industry for their input
• Make a list of the commonly used terms
• When you feel you have identified all the common industry terms, you can move on to the next step.

Understanding the Different Types of Construction Management Contracts

• Identify the standard clauses in a construction management contract
• Review the types of construction contracts, including lump sum, unit price, cost plus, and design-build contracts
• Read the contract to ensure you understand the scope of services and the payment structure
• Research the contractor to ensure they are qualified and have a good track record with other projects
• When ready, negotiate the terms and sign the contract
• Once complete, you can move on to the next step of exploring the various options available.

Exploring the various options available

• Research the types of construction management contracts available
• Identify which type of contract is most appropriate for the project
• Compare the different options to ensure the chosen contract meets the project’s requirements
• Look into any customizations or adjustments that may need to be made to the contract
• Make sure to read and understand the terms and conditions of the contract
• When you have identified the right contract and made any necessary adjustments, you can move on to the next step.

Identifying which type fits the project’s needs

• Research the different types of contracts available to determine which one best meets the project’s needs
• Consider factors such as time frame, budget, scope of work, and risk assessment
• Analyze the project in detail to better understand the scope of the job, and the associated risks
• Identify the most suitable contract type for the project and its needs
• Once you have identified the most suitable contract type for the project, you can proceed to negotiating the terms of the contract.

Negotiating the Terms of a Construction Management Contract

• Compile a list of all the terms and conditions that need to be included in the contract
• Meet with all parties involved in the project and negotiate the terms of the contract
• Reach an agreement on all the terms, including pricing, timeline, payment terms, contract duration, scope of work, and any potential risks
• Once all parties have agreed to the terms, have the contract reviewed by a lawyer to ensure it meets all legal requirements
• Finalize the contract and have it signed by all parties
• You’ll know you have completed this step when the contract is signed by all parties involved and all terms have been agreed upon.

Gathering input from all stakeholders

• Establish meetings with all stakeholders to discuss the proposed contract
• Make sure all stakeholders are present and involved in the discussion
• Take all feedback into consideration and create a document outlining what was discussed
• Determine any changes needed to the contract based on feedback from the stakeholders
• Revise the contract until all parties agree with the terms
• Finalize the contract and agreement when all parties are in agreement
• Check this step off the list once the contract has been finalized and agreed upon by all stakeholders.

Addressing each party’s needs

• Review the input gathered from all of the stakeholders in the previous step to ensure that each party’s needs are being addressed in the contract
• Draft a contract that outlines the roles, responsibilities, and expectations of each party
• Ensure that the contract is fair and equitable to both parties by clearly defining the project scope, timeline, and budget
• Have each party review the contract for accuracy and completeness
• Seek a legal opinion on the contract to ensure that it is legally sound
• After both parties have reviewed, revised, and approved the contract, it is ready to be signed
• You will know that this step is complete when the contract has been reviewed, revised, and approved by both parties, and a legal opinion has been sought.

Outlining the Responsibilities of Each Party

• Consider the nature of the project and the expectations of both parties
• List the specific responsibilities of each party in the contract
• Make sure that the responsibilities of each party are clearly defined and that there is no overlap or confusion
• Ensure that the details of the contract are accurately reflected in the document
• Check the contract for any inconsistencies or errors
• When satisfied that the contract accurately outlines the responsibilities of each party, it is ready for review and signature by both parties.

Defining roles and expectations

• Establish a chain of command between the two parties
• Identify the roles and responsibilities of each party
• Decide who will be the decision maker
• Identify the authority of each party
• Describe the roles and responsibilities of subcontractors
• Agree on communication channels and methods
• When all the roles and expectations have been laid out, the next step is to specify which party is responsible for each task.

Specifying which party is responsible for each task

• Determine which party is responsible for each task outlined in the Construction Management Contract.
• Include any and all responsibilities in the contract to ensure that the duties of each party are clearly defined.
• Review the contract and make sure that all tasks and responsibilities are clearly identified and assigned.
• Once you are satisfied that the responsibilities of each party are clearly defined, you have successfully completed this step.

Establishing Payment Terms

• Establish payment terms in the contract, including when payments will be made and under what conditions.
• Consider whether you need to include language that requires periodic payments on a specific schedule (for example, every two weeks).
• Include details about how invoices will be submitted and approved.
• Specify what payment methods will be accepted.
• Discuss late fees and the consequences for late payments.
• Include information about the party responsible for paying for any damages caused by the contractor.
• Agree on a dispute resolution process for any disagreements about payment.

How you’ll know when you can check this off your list and move on to the next step:
Once all payment terms have been agreed upon and included in the contract, you can move on to the next step of setting the payment schedule.

Setting the payment schedule

• Agree on a payment schedule that works for both parties, taking into account the estimated time and cost of the project
• Develop a payment schedule that outlines the amounts, due dates and payment methods for each payment
• Discuss any additional clauses and language related to the payment schedule with the other party
• Finalize the payment schedule, making sure to include all agreed upon details
• Check the payment schedule for accuracy and sign off on the contract
• Once the payment schedule has been agreed upon, signed and submitted, this step is complete and you can move on to the next step.

Establishing the payment amount

• Calculate the total cost of the project and determine the payment amount for each phase or milestone.
• Set an initial payment amount for the first phase of the project.
• Agree on the payment amounts for each phase or milestone with the contractor.
• Once all amounts have been agreed upon, document the payment amounts in the contract.
• You will know you are done with this step when all payment amounts have been agreed upon and documented in the contract.

Determining the payment method

• Decide whether the payment will be made in a lump sum or in installments
• If installments, decide how many payments will be made and when
• Determine what methods of payment the contractor will accept (e.g. check, money order, online payment)
• Include details on the conditions for late payments
• When you have discussed and agreed on the payment method, write it into the contract
• Once the payment method is included in the contract, you can move on to incorporating binding arbitration

Incorporating Binding Arbitration

• Research the types of binding arbitration available and determine what type is best for the project.
• Include the details of the binding arbitration in the contract.
• Have both parties agree to the binding arbitration and sign the contract.
• You can check this step off your list once the details of the binding arbitration have been agreed upon and both parties have signed the contract.

Exploring the advantages and disadvantages

• Research the pros and cons of using a construction management contract
• Consider the risk management implications of a contract
• Analyze the potential conflicts and areas of dispute that could arise
• Evaluate the potential benefits of using a construction management contract
• When you have examined the advantages and disadvantages of using a construction management contract, you can move on to drafting a binding arbitration clause.

Drafting a binding arbitration clause

• Consider the various methods of binding arbitration and select the most suitable for your contract
• Research the applicable state and federal laws governing binding arbitration agreements
• Draft a binding arbitration clause for your contract that includes all necessary provisions
• Ensure that the clause is in compliance with the applicable state and federal laws
• Include language in the clause that specifies the process for the binding arbitration
• Have both parties sign the contract and the binding arbitration clause
• When both parties have agreed to the binding arbitration clause and signed the contract, you can move on to the next step of addressing liability concerns.

Addressing Liability Concerns

• Review applicable statutes, regulations, and case law to make sure that any liability concerns are addressed in the contract
• Make sure to consider any potential defenses that can be used in the event of a dispute or lawsuit
• Consult with an attorney or legal advisor if necessary to ensure that the contract is legally sound
• Ensure that all parties are in agreement regarding the terms of the contract
• Once all parties have agreed to the terms, the contract can be signed and put into effect.

Identifying the risks associated with the project

• Take the time to research any potential risks associated with the project, such as delays, accidents, cost overruns, etc.
• Consider the possibility of external risks, such as weather, changes in legislation, or other outside factors that could affect the project.
• Take into account both short-term and long-term risks.
• Make sure to record any risks that you identify in writing.
• Once you have identified all the risks associated with the project, you can move on to the next step.

Outlining which party is responsible for each risk

• Define the roles and responsibilities of each party in the contract
• Assign which party is responsible for controlling and managing each risk determined in the previous step
• Create a list of each risk and the party responsible for it
• Make sure that all risks have an assigned party that is responsible for it
• When each risk has been assigned a responsible party, you can move on to the next step of drafting the final contract.

Drafting the Final Contract

• Gather all the information you’ve collected in the previous steps, including the risk outlines and input from stakeholders
• Draft the contract language to reflect all the information you’ve collected
• Make sure the language is clear, concise, and easily understood
• Review the contract language with all stakeholders to ensure all parties understand the terms
• Get signatures from all parties involved in the contract
• Once all parties have signed the contract, you can check this step off your list and move on to the next step.

Gathering all input from stakeholders

• Gather input from all stakeholders involved in the construction project, including the contractor, client, suppliers, and other related entities.
• Make sure to collect information on the scope of the project, budget, timeline, and any other relevant details.
• Take notes and document any conversations that take place to ensure all stakeholders’ input is properly recorded.
• Once all the input is collected, you can move on to the next step of writing the contract using legal language.

Writing the contract using legal language

• Draft the contract using specific language and legal jargon to ensure it is legally binding
• Have the contract reviewed by a lawyer to make sure it is valid and legally sufficient
• Make sure the contract is comprehensive and covers all points, and contains no ambiguity
• Once the contract is finalized, you can check this step off your list and move on to the next step.

Ensuring the contract is in compliance with relevant laws

• Research and understand the relevant laws in the jurisdiction of the contract
• Check that the contract does not violate any of the applicable laws
• Be aware of any specific regulations that may be applicable to the contract
• Consult a lawyer or legal expert as needed to ensure the contract is in compliance with applicable laws
• Once you are confident that the contract is in compliance with all applicable laws, you can move on to the next step.

Signing and Finalizing the Contract

• Have the parties involved sign the contract
• Make sure the signatures are notarized and witnessed if necessary
• Ensure all parties are in agreement and understand the terms of the contract
• Check that all required signatures and documents are included in the contract
• Make a copy of the signed contract for each party and the mediator
• You know you can move on to the next step when you have verified that all parties have signed the contract.

Verifying all parties have signed the contract

• Check that all parties have signed the contract
• Ensure that all signatures are valid by having them notarized if necessary
• Make copies of the contract for each party
• Check that all relevant documents have been attached to the contract
• Once all parties have signed the contract, you can move on to the next step of distributing copies of the contract.

Distributing copies of the contract to all parties

• Make copies of the signed contract and distribute to all parties
• Confirm that each party has received their copy of the contract
• Ensure that all copies are securely stored
• Check off this step once all parties have acknowledged receiving their copy of the contract

Securing Insurance

• Determine the type of insurance required for the project
• Research insurance options and compare prices
• Select an insurance option that meets the project’s needs
• Contact the insurance provider to secure the insurance
• Receive confirmation of coverage from the insurance provider
• Include a copy of the insurance policy in the construction management contract

You know you can check this off your list and move on to the next step when you have received confirmation of coverage from the insurance provider and included a copy of the insurance policy in the construction management contract.

Researching insurance options

• Review different insurance options available to cover the construction project
• Consider the amount of coverage needed as well as the price of the policy
• Contact insurance providers to inquire about the types of policies they offer
• Obtain quotes from different providers to compare coverage and cost
• Choose an insurance provider that meets the coverage and cost requirements
• When you have found an insurance provider that meets your needs, you can check this step off your list and move on to purchasing the insurance policy.

Purchasing insurance to cover the project

• Contact the insurance company to discuss the project and get a quote for the policy
• Review the policy to ensure it covers all necessary elements of the project
• Sign the insurance policy and pay the premium
• Keep a copy of the policy for your records
• Once you have the policy and have paid the premium, you can check this step off your list and move on to the next step.

FAQ:

Q: How easy is it to create a contract for Construction Management?

Asked by Jason on December 28, 2022.
A: Creating a Construction Management Contract is usually quite straightforward. It requires some basic knowledge of contract law, as well as an understanding of the specific needs of the particular project. You’ll need to include key details such as the scope of work, payment terms, and any applicable regulations or laws. If you have access to a template, this will make it much easier. If not, you can work with a lawyer or legal services provider to help create a contract tailored to your individual needs.

Q: What type of clauses should be included in a Construction Management Contract?

Asked by Jenna on April 2, 2022.
A: A Construction Management Contract should include all the essential clauses needed to ensure proper management of a construction project. This includes clauses related to the scope of work, payment terms and conditions, dispute resolution and liability issues, insurance requirements, and any applicable laws or regulations. It should also include clauses defining how changes in the project will be handled or how costs may be allocated between parties.

Q: Are there specific laws and regulations related to Construction Management Contracts?

Asked by David on April 28, 2022.
A: Depending on the jurisdiction (e.g., UK vs USA vs EU), there may be specific laws and regulations related to Construction Management Contracts. It is important to research and understand any applicable laws prior to creating a contract so that all involved parties are aware of their legal obligations. Additionally, it is important to stay up-to-date with any changes in laws that may affect the terms of the contract.

Q: What are some common risks associated with Construction Management Contracts?

Asked by Nicole on October 3, 2022.
A: Common risks associated with Construction Management Contracts include allegations of breach of contract, disputes over costs or payment terms, and failure to meet deadlines or deliverables. Additionally, if a party fails to comply with the terms of the contract or any applicable laws or regulations, they may face legal action or financial penalties. It is important for all parties involved in a Construction Management Contract to understand their roles and responsibilities so that these risks can be minimized or avoided altogether.

Q: Are there other documents which need to be included in a Construction Management Contract?

Asked by Alex on June 20, 2022.
A: In addition to the main contract document outlining the agreement between parties involved in a construction project, there may be other documents which need to be included in a Construction Management Contract such as an insurance document outlining the insurance requirements for all parties involved in the project; drawings or plans; and specifications outlining materials and methods that will be used during construction. It is important to ensure that all documents are properly reviewed and signed by all parties prior to beginning work on the project.

Q: What should be done if changes need to be made during construction?

Asked by Kimberly on January 9, 2022.
A: If changes need to made during construction it is important that they are documented in writing and signed off by all parties involved in the project before work can begin on any new tasks or activities associated with those changes. Additionally, any changes should also be reflected in any applicable documents associated with the project such as drawings or plans as well as insurance documents and specifications where applicable.

Q: How does one go about finding an experienced lawyer for assistance with creating a Construction Management Contract?

Asked by Michael on August 30, 2022.
A: Finding an experienced lawyer for assistance with creating a Construction Management Contract can be done through referrals from trusted professional networks or online resources such as legal support networks or online directories of qualified lawyers who specialize in contracts law and construction management contracts specifically. It is also recommended that you ask questions regarding experience and qualifications prior to hiring a lawyer so that you can make sure they have experience handling similar contracts and are familiar with relevant regulations and laws related to your particular project.

Q: How much does it typically cost to hire a lawyer for assistance with creating a Construction Management Contract?

Asked by Sarah on February 19, 2022.
A: The cost of hiring a lawyer for assistance with creating a Construction Management Contract will vary depending on several factors including complexity of the project, experience level of the lawyer being hired as well as any additional services requested such as legal advice or representation during negotiations or dispute resolution processes. Generally speaking however it is advisable to budget for at least several hundred dollars for basic services related to creating a contract from scratch up to several thousand dollars depending on how complex the project is expected to be.

Q: What type of dispute resolution processes should be included in a Construction Management Contract?

Asked by Matthew on May 14, 2022.
A: A good dispute resolution process should outline how disputes between parties involved in a construction project will be handled as well as provide clear guidelines for communication between parties during disputes as well as setting expectations for how long disputes should take before being resolved either through negotiation or other methods such as arbitration or mediation if necessary. Additionally it is important that any dispute resolution process outlined in your contract is legally binding so that it can be enforced if need be.

Q: How long does it typically take to create a Construction Management Contract?

Asked by Emily on July 10th 2022.
A: The amount of time it takes to create a Construction Management Contract will depend on several factors including complexity of the project requirements; experience level of those writing up the document; whether templates are used; and any additional services requested such as legal advice or representation during negotiations or dispute resolution processes if necessary. Generally speaking however it could take anywhere from several days up to several weeks before an agreement is finalized depending on these factors mentioned above.

Q: Are there any tips for ensuring smooth negotiation between parties while creating a Construction Management Contract?

Asked by Joshua on September 15th 2022.
A: When negotiating over terms while creating your Construction Management Contract it is important that both parties involved have an understanding of what they are trying achieve from each other so expectations are clearly defined from the start and there are no surprises later down the line when it comes time for delivery or payment terms etc… Additionally it can help ensure smooth negotiations if both parties have access to experienced legal support who can advise them throughout negotiations so everyone has a good understanding of what is being agreed upon throughout each step of negotiations until both sides are satisfied with an agreement which works for them both .

Example dispute

Possible Lawsuits Involving Construction Management Contracts

• Breach of contract – if either party fails to adhere to the conditions of the contract, a lawsuit may be raised by the aggrieved party.
• Negligence – if one party fails to perform their duties in accordance with the contract, or if a subcontractor fails to do the same, the injured party may be able to sue for damages.
• Fraud – if either party provides false information or documentation during the negotiation process, a lawsuit may be raised by the aggrieved party.
• Misrepresentation of facts – if either party misrepresents facts to the other party, a lawsuit may be raised by the aggrieved party.
• Unpaid work – if one party fails to pay the other party for work completed, a lawsuit may be raised by the unpaid party.
• Interference with contractual relationships – if one party attempts to interfere with the other party’s contractual relationships, a lawsuit may be raised by the aggrieved party.
• Defective construction – if any defects are found in the construction work, a lawsuit may be raised by the aggrieved party.
• Delay in completion of project – if one party fails to complete the project on time, a lawsuit may be raised by the aggrieved party.
• Unsafe working conditions – if the construction site is found to be unsafe for workers, a lawsuit may be raised by the aggrieved party.
• Professional malpractice – if a professional involved in the construction process fails to adequately perform their duties, a lawsuit may be raised by the aggrieved party.

The plaintiff may be able to win the lawsuit if they are able to demonstrate that they have suffered damages as a result of the defendant’s actions, and that the defendant was responsible for those damages. The plaintiff may need to provide evidence such as written contracts, photographs, or witness testimony to support their claim. Depending on the specific circumstances, the plaintiff may be able to seek damages in the form of financial compensation, the reimbursement of legal fees, or the return of any property that has been taken.

Templates available (free to use)

Construction Management Agreement
Jct Construction Management Appointment
Jct Construction Management Guide
Jct Construction Management Trade Contract

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