We all see some type of construction in our daily life. And, most of us have been involved in construction work. Whether doing fence masonry; painting of family house; construction of building/bridge; or a big dam; these all fall in into construction category with of course wide range of complexity.

It should be interesting to note that the words we use in complex construction works are very similar to simple constructions. For example, masonry -> masonry; concrete -> concrete; roof -> roof; and contract agreement –> contract agreement.

In this article, we shall discuss construction contract agreement briefly and why it is very important to your construction work. Finally, you shall be able to draft an agreement for your construction project.

What is construction contract agreement?

A construction contract agreement is a written understanding between two parties to build or construct a civil engineering or related work. Now, who are these two parties? Look at the following pictures.

Relation Ship	Party 1 (Owner)	Party 2 (Consultant or Contractor)
1	Individual (like Abebe, Chaltu)	Individual (like Teshome, Almaz)
2	Individual (like Abebe, Chaltu)	Company (AGY Consultant or Extreme General Contractors)
3	Private Business (ZTY Supermarket)	Individual (like Teshome, Almaz)
4	Private Business (ZTY Supermarket)	Private Business (ZTY Supermarket)
5	Government Organization (AA Housing)	Individual (like Teshome, Almaz)
6	Government Organization (AA Housing)	Private Business (ZTY Supermarket)

As can be seen above, the first party (Owner/Client) want to build something while the second party will be the builder (Contractor). When these two parties agree and sign a piece of paper for a construction work, they have formed or committed a construction contract agreement.

What are the benefits of a construction agreement?

Construction in general is a complex undertaking. It involves two or more people to complete a project. Having written and signed contract documents shall have the following benefits

• It clearly explains what work will be done, who is responsible for what, how long the project will take, and how much it will cost
• It serves as a legal document for both the owner and the contractor
• If something goes wrong or there’s a disagreement, the contract can be used to solve the problem fairly
• It makes sure payments are made properly and on time, and it can include penalties for late work or rewards for finishing early
• It also helps the project run smoothly by setting clear deadlines and steps to follow

Can I prepare a construction contract agreement for my project?

In order to give you an answer, we first need to classify your project into one of the following complexity categories.

EASY: This is a type of construction where one or two skilled-manpower (mason, electrician, plumber, etc.) are involved. House paintings, ditch construction, fence construction, house maintenance, and so on are examples of easy construction. In this case, you may assign yourself as owner and project manager even if you don’t have experience in construction.

SMALL: House renovation/maintenance; residence villa/building; small internal road; and small bridge constructions can be included into this group.  These construction works involve more than two skilled-men power with professionals. In this case, you may assign yourself as owner and project manager but you definitely need an experienced professional adviser. It may also be wise to assign a professional as project manager.

MEDIUM: These are projects with wide scope compared to small projects. Medium rise buildings (five to twelve stories), small factories, medium span bridges, small dams, and so on fall into this category. These projects require dedicated individual professionals and companies to manage, supervise, and construct. It is highly recommended for the owner not to be a project manager. A qualified professional or company shall manage these projects.

BIG: From medium to high-rise buildings (more than twelve stories) to highways to bridges to dams; all shall fall under this category. These projects are highly complex and difficult to manage/construct in which competent companies with specialized experience are required.

How shall I draft my construction contract agreement?

Based on the above complexity categories, you shall prepare a contract document for easy projects only. We have prepared a step by step guide for you on our article “how to draft a simple construction contract agreement”. You can also draft an agreement together with a professional for a small project too. Please read our guide on our article “how to prepare a formal construction contract agreement”. For medium and big projects, it is highly recommended to hire professional companies on this matter.

In conclusion,

A good construction contract isn’t just legal protection—it’s peace of mind. For owners, contracts provide quality guarantees and remedies if things go wrong. For contractors, they ensure fair payment terms and clear work expectations.