Contract for building works: a guide

Guide to Drafting and Understanding Building Contract Agreements

The contract for building works establishes an agreement between the client and the contractor, wherein the latter commits to executing specific building projects in exchange for a payment. This article explains the essential features and structure of such a contract to ensure the correct execution of the work.

Definition and Features According to Art. 1655 of the civil code, a contract is the agreement where one party commits, using their resources and at their own risk, to complete a work or provide a service in exchange for monetary payment. In the construction context, this contract should be drafted in written form, detailing the amount of work, timelines, and compensation.

Types of building works

Annex X of Legislative Decree 81/08 defines construction works as activities involving the building, maintenance, repair, and other operations related to buildings, regardless of the material used. It also includes electrical structures, roadworks, railways, and other civil engineering works.

Basic Building Contract It’s crucial to differentiate between contracts for private and public works. To draft an effective and error-free building contract, one can refer to predefined templates, like those provided by specific software.

Structure of a typical contract general information

This section includes data about the client and the contractor, such as residence, fiscal details, and other legal information.

Scope and Guarantees

For instance, the client ensures the availability of the area and the project’s compliance with existing regulations. 

The contractor, on the other hand, guarantees the proper execution of the works and adherence to regulations. 

Subcontracting

Generally, subcontracting in private works is not allowed unless previously authorized. 

Collaborators

This section lists all professional figures involved in the project, such as the work director, safety coordinator, among others. Cooperation among all parties involved is vital to ensuring efficient work execution. This can be facilitated by using dedicated platforms to monitor work progress in real-time. In summary, accurately drafting a building contract is fundamental to avoid future problems and ensure the work’s excellence.

Obligations and Duties of the Contractor

The contractor’s duties during work execution are clearly defined. These include specific actions like avoiding starting fires and properly managing waste materials.

Management of Earth and Rock Excavation Two options exist regarding the management of earth and rock excavation:

1. The client delegates this responsibility to the contractor.
2. The contractor follows the directives detailed in the project annexes provided by the client.

Determination of Payment The contract payment is determined based on technical-administrative documentation. Specific charges for safety are vital, as established by Legislative Decree 81/2008, art. 26, co. 5.

Payment Methods and Terms

The payment procedures are outlined in the technical-administrative documentation attached to the contract.

Duration of the Works

The start and expected completion dates are indicated, considering potential delays due to force majeure. It’s essential to document key phases, such as the beginning and end of the work, through records signed by both parties.

Suspension of Works If the works are suspended for reasons beyond both parties’ control, the contractor can request an extension equivalent to the suspension period.

Ongoing Checks

During the works, checks can be carried out to assess progress. Partial tests might also be requested by one of the parties.

Final Check

Before handover, the client has the right to inspect the work. If the work is accepted without reservations, it’s considered approved, and the contractor is entitled to payment.

Contract Termination

In cases of severe non-compliance, the client can request contract termination, providing reasons through a registered letter.

Construction Work Without a Building Contract

Although the law doesn’t require a specific form for the contract, a written agreement is highly recommended. This helps avoid risks like disputes, as highlighted by the Court of Cassation’s ruling n. 14006 of June 6, 2017.

Given the potential complexity of building works, a written building contract is always the wisest choice.

The Importance of Insurance Guarantee in Building Contracts

In the complex and sometimes intricate world of building contracts, the insurance guarantee stands out as a crucial component, ensuring fundamental protection for both the client and the contractor.

But what exactly is an insurance guarantee, and why is it so vital in the context of building contracts?

Definition and Role of the Insurance Guarantee An insurance guarantee is a pledge provided by an insurance company, committing to compensate the beneficiary (usually the client) in case of non-compliance by the primary contractor (the builder). It ensures that the works will be completed according to the terms and conditions agreed upon in the building contract.

Why is it Crucial?

Security for the Client

A primary concern for someone commissioning a building project is that, for various reasons, the contractor may not be able to complete the project as agreed. This could result from financial issues, technical difficulties, or any other unforeseen reason. The insurance guarantee acts as a safety net, assuring the client that, in case of problems, they will be compensated for the losses incurred.

Contractor’s Reputation

Offering an insurance guarantee is also a strong signal of the contractor’s reliability and solvency. It showcases their commitment to completing the project and provides reassurance to the client. Having an insurance guarantee can set a contractor apart from competitors and be a decisive factor in securing a project.

Types of Insurance Guarantees

There are multiple types of insurance guarantees that cater to various needs and potential risks involved in building contracts:

• Advance Payment Guarantee: This ensures that if the contractor fails to initiate the work after receiving an advance, the client will be compensated for the amount paid.
• Performance Bond: This is a commitment that the contractor will execute the project according to the terms stipulated in the contract. In case of failure, the client will be compensated.

• Maintenance Bond: It covers the post-completion maintenance period, ensuring that if the contractor doesn’t abide by maintenance obligations, the client will be compensated.

How to Acquire an Insurance Guarantee

Acquiring an insurance guarantee involves liaising with an insurance company that offers these services. The insurer will assess the contractor’s financial health, the specifics of the project, and the associated risks before providing the guarantee. There’s usually a fee associated with obtaining an insurance guarantee, which varies based on several factors.

In conclusion, an insurance guarantee is a critical tool in the realm of building contracts. It provides peace of mind to clients and enhances the reputation of contractors, facilitating smoother and more secure business transactions.