Risk Allocation & Subsequent Legal Issues in Construction Contracts

Abstract

The paper aims to shade intensive lights over risks allocation and its related aspects embedded with a construction contract. For this purpose, an in-depth study of different types of risks which generally arisen in large sized construction projects is presented within the paper. For making the context clear, the paper elaborates some significant information about construction contract and different parties which are generally involved within a construction contract. In this section, the nature of different construction contracts is also discussed, which becomes a prime reason behind different types of risk in the contract. Further, the paper discusses different types of risks availed by different parties so that raw data for proper risk allocation can be collected. Further section of the paper is related with the risk allocation in a construction contract. The section explores disclaimer method for transferring risk from one party to other. Furthermore different roles played by different parties in the mitigation of risks in a contraction contract are also explained in the paper.

The contractor under a construction contract is invariably required to carry out and complete the project by a specified date. This requirement is often accompanied by an obligation to produce a construction programme and to keep it up to date. There may be a contract administrator with powers to approve the programme. This paper identifies matters in relation to these obligations over which the parties can be in dispute and examines the legal principles governing their resolution. The matters include the contractor’s choice of type of programming method, consequences of the contractor’s failure to comply with its programming obligations, the contractor’s right to complete earlier than required and delay from concurrent causes.

Contracts for the construction of roads, buildings and other works present certain special features from the legal perspective. Having regard to the importance of these contracts in the economic life of the country, it is proper that their legal significance be examined in some detail.

Keywords: Risk Allocation, Legal Issues, Construction, Contract, Project Finance

JEL Classification: K00, K12, K22, K39, K40, K42