Management Contracting - Essay Example

Generally, management companies wish to formulate standard form of contracts as it has a wide range of long term benefits. This paper will advise the client about the significance of having a decent contract before getting strait into the construction work. It will also explain the impact of such contracts on both the company and client. Since the client wishes to tie the contractors down with low fixed prices and other similar restrictions, it is better to design an established standard form of contract.

In the opinion of Beard, Loulakis, and Wundram (2001, p.347), the standard form contracts assist the parties to contract with economical and convenient way of performance. The authors add that these types of contracts aid both the parties to minimise the costs associated with the lawyering for every subsequent contract in the formation of new projects (ibid). Since standard form contracts do not allow further negotiation on formed contracts, both the parties can take advantage of the reduced transaction costs.

Similarly, this established contract reduces the possibilities of unforeseen anomalies and thereby it would help the client to save unexpected costs that may incur in the future. The client gives great emphasis on time and it can be achieved by the formation of a standard form contract. . When the project owner or client gives a valid acceptance to the offer, the contract comes into force. The court has developed some additional terms for the standard term contract in order to protect the interests of both the parties.

It would be difficult for the large-scale construction management organisations to maintain separate contracts for every individual. Therefore, a standard form of contract helps the firm to escape from the troublesome difficulties of negotiation and other legal formalities. Similarly, it provides conveniences to client also. The standard form contract obliges the firm to give reasonable notice to the client at proper times regarding necessary information. It is also held that the notice should be contemporaneous with the contract so that it would save the client from additional liabilities.

Likewise, the client will be legally protected if the firm makes a fundamental breach of the contract on the strength of sub-clauses. In addition, the standard form contracts maintain many provisions that would satisfy the interests of both the parties. For instance, Murdoch and Hughes say that JCT SB 05 is a standard building contract which necessitates the appointment of an architect or contract administrator who has some strictly defined powers such as “issuing of certain instructions on behalf of employer and also certification of payments, the quality of work, and the contractor’s performance” (Murdoch & Hughes, 2008, p.106). In addition, it includes certain fluctuation clauses which save the parties from losses associated with fluctuations in money market and changes in governmental regulations.

There may be variations in labour prices, tax rates, and raw material costs which would