Today’s video explains why you need to be on the lookout for two contractual red flags. You can check it out here or continue with this quick read.
Let’s talk about Deeds and Guarantees in Construction Contracts.
Firstly… the biggest and the best construction companies have a contracts department.
The reason for this is that they understand that construction is as much about delivering onsite as it is delivering commercially/contractually.
So YES, you have to build and construct what you have agreed to.
BUT/AND
You also have to deliver in regard to what is stipulated in the contract.
Delivering contractually means that you will be PAID for the work that you’ve done.
“But I don’t need to do that because I’ve always maintained great relationships!”
Relying heavily on relationships is, dare I say it, naive. Of course, relationships are important, but in construction, they don’t pay the bills.
Stay with me…
Relationships don’t account for close-out teams.
Close-out teams come in at the end of a project and you don’t have a relationship with them. They are literally there to comb through contracts and check for compliance.
If you’ve relied on relationships and ignored what’s in the contract your relationships won’t save you.
Think about it in terms of marriage and divorce. When the marriage/relationship is good you think you don’t need a contract. But then when things go wrong… that contract is EVERYTHING.
Being contractually compliant will mitigate any issues and you will get paid in full.
There’s also no such thing as being too contractual… as long as you are contractual from the beginning.
Some construction contracts ask you to provide a GUARANTEE…
There are various types of guarantees.
- Parent Company Guarantee: the contracting party’s holding company takes on the risk. Basically, the parent company will guarantee that you complete the work.
- Directives Guarantee: taking personal liability when something goes wrong. Basically putting your house and family on the line.
NEVER sign a Directives Guarantee.
And you should also AVOID SIGNING a Parent Company Guarantee.
TOP TIP: If they want a Parent Company Guarantee to be signed you can then negotiate security out of the contract. This will increase your cash flow.
Sometimes on really big projects, you may be asked to sign a DEED…
A deed is a small contract.
So ostensibly you’re being asked to sign a contract within a contract.
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Asking you to sign a deed basically means they want you to take on more risk.
So LOOK OUT for GUARANTEES AND DEEDS in EVERY CONTRACT.
It’s never too late to start thinking commercially and getting contractually savvy. We’re here to help.
We want you to be the MOST SUCCESSFUL you can possibly be. That’s why we put together content with tips and advice that is tried and tested.
For more contractual advice, Quantum Contract Solutions is here to guide and assist you through everything contract related. Let’s reduce risk in your contracts and save time and money, just click this link to get our FREE case study to show you how clients just like you are doing it.
