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The construction industry strongly relies on the contractual norms and conditions for its legal, regulatory, and formal obligation of work. As we know, a contract is an agreement enforceable by law. Broadly, there are three types of contracts classical, neoclassical, and relational contract. Clarity and correctness and contractual documents reduce at least 30% of project risk. As the need for development in increasing day by day, there is also a growing need for adoption of modern technologies, smart contracts methods, regular amendments in regulations and laws. Which in turn requires highly collaborative decision-making teams and well-planned processes for the successful execution of project delivery.
The traditional contracts assume that risk and liabilities of the project lie with the party who is best capable to handle the risk on its own. It becomes very difficult for any stakeholder in such cases to anticipate probable threat/opportunity without the help of other stakeholder’s involvement.
Relational contracting is a term itself suggesting about the relationship in the contracts. Relational contracting is based on mutual benefits and win-win situations through more cooperative relationships between one or more stakeholders.
The relational contracts are not the form of any contract, rather it is about having good relationships between two or more stakeholders, contributing towards the successful completion of the contract. It is the arrangement of a cooperative or a team approach to deal with the accomplishment of best project outcomes. It is a system of exchange trying to express acknowledgement to the commercial relationship between the stakeholders involved in the contract.
This article first appeared on www.metrorailnews.in
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