Contract System & Contract Types Based on Reimbursement

A construction contract is also a business contract, which is an agreement in written form in which the substance agreed by the parties involved in it contains business-related actions. A process of cooperation between various parties to create a certain system that has been agreed upon is a contract. The construction work contract is made separately according to the stages in the work consisting of a construction work contract for planning work, a construction work contract for implementation work, and a construction work contract for supervisory work.
Definition of a construction work contract
Is a document that has a legal force that contains a voluntary mutual agreement between the first party and the second party. The first party promises to provide services and provide materials to build the project for the second party; The second party promises to pay a sum of money in exchange for the services and materials used.
The biggest project losses were caused by the failure to manage construction contracts. Contract documents that need attention include, among other things, the terms of the agreement because this document has stated all the provisions which are the rules agreed upon by the two parties who have agreed.

Technical aspects covered in the Construction Work Contract include:

  1. General Conditions of Contract
  2. Appendices
  3. Special Conditions of Contract / Condition of Contract – Particulars
  4. Technical Specifications
  5. Contract Drawings.

In this technical aspect, a description of:

  1. Scope of Works
  2. Implementation Time (Construction Period)
  3. Implementation Method (Construction Method)
  4. Schedule of Implementation (Time Schedule)
  5. Method / Method of Measurement (Method of Measurement).

Apart from technical aspects, several legal aspects often cause quite broad or serious legal impacts, namely:

  1. Suspension of Work
  2. Termination of Contract (Termination of Contract)
  3. Compensation for Delays (Liquidity Damages)
  4. Settlement of Dispute
  5. Force Majeure
  6. Governing Law
    7.Contract Language
  7. Domicile (Domicile).

The Law of the Republic of Indonesia has explained the principles of contracts used as the basis for the operation of construction services, namely:

  1. Fair, namely protecting the interests of each party fairly and not protecting one party excessively to harm the other party.
  2. Balanced, namely the sharing of risk between service users and service providers must be balanced.
  3. Equal, namely the rights and obligations of service users and service providers must be equal.
    The contract must not violate the contract principles contained in the laws or regulations of the country where the construction project is carried out. Generally, construction contracts in this country are not by commercial construction contracts regulations. Especially for private projects. The private sector wants to transfer all risks to the contractor. In fact, this will backfire for the private sector.

A construction work contract must at least cover:

  1. the parties, clearly containing the identities of the parties,
  2. a working formula, containing a clear and detailed description of the scope of work, the value of the work, and the time limit for implementation,
  3. the period of coverage and/or maintenance contains the period of coverage and/or maintenance which is the responsibility of the service provider,
  4. experts, containing provisions on the number, classification, and qualifications of experts to carry out construction work,
  5. rights and obligations, specifying the rights of service users to obtain the results of construction work as well as their obligations to comply with the agreed conditions as well as the rights of service providers to obtain information and compensation for services and their obligations to carry out construction work.