My Professor of Contract Law once mentioned to us – 'A contract is required since there is mistrust amongst parties.' So true, else, why would need a document.
Otherwise, the purpose of the contract document is to define either party's obligation and share the risk between them.
In construction, contents of a contract document are not understood by engineers. Many resist going through it. This document is referred to when the teams encounter a problem.
As a project manager, the first activity I used to assign any engineer when he joins the team was to ask him to go through the contract document. I then used to ask him a few questions to ascertain that they have gone through it. The intention was not to examine them. It was to provide awareness about various provisions in the document. In an open book exam, refereeing to the right book and location is necessary to answer.
Simply put, there are three sections to a contract document. Technical, Commercial, and Legal.
Legal subtilities are related to legal provisions from the Contract and other Acts. They are required to complete the contract document. These provisions detail how situations related to performances, breaches, unfairness, rights, obligations, capacity, consent, concerns arising out of external causes, and others are managed.
Commercial details are related to the consideration and its disbursements from contracting party to other. Payment terms, rates of items, pieces related to discounts, bill preparation and submission methods, Billing period & cycle, closure of certification, reference documents, and many others are commercial details available.
Several contents about technical requirements for the complete performance of the contract are provided in the contract. Specifications, material usage, work methodology, quality/quantity measurements & considerations, reference documents are some details in the document.
Engineers at the site are advised to categorize sections in the documents as above to understand different contents better.
Various types of contract forms have evolved based on how the risks are shared between the contracting parties. Some forms have the main risks allocated to the service provider/supplier. Others have them allotted to the employer to manage.