5 pitfalls in construction contracts for professional developers

Pitfall 1: an unclear scope of works

If the works to be carried out by the contractor are not defined precisely, discussions about the scope of the construction contract can quickly arise. This often leads to questions about which services are included in the price and which works may be charged as additional works.

At a minimum, the following documents and arrangements should therefore be clearly included in the contract:

• plans;
• specifications;
• technical data sheets;
• bills of quantities;
• exclusions;
• a clear list of the works to be carried out.

This helps to define the contractual boundary between agreed works and additional works more clearly.

Pitfall 2: unclear pricing arrangements and additional works

Pricing arrangements also require particular attention.

Clearly define how the price is determined: by way of a fixed price, an indicative price, relative lump-sum prices, absolute lump-sum prices, the open-book principle or work on a time and materials basis. Also determine which services are included in that price and whether price revision is possible.

The appropriate contractual arrangement always depends on the specific requirements of the project.

In practice, poor arrangements regarding additional works often give rise to disputes. As soon as additional services arise during execution, the question immediately follows whether these are works that were already included in the original contract or additional works giving rise to an additional price, and how the construction partners should deal with them.

It is therefore important to provide a clear arrangement for additional works. Consider whether prior written approval is required, whether approval may be inferred from the execution itself, how the price is determined and what impact additional works have on the execution period.

Evidence also deserves attention: emails, site reports, photographs and other documents often play an important role later on.

Our expert Dieter Vanelverdinghe explains:

“Additional works are often one of the biggest points of discussion in construction projects. They only become manageable when it has been agreed in advance who may approve them, how they must be evidenced, how the price is determined and what impact they have on the execution period.”

Pitfall 3: no strict arrangements on timing and delay

The execution period also requires a watertight contractual arrangement. It is not sufficient to mention only an end date or an overall duration. If it remains unclear when the period starts to run, whether calendar days or working days apply, which circumstances justify suspension or extension and what impact additional works have on the planning, delay can quickly become a point of dispute.

This often leads to disagreement about whether the contractor is actually in delay, whether that delay is attributable to the contractor and from which moment the other party can invoke contractual sanctions.

Preventing delay often starts with the right contractual levers towards the construction partners. This is precisely why this point deserves particular attention in your construction contract.

Pitfall 4: no clear arrangements on the environmental permit and the architect

As a rule, you are required to appoint an architect for any construction or renovation works that require an environmental permit, subject to the statutory exceptions. The construction contract should preferably refer expressly to the appointed architect.

Environmental permits should also be addressed explicitly. It must be clear whether the project requires an environmental permit, whether that permit has already been obtained and, if not, who will prepare and submit the application before the works can start.

If works that require a permit are nevertheless carried out without the required environmental permit, there is a real risk that the validity of the construction contract may be called into question. A contract must, among other things, have a lawful object. Carrying out permit-requiring works without a prior environmental permit is contrary to the applicable environmental and urban planning regulations. As a result, the construction contract may create or maintain an unlawful situation.

Pitfall 5: inadequate arrangements on acceptance, approval and liability

The arrangements regarding acceptance and approval also deserve particular attention. Clearly determine when the works are deemed to have been accepted and what consequences are attached to provisional acceptance, taking the works into use and final acceptance. Uncertainty about the moment of acceptance gives rise to discussions about the possibility of taking legal action against the contractor at a later stage. This applies in particular to the ten-year liability for defects threatening stability within the meaning of articles 1792 and 2270 of the old Civil Code, but also to liability for minor hidden defects.

It is therefore advisable to determine very precisely whether provisional or final acceptance constitutes acceptance, which visible defects are covered by acceptance and which regime applies to minor hidden defects.

Conclusion

For a professional developer, a construction contract is first and foremost a risk management tool. By clearly regulating the scope of the works, pricing arrangements, execution period, permit situation and acceptance in advance, you significantly reduce the risk of delays, additional costs and disputes during execution.

A well-considered construction contract therefore remains essential to safeguard the budget, timing and control of the project as much as possible.

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