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Contract guide

Construction contracts: legal and financial essentials

On projects, disputes are rarely about the price; they are about extra work, delays and progress statements. A good contract has settled these in advance.

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At a glance

A construction contract is an agreement between an employer and a contractor to carry out specific work for a set time and price. On public projects, Iran's General Conditions of Contract (Publication 4311) form the basis; on private projects, the parties must define the scope, payment method, guarantees and variation procedure themselves.

Essential clauses

  • A precise scope of work and technical annexes (drawings, specifications, price lists)
  • Contract type: lump sum, unit-rate or cost-plus
  • Advance payment, progress statements and review and payment deadlines
  • Guarantees and retentions (performance and good workmanship) and when they are released
  • A variation procedure requiring written instructions
  • Timeline, extensions and delay penalties
  • Provisional and final acceptance and the defects liability period
  • Termination and dispute resolution

Costly mistakes in construction contracts

  • Carrying out extra work on verbal instructions
  • No clear deadline for the employer to approve progress statements
  • No price-adjustment mechanism on long projects
  • Unclear responsibility for materials, insurance and site safety

Frequently asked questions

A contractor is responsible for delivering a result using its own management and tools, while an employee works under the employer's direction. If the real relationship is employment, calling it a contract for services doesn't change that — see employment contracts.

First follow the deadlines and steps in the contract and keep all correspondence. Then pursue debt collection or arbitration.

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