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Risk Allocation in The Construction Contract Essay

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Updated: Aug 6th, 2019

The Scope of the Work

The refurbishment work will consist of a total repair of the whole house. The first step will involve removing the old roof and disposing it carefully before replacing it with a new one. The quality of the current roof has deteriorated as a result of being attacked by rust. The second task will be to replace some of the doors and windows that have grown extremely old and painting those that can be reused.

This task will also involve replacing the old and faulty locks. The third task will involve removing the existing tiles on the floor and replacing them with new ones. The contractor will also be required to replace the existing ceilings, which are also in a bad state. The fifth task the contractor will undertake is repairing the bathroom and kitchen. The last job will involve re-painting the walls, ceilings, roof, doors, windows, and other parts of the house, both from inside and outside.

The Risks Involved

There are a number of risks involved the refurbishment of the house especially when it is left in the hands of a contractor. The risks in this case include: the cost of the refurbishment, the quality of the work, the project’s duration, the delays that could occur, the claims that could arise, and any other potential disputes that may crop up.

In most cases, the potential disputes are propagated by misallocation of risk during the refurbishment process. The contract risks have to be identified in time to avoid legal issues and any other misunderstandings between the owner of the house and the contractor.

The cost risks involved in the refurbishment involve the expenses that will be incurred in the purchase of new materials, which are supposed to be used in replacing the old ones. The risks relating to the quality of the job will be determined by the outcome of the refurbishment.

The risks concerning time, delays and any claims that may arise out of breaching the contract will be determined at the end of the whole refurbishment. If the contractor fails to allocate the risks well, any other disputes that may crop up later will be considered to have been caused by negligence on his part.

Allocating Risks in the Construction Contract

The risks in the construction contract will be allocated based on four principles: the ability of the contractor to carry out the refurbishment, the alignment of the objectives of the refurbishment, the allocation the risks according to the preferred goals of the owner, and the provision of risks based on the promotion of the relationship between the owner and the contractor.

According to the first principle, the contractor will be responsible for the evaluation, control, costs and benefits that will result from his assumptions. This type of allocation will reduce the overall price of the contract since the contractor will not have to include the possibility of financial losses within the contract.

The second principle will be used to maximize the success of the contract; this will require the contractor to understand every objective that the refurbishment is intended for. Other risks will be allocated according to the third principle, which will ensure that the refurbishment considers the specific operations that the contractor will use to accomplish the refurbishment task.

Lastly, the risks will be allocated between the owner and the contractor based on owner-oriented performance goals. This principle of allocation will ensure that the contractor aligns his refurbishment team with the performance goals or preferences of the owner.

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IvyPanda. (2019, August 6). Risk Allocation in The Construction Contract. Retrieved from https://ivypanda.com/essays/risk-allocation/

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"Risk Allocation in The Construction Contract." IvyPanda, 6 Aug. 2019, ivypanda.com/essays/risk-allocation/.

1. IvyPanda. "Risk Allocation in The Construction Contract." August 6, 2019. https://ivypanda.com/essays/risk-allocation/.


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IvyPanda. 2019. "Risk Allocation in The Construction Contract." August 6, 2019. https://ivypanda.com/essays/risk-allocation/.

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IvyPanda. (2019) 'Risk Allocation in The Construction Contract'. 6 August.

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