AIA Document A312Association of Construction and Development
February 4, 2013 — 1,506 views
The A312-2010 Document is essentially a compilation of two separate bonds, the first of which describes the terms of an agreement between two parties, the owner and the contractor. This agreement helps to measure the performance of the contractor, with regard to a particular undertaking/project. This is known as a performance bond. The second bond, known as a payment bond, covers the conditions by which the contractor may compensate any sub-contractors or other relevant parties, for their provision of labor or raw material.
A performance bond is issued in order to ensure that the contractor maintains a particular promised standard of quality. It provides the hiring party with rights to evaluate and question the methods, practices and behavior of the contractor, with respect to the project. In the case where the hiring party, the owner, declares a contractor to be in default, claiming that the contractor has not fulfilled the necessary obligations, the performance bond clearly outlines, how the two parties may go about settling the dispute.
The performance bond includes procedures as well as time limits by which both parties are required to adhere to. In the case, where the owner is satisfied with the Contractor, the bond also stipulates the various courses of action available to the contractor, in the performance of the project. The bond also protects both parties from exploitative action through carefully worded language when discussing monetary aspects like balance of the contract price, costs, and compensation.
A payment bond is issued to outline the terms and conditions by which the contractor will interact with the parties whom he chooses to employ. These parties are referred to as claimants. The payment bond, once in effect, defines the procedure by which claimants may claim monetary compensation for the labor, raw material, or services they have provided. It also defines the conditions, temporal and otherwise, by which the contractor may go about compensating the claimant. In the case where the contractor betrays his obligations, the contract dictates the manner in which the claimant may go about taking legal action.
Benefits of a Construction Contract
One of the most important benefits of having a construction contract such as the A312 is the clear stipulation of time limits. In the case of the a performance bond, the contract clearly states that in the event of a contractor being in default, there is a fixed period in which interactions are expected to take place and resolution procedures will be undertaken. Moreover, the contract protects the hiring party in that it creates a transparency when discussing financial terms and payment schemes. The contractor must clearly mention the cost of the project to the owner and any other parties involved so that appropriate compensation may be decided.
In the case of payment bond, to protect the contractor, the contract makes it clear that the contractor and the owner must act as a singular party in the compensation of other parties such as sub-contractors. Also, large waiting periods present in previous contracts have been removed in the new amended version, thus eliminating delays in the completion of the project. Finally, the 45-day period in which the contractor is meant to conduct an investigation into the activities of the claimant before compensating him, has been extended to 60 days, enabling more thorough information-gathering.