The Role of Intellectual Property in Growing and Protecting your Business Brand

In today’s competitive business landscape, developing a strong brand has become crucial for companies seeking long-term sustainability and growth. Therefore, one essential aspect of brand development that cannot be overlooked is the strategic utilization of intellectual property (IP) rights. IP serves as a valuable tool for businesses to protect their creative ideas, innovations, while growing their brand assets. This article delves into the significance of IP in brand development and highlights the multitude of benefits it offers, especially to small and medium enterprises (SMEs).

Branding

Branding encompasses an array of elements and strategies that set a company’s products or services apart from the competition. It goes beyond the visual and verbal identifiers like logos and slogans and encompasses an organization’s culture, business strategy, and marketing collateral. Successful branding helps create recognition, nurtures customer loyalty while contributing to long-term success.

Types of Brands

While not directly IP-related, understanding different types of brands provides a great insight into the multifaceted nature of branding. Types of brands include certification marks issued by recognized institutions (such as the Fair Trade Certified Mark); geographical indicators (such as champagne and scotch whiskey); product brands (e.g., Coca-Cola, Nescafé), service brands (e.g., British Airways, and hotel chains such as Radisson Hotels); and varietal brands (associated with protected varieties of products).

The Importance of Investing in Branding

Investing in branding endeavors aims to achieve goodwill for the Company. Goodwill in this case, represents the value derived from a company’s positive reputation among consumers for its products, customer service, and overall quality. Establishing goodwill is crucial and a pivotal element in achieving sustainable business growth. Apple is a good example of this, as it has solidified its market position and achieved long-term market sustainability simply by leveraging on its commitment to innovation, cutting-edge design, and a strong brand identity.

Understanding Intellectual Property Rights (IPRs):

Noting that branding is therefore important to develop goodwill, it is important to understand how to leverage the same through IPRs. IPRs are legal protections that allow individuals or entities to safeguard their creations and innovations. These rights grant exclusive usage privileges to creators and inventors over a specific period.

IP, though intangible in nature, possesses substantial value as a business asset. It can be sold, licensed, transferred, and even employed as collateral in different jurisdictions. There are various types of IPRs that SMEs can leverage to protect their brand, such as copyrights (for creative works), trademarks (distinguishing marks), industrial designs, geographical indicators, patents, and utility models.

The main rationale behind IPRs is that they play a vital role in promoting innovation by providing legal protection to creators and inventors. These protections enable right holders to generate more revenue, enhance business value, and gain a competitive edge in the market. By safeguarding their innovative products and services, companies can monetize their unique offerings and capitalize on their distinctiveness.

Value of IPRs for Building Brands:

IPRs offer several advantages to brands, including exclusivity, the ability to deter competitors, protection from unfair competition, the potential for premium pricing, and avenues for market expansion through licensing and franchising., detailed further below:Exclusivity

IPRs such as trademarks and copyrights offer businesses the power of exclusivity. By securing a trademark for a distinct logo, tagline, or product name, a brand can carve out a unique identity in a customer’s mind. This exclusivity sets them apart from competitors, allowing them to build recognition, loyalty, and trust among their target audience.

• Protecting your Business

IPRs also play a crucial role in protecting businesses and their innovative concepts. With patents, copyrights, trademarks, and trade secrets in place, organizations can confidently invest in research and development, knowing that their ideas are legally safeguarded. This deterrent effect sends a clear message to potential competitors: “Stay away, this is our territory.” IPRs serve as a formidable warning, deterring infringement and ensuring that businesses can thrive in a competitive marketplace.

• Defense against unfair competition

In the wild world of business, unfair competition can erode a brand’s market share and reputation. However, IPRs provide a vital legal shield, protecting brands against practices like counterfeiting, piracy, and deceptive trade practices. With this defense in place, businesses can compete on a level playing field, where the quality and uniqueness of their offerings become the deciding factors, eliminating the impact of underhanded tactics. IPRs ensure fairness and uphold the integrity of the marketplace for all participants.

• Premium Pricing

Consumers are often willing to pay a premium for products or services associated with established, trusted brands. IPRs enable businesses to create a perception of quality and authenticity, positioning their offerings at a higher price point. By effectively leveraging trademarks and patents, brands can emphasize the value they bring to the market, attracting discerning consumers who are willing to invest in a premium experience.

Conclusion

Intellectual property plays a vital role in brand development, offering legal protection and value creation opportunities for businesses. By leveraging IP rights effectively, SMEs can differentiate themselves in the marketplace, secure their market position, and maximize revenue.  However, it is crucial to approach IP investment strategically, supported by ongoing marketing efforts and comprehensive IP protection measures. With the right expertise and structured approach, businesses can unlock the full potential of their intangible assets and drive sustainable growth in an increasingly competitive global market. Explore more on Intellectual property.

Please contact us for our services via email or visit our website  for more information on our services. Lawyer on your laptop!

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WHY YOU SHOULD ALWAYS INCLUDE AN ARBITRATION CLAUSE IN A CONTRACT DOCUMENT

An arbitration clause is a provision in a contract that requires the parties to resolve any disputes that may arise through arbitration rather than through court litigation. The act defines an Arbitration as, a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. (Arbitration Act 1995).

It is important that when parties are drafting, negotiation or to always include a Dispute resolution method clause in the document, there are several Dispute resolution methods, Arbitration being at the core of them all. Here are some reasons why you may need to have an arbitration clause in every agreement:

1. Faster and Less Expensive Dispute Resolution: Arbitration is typically faster, less formal, and less expensive than court litigation. With an arbitration clause, the parties agree to avoid the expense and delay associated with court litigation.
2. Expertise and Neutrality: The parties can select an arbitrator with expertise and experience in the subject matter of the dispute, which can lead to a more informed and neutral resolution.
3. Privacy: Arbitration proceedings are generally private and confidential, which can be beneficial if the dispute involves sensitive or proprietary information.
4. Enforceability: Arbitration awards are generally easier to enforce than court judgments. If the losing party refuses to comply with the decision, the winning party can obtain a court order to compel compliance.

In conclusion, including an arbitration clause in every agreement can provide benefits such as faster and less expensive dispute resolution, expertise and neutrality, privacy, and enforceability. However, it is important to consult with legal counsel to ensure that an arbitration clause is appropriate for your specific situation.

How can we assist?

The success of a business is pegged on how well it protects itself from loss and harm arising from contractual relationships. Such loss and harm is prevented or reduced by having an understanding of how contracts/agreements are drafted and negotiated. At Netsheria International, we offer a wide scope of legal documents and legal to meet the requirements for different businesses. For more information, kindly visit our website or contact us via email.

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7 EXAMPLES OF WHAT TO DISCLOSE AT THE INITIAL STAGES OF CONTRACT NEGOTIATION

1. Material facts: Parties to a contract should disclose all material facts that are relevant to the transaction. This includes things like the terms of the contract, the price, and any relevant conditions.
2. Known issues: If there are any issues that the parties know about that could affect the value or performance of the contract, they should disclose them for example is the property charged to a bank in case of a land transaction.
3. Legal issues: Parties should disclose any legal issues that may affect the contract, such as any legal disputes or regulatory requirements, for example if it is a merger, Capital Markets Authority, the Competition Authority need to be notified and approved to avoid unfair competitive tendencies.
4. Financial issues: Parties should disclose any financial issues that may affect the contract, such as creditworthiness or bankruptcy this is made clear by providing audited reports on the books of accounts.
5. Intellectual property issues: If the contract involves any intellectual property, parties should disclose any issues related to ownership, infringement, or licensing.
6. Confidential information: Parties should disclose any confidential information that may be relevant to the contract, such as trade secrets or proprietary information.
7. Performance expectations: Finally, parties should disclose their expectations regarding the performance of the contract. This could include things like timelines, deliverables, and quality standards, payment terms, conflict resolution.

How can we assist?

The success of a business is pegged on how well it protects itself from loss and harm arising from contractual relationships. Such loss and harm is prevented or reduced by having an understanding of how contracts/agreements are drafted  and negotiated. At Netsheria International, we offer a wide scope of legal documents that can be tailored to meet the requirements for different businesses. For more information, kindly visit our website.

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BEWARE OF THESE RED FLAGS!!!!

Many clients have been asking us how to tell that a contract/agreement is not favorable, considering all clauses have been stated in the agreement. Some have signed and gone into contracts without noticing the RED FLAGS that can later cost them or make them lose millions of shillings. Below are the 9 examples of RED FLAGS to look out for in an agreement.

1. Unclear or ambiguous language: Any ambiguity in the contract can lead to disputes and disagreements down the line. Make sure all terms and language are clearly defined.
2. One-sided terms: A contract should be a mutually beneficial agreement. If one party is getting a significantly better deal than the other, it may be a red flag.
3. Missing or incomplete information: A contract should include all necessary details and information. If any key information is missing or incomplete, it could cause problems during the contract period.
4. Non-disclosure clauses: Non-disclosure clauses can be helpful in protecting confidential information, but they may also limit your ability to share or use certain information.
5. Lack of flexibility: Contracts that are too rigid may not account for unforeseen circumstances or changes in circumstances.
6. Short-term focus: Contracts that are focused solely on short-term gains may not account for long-term implications or consequences.
7. Lack of legal review: Contract negotiations should always be reviewed by a lawyer to ensure the terms are fair and legally binding.
8. Excessive demands: If one party makes excessive or unreasonable demands, it may be a sign that the other party should walk away from the deal.
9. Requesting that the work or the job commences without signing the contract first is a big red flag, often times the other party is not willing to commit or may not pay for the services offered to them and you shall have no proof of an agreement because it was not signed.

In conclusion, always be aware of these red flags before signing any contract or agreement.

How can we assist?

The success of a startup is pegged on how well it protects itself from loss and harm arising from contractual relationships. Such loss and harm is prevented or reduced by having understanding how contracts/agreements are drafted. At Netsheria International, we offer a wide scope of legal documents that can be tailored to meet the requirements for different businesses. For more information, kindly visit our website.

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4 REASONS WHY DISCLOSURE IS IMPORTANT IN AN AGREEMENT OR CONTRACT SIGNING

Disclosure is an essential component of any agreement or contract signing. It is the act of revealing all significant and relevant information to the other party involved in the agreement or contract. This information could include finances, obligations, liabilities, and other pertinent details that can affect the outcome of the contract.

When entering into transactions like mergers and acquisitions, construction agreements and general dealings even when buying a car or a house, disclosure if not honored can cause or lead to losses to the party investing in the transaction.

The importance of disclosure in contract or agreement signing lies in the following reasons:

1. Avoidance of legal issues: One of the main reasons why disclosure is crucial is to avoid any legal issues or disputes. It ensures that all parties involved in the agreement understand what they are getting into and reduces the risk of misunderstandings and conflicts.
2. Protection: Disclosure can protect both parties involved in the agreement. For example, if you are signing a contract to buy a car, the seller must disclose any defects or issues with the vehicle. This ensures that the buyer knows what they are getting and can make an informed decision.
3. Trust: Disclosure builds trust between both parties. If one party hides information or provides incomplete details, it can damage the trust they have and impact the relationship going forward.
4. Fulfilling obligations: Disclosure sets out the expectations and commitments of both parties. By revealing all necessary information about the agreement, it ensures that obligations get fulfilled on both sides.

In conclusion, disclosure is a critical component of any contract or agreement, and both parties must understand the importance of full and transparent disclosure. This ensures that everyone involved can make informed decisions and fulfill their obligations without any legal issues or disputes.

How can we assist?

The success of a business is pegged on how well it protects itself from loss and harm arising from contractual relationships. Such loss and harm is prevented or reduced by having understanding how the contracts are reviewed, managed and negotiated. At Netsheria International, we advise on contract negotiation and also review contracts. For more information, kindly visit our website at www.netsheria.com

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WHY REPRESENTATIONS AND WARRANTIES ARE A MUST HAVE CLAUSE IN YOUR AGREEMENT

Representation and warranty clauses are an essential part of any agreement as they help to provide a level of assurance and protection to all parties involved in the agreement. These clauses are typically included in contracts or other legal documents, and they serve to outline the rights, obligations, and responsibilities of each party.

Representation clauses are used to confirm the accuracy of certain information or facts related to the transaction. This includes information about the parties involved, the assets being transferred, and any obligations that are being assumed as part of the agreement. For example, if a company is acquiring another company, the representation clause might state that the target company has no outstanding legal or tax issues, and that they own all of their intellectual property rights.

Warranty clauses, on the other hand, are used to provide a guarantee or promise related to the transaction. This includes guarantees related to the quality of the goods or services being provided, and the ability of the parties to fulfill their obligations. For example, if a company is selling a product to a customer, the warranty clause might state that the product is free from defects, and that the company will replace or repair any defective products within a certain time frame.

EXAMPLES OF REPRESENTATION AND WARRANTY CLAUSES YOU MAY HAVE INCLUDE IN YOUR CONTRACTUAL AGREEMENT

1. The seller represents and warrants that it has full power and authority to execute, deliver and perform this agreement and the transactions contemplated herein.
2. The buyer represents and warrants that it has sufficient funds to complete the purchase of the assets and that it is not aware of any circumstances that would prevent it from completing the purchase.
3. The seller represents and warrants that it is the legal and beneficial owner of the assets and that it has good and marketable title to the assets, free and clear of all liens, mortgages, charges, claims, and encumbrances.
4. The buyer represents and warrants that the purchase of the assets will not violate any law, regulation, order, or judgment of any court, or any agreement to which the buyer is a party.
5. The seller represents and warrants that the assets are in good and saleable condition and that there are no material defects that would materially affect the value of the assets.
6. The buyer represents and warrants that it has conducted sufficient due diligence with respect to the assets, and it is satisfied with its findings.
7. The seller represents and warrants that it has obtained all necessary consents, authorizations, and approvals required for the sale of the assets.
8. The buyer represents and warrants that it will comply with all applicable laws and regulations in connection with the ownership and operation of the assets.
9. The seller represents and warrants that it is not aware of any litigation or other proceedings that would materially affect the value of the assets.

In summary, representation and warranty clauses are important because they help to clarify the terms of an agreement, provide assurance to all parties involved, and reduce the risk of misunderstandings, disputes, and legal issues.

How can we assist?

The success of a startup is pegged on how well it protects itself from loss and harm arising from contractual relationships. Such loss and harm is prevented or reduced by having understanding how contracts/agreements are drafted. At Netsheria International, we offer a wide scope of legal documents that can be tailored to meet the requirements for different businesses. For more information, kindly visit our website. 

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UNDERSTANDING THE ROLES AND RESPONSIBILITIES OF A GUARANTOR

A guaranteed loan is a loan that a third party guarantees or assumes the debt obligation for, in the event that the borrower defaults. The third party is a guarantor often making reference to either a legal person or an individual who promises to pay a borrower’s debt in the event that the borrower defaults on their loan obligation.

Guarantors can either be limited or unlimited, with respect to different levels of financial involvement.

A limited guarantor may be asked to guarantee a loan only up to a certain time, after which the borrower alone assumes responsibility for the remaining payments and alone suffers the consequences of defaulting.

Unlimited guarantors on the other hand, are liable for the entire amount of the loan throughout the entire duration of the loan agreement.

In rare instances, individuals (borrowers) act as their own guarantors, by pledging their own assets against the loan. In Kenya, it is to be noted that the term “guarantor” is often interchanged with the term “surety.”

A guarantee is a significant element when an agreement is made between two parties to advance a loan facility and thus the inclusion of a guarantor is necessary. For instance, when the lender has less confidence in the borrower due to a low credit score, the presence of a guarantee can attract the lender. A guarantor thus needs strong credit, a good income, and adequate assets to guarantee loan repayment.

Some of the mandates of a guarantor include:

• A guarantor guarantees to pay a borrower’s debt in the event that the borrower defaults on a loan obligation.

In a guarantor loan agreement, the Guarantor will pay to the Lender, upon demand, all money and discharge all obligations and liabilities, whether actual or contingent, owing or incurred to the Lender by the Principal Debtor.

• The guarantor guarantees a loan by pledging their assets as collateral.
• If the borrower defaults on their loan, then the guarantor is liable for the outstanding obligation, which they must meet, otherwise, legal action may be brought against them.

The Rights of the Guarantor

Unlike a co-signer who co-owns the asset purchased via the loan facility advanced to the borrower by the lender, a guarantor has no claim to the asset purchased by the borrower.

It is thus crucial to be aware of the few rights available to you as a guarantor if the borrower defaults and the lender pursues you to repay the outstanding debt. These include:

• Reimbursement: if a guarantor paid any part of the borrower’s debt, the guarantor can pursue the borrower to recover the money paid or any out-of-pocket expense incurred in paying the debt. Specifications on this may vary from contract to contract.
• The right to subrogation: if the guarantor pays back the lender/ financial institution in full, the guarantor is released of liability to them and consequently becomes the lender. As a result, the guarantor then has all the same rights as the bank did to collect the debt from the borrower.

In the event that the borrower has a claim against a third party that has caused the default, the guarantor has the right to invoke the doctrine of subrogation (“step into the shoes of the borrower”) in order to recover damages.

• Collection from other guarantors: had there been multiple guarantors on the guarantor loan agreement and a guarantor paid more than his/her share of the debt or even satisfied the debt in full, he/she can pursue the other guarantors for their aggregate portions.

How can we assist you?

At Netsheria International, we have an experienced team of lawyers who can offer you legal assistance in your Guarantor Loan Agreements. Please contact us for our services via email or visit our website for more information on our services.

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KEY ELEMENTS OF A GUARANTOR LOAN AGREEMENT

A Guarantor Loan Agreement (also known as a Deed of Guarantee) refers to an agreement between a Financial Institution (the Lender) and the Guarantor detailing the rights, responsibilities, procedures, terms, and conditions under which a loan provided by a Financial Institution and advanced to a Borrower may be guaranteed.

6 key things to consider

Whether you are entering into a guarantor loan agreement as the guarantor or the lender, there are many important considerations to be made. Some of these include:

1. What exactly are the conditions of the loan that is being guaranteed?
2. Who is the guarantor? Is it a company or an individual?
3. Does the guarantor have sufficient assets to repay the loan should that become necessary?
4. Has the guarantor obtained independent legal advice regarding the terms of the loan and the deed of guarantee?
5. How is the deed to be executed? If the guarantor is a company, who is permitted to sign on behalf of the company?
6. What are the payment terms and conditions?

Core Clauses in the Agreement

With mutual considerations on the aforestated, the rights and responsibilities with respect to the guaranteed loan shall be substantially described in an agreement entered into between the Financial Institution, as the lender, and the guarantor, which agreement shall provide the following clauses:

1. Guaranty

In this clause, the Guarantor unconditionally guarantees and covenants with the Lender that the Guarantor will duly and punctually pay to the Lender all debts and liabilities, present or future, direct or indirect, absolute or contingent, matured or not at any time owing by the Borrower to the Lender upon demand wherever incurred and whether incurred by the Borrower.

2. Contribution by Guarantors.

In an Agreement with multiple guarantors, the co-guarantors will express desire to allocate among themselves, in a fair and equitable manner, their obligations arising under the Guarantee Agreement.

3. Payment

In this clause, Guarantors will upon demand pay, or cause to be paid, in Cash, to the Lender, an amount equal to the sum of the unpaid principal amount together with accrued and unpaid interest

The clause will also provide for the amounts payable as of any date of determination or it will include an arrangement to make Aggregate Payments in installments.

4. Liability of Guarantors. 

In this clause, each Guarantor agrees that its obligations are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full.

5. Authority of Guarantors.

This clause establishes the capacity and/or powers of any Guarantor or its officers, directors or any agents acting or purporting to act on behalf of any of them.

6. Default and Enforcement

This clause often provides that if the Guarantor shall fail on demand to make payment pursuant to the Borrower’s Liabilities, the Lender may in its discretion proceed with the enforcement of its rights with litigious action to recover owing sums.

7. Set off and lien

This clause provides that the Lender may, at any time and without notice or demand and notwithstanding any settlement of account or other matter whatsoever, combine or consolidate any existing accounts including accounts in the name of the Lender of the Guarantor and set off or transfer any sum in satisfaction of any obligations or liabilities to the Lender by the Guarantor.

8. Release and Discharge of the Guarantee

After all moneys payable by the Borrower to the Lender have been paid in full, the guarantee in the Agreement shall cease and become null and void and the Lender shall, at the request and at the expense of the Guarantor execute and deliver a release to the Guarantor.

How can we assist you?

At Netsheria International, we have an experienced team of lawyers who can offer you legal assistance in drafting and reviewing your Guarantor Loan Agreements. Please contact us for our services via email or visit our website for more information on our services.

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Protecting Your Interests in a Guarantor Loan Agreement

When someone takes out a loan, lenders may require a guarantor to sign on as well. A guarantor is someone who agrees to be responsible for repaying the loan if the borrower is unable to do so. While it may seem like a simple task, agreeing to become a guarantor can be a significant financial risk. As such, it is important for a guarantor to protect their interests in a guarantor loan agreement. Here are some ways a guarantor can do so:

1. Review the loan agreement thoroughly: Before signing on as a guarantor, it is important to read the loan agreement carefully. Make sure you understand the terms of the loan, including the interest rate, repayment schedule, and any penalties for late payments or default. If you have any questions or concerns, don’t hesitate to ask the lender for clarification.
2. Set limits on your liability: In some cases, a guarantor may be asked to guarantee the entire amount of the loan. However, it is possible to negotiate limits on your liability. For example, you may be able to agree to guarantee only a portion of the loan or to limit your liability to a certain amount.
3. Require notice of default: As a guarantor, you should require the lender to notify you if the borrower defaults on the loan. This will give you time to take action to protect your credit rating and financial interests.
4. Secure your own assets: In some cases, lenders may require a guarantor to provide collateral to secure the loan. If you are asked to do so, make sure that the collateral is something you are comfortable putting at risk. You may also want to consider securing your own assets with a lien or other legal instrument to protect them from potential loss.
5. Get legal advice: Before signing on as a guarantor, it is always a good idea to seek legal advice. A lawyer can review the loan agreement and help you understand your rights and obligations as a guarantor. They can also help you negotiate more favorable terms or protect your interests in other ways.

Conclusion

Becoming a guarantor for a loan is a serious financial responsibility. It is important to protect your interests by thoroughly reviewing the loan agreement, negotiating limits on your liability, requiring notice of default, securing your own assets, and seeking legal advice. By doing so, you can minimize your risk and ensure that you are not left with a significant financial burden in the event that the borrower defaults on the loan. At Netsheria International LLP, we offer guarantor loan agreements that seek to protect the interests of the guarantor. For more information, visit our website at www.netsheria.com

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The 5 Types of Construction Contracts You Need to Know

A construction contract can be defined as a legal document that is can be entered into between all parties involved in the construction and details the scope and terms of the project or development.

There are 5 types of construction contracts. These are:

1. Lump sum contract– This contract sets a fixed total price for the entire project rather than individual aspects. In most cases, it is set for straightforward projects with a clearly defined scope of work. For instance, a software installation company may enter into a lump sum contract for installing multiple data processing systems in a building. The installation company would receive a lump sum upon completion of the project. Lump sum contracts involve a fair amount of risk for contractors because they don’t take into consideration the unexpected costs or delays after the project is started.

The downside of lump sum contracts are that one may make less money, or, even worse, lose money on a construction project.

2. Time and materials contract– This contract works best for projects in which the scope of work is not well-defined. It is entered into where contractors of a project are reimbursed for the cost, materials, and labor at an agreed pay rate; daily or hourly. This is often used for projects without a clearly defined scope of work. For example, where a client wishes to redo their veranda, the contractor is expected to look at the scope of the work/ project, the materials required and the expected time to complete the work.
3. Cost-plus contract– This contract is also known as a cost- reimbursement contract. It is entered into where the owner pays the contractor for direct costs such as materials and labor, and indirect costs such as all overheads incurred during the project, travel and insurance expenses as well as a preset profit margin. The importance of this contract is that it offsets contractor risk for projects that involve design changes. The majority of the risk is borne by the owner/ developer. This is because the contractor gets to be paid for all costs incurred during the project and any unforeseen expenses are borne by the owner/ developer. For example, where a XYZ Limited, a construction company is hired to construct a property for a consideration of Kes 20 million, subject to it been completed within 12 months, if the project is completed within 11 months, they are subjected to a 5 % incentive of the total consideration of Kes. 20 million.
4. Unit price contract– This contract is also known as measurement contracts, measure and pay contracts, or remeasurement contracts. It divides the work to be completed into separate units, which the contractor bills for individually. The importance of this contract is that it allows the construction work to start before the full extent of the project can be determined. This removes the risk of inaccurate estimation of the quantities. For example, the cost of constructing a road might have been laid out based on an approximate estimate of the distance required, and then the actual payment calculated based on the final length of the road.
5. Guaranteed Maximum Price (GMP) contract– This contract seeks to establish an upper limit for construction costs and contractors absorb costs above this set point. This means that customers agree to reimburse the contractor for labor costs, cost of purchase of materials and the contractor’s fee that cover profits. This contract is best suited to projects with few unknowns, meaning that the building plans have been repetitively used and thus removing any uncertainty.

The key advantage of a GMP contract is that it shifts the risk to the contract since the owner does not pay for any cost overruns.

Conclusion

Every construction project requires properly drafted contracts that seek to protect the interests of the parties. At Netsheria International LLP, we offer various construction contracts that seek to protect the interests of the parties. For more information, visit our website at www.netsheria.com

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