Construction Contract Executed as a Deed: What You Need to Know
When it comes to entering into a construction contract, there are various factors to consider. One of the most important factors is the manner in which the contract is executed. The manner of execution can significantly affect the legal enforceability of the contract in the event of a dispute. In this article, we will be discussing the importance of executing a construction contract as a deed and what you need to know.
What is a Deed?
A deed is a legal document used to transfer ownership or interest in property from one party to another. A deed serves as evidence of the transfer and is regarded as an irrefutable proof of the transfer. In a construction context, a deed can be used to transfer an interest in land, such as a leasehold or freehold interest.
Why Execute a Construction Contract as a Deed?
Executing a construction contract as a deed offers the following benefits:
1. Provides Greater Formality: Execution of a construction contract as a deed adds a greater formality to the process of entering into a contract. This is because a deed requires greater formalities than a simple agreement. These formalities include signing before a witness who attests to the signature and sealing the document.
2. Extends Limitation Periods: A limitation period is the time within which a party can initiate legal proceedings. The limitation period for a simple agreement is six years, while a deed has a limitation period of twelve years. Thus, by executing a construction contract as a deed, you are providing yourself with an extended time frame within which to initiate legal proceedings in the event of a dispute.
3. Provides Greater Certainty: A deed provides greater certainty in the enforceability of the contract. This is because the execution requirements of a deed are more stringent, making it less likely that the contract will be challenged in the courts.
4. Facilitates Financing: Executing a construction contract as a deed is often a requirement of financiers and lenders. This is because it provides them with greater certainty in the enforceability of the contract and their security interests.
What Should be Included in a Construction Contract Executed as a Deed?
A construction contract executed as a deed should include the following:
1. Identification of the Parties: The contract should clearly identify the parties involved in the contract, including the contractor, the client, and any other relevant parties.
2. Description of the Works: The contract should describe the works to be undertaken, including the scope, schedule, and specifications.
3. Payment and Payment Terms: The contract should specify the payment terms, including the payment amount and schedule, and any applicable penalties or bonuses.
4. Termination: The contract should specify the grounds for termination, the notice period, and any applicable damages.
5. Governing Law and Jurisdiction: The contract should clearly specify the governing law and jurisdiction in the event of a dispute.
Conclusion
Executing a construction contract as a deed provides greater formality, certainty, and a longer limitation period. This is crucial in the construction industry, where disputes can arise quickly, and financial interests are high. By including the necessary components in the contract, you will be better prepared to handle any disputes that may arise.
