A well-structured and comprehensive construction contract is essential to avoid many of the common problems that arise during building projects in Costa Rica. The level of detail and care given to the drafting of such an agreement directly impacts the likelihood that the final outcome will match the expectations of the parties and remain within the projected budget.
In practice, construction companies often propose simple, standard agreements that do not adequately reflect the specific characteristics of a project. These agreements frequently omit important elements, leading to misunderstandings that typically result in additional costs, deviations from agreed plans, or even the premature termination of the relationship between the parties, with all the complications that this entails.
When appropriate—particularly when the owner is not in a position to closely supervise the project or manage the procurement of materials and labor—it is advisable to negotiate a “llave en mano” (turnkey) contract. Under this structure, the contractor assumes responsibility for the procurement of materials, management of labor, permits, finishes, and construction. In these cases, materials and finishes are selected by the owner, either from an agreed list or as specified in blueprints or contractual appendices.
The level of detail used to describe materials and finishes is critical to ensure that the final product corresponds to the owner’s expectations. If this level of detail is deferred to architectural plans, it is important to verify that such plans contain sufficient specification, as not all professionals provide the same degree of definition.
Beyond these general considerations, there are several key elements that should be included in any construction agreement to provide adequate protection:
- The property where construction will take place should be clearly identified, including, if possible, its registration (“folio real”) and survey (“plano catastrado”) numbers.
- The contract must expressly state that the contractor is responsible for all labor obligations, including salaries, social security contributions, and workers’ compensation insurance, to avoid potential liability for the owner.
- Responsibility for obtaining all required building permits and governmental and municipal authorizations must be clearly assigned to the contractor, including confirmation that all related costs are included in the contract price.
- Payments should be structured in stages, directly tied to measurable progress in the construction process (such as roofing, electrical installations, and other defined milestones).
- A specific completion deadline must be established, clearly defining what constitutes finalization of the work, along with penalties in the event of delays.
- The contract should address the possibility of delays beyond acceptable limits, granting the owner the right to extend deadlines with penalties or terminate the agreement and pursue damages if necessary.
- Regular inspections and meetings between the owner, contractor, and technical team (including architects and engineers) should be established, with defined frequency, to ensure proper supervision of the project.
- It is advisable to include provisions regarding intellectual property, specifying ownership rights over the constructed works.
Although negotiating and carefully drafting these provisions may initially seem time-consuming, this process is essential to prevent more significant delays, disputes, and risks during the execution of the project. Properly addressing these elements from the outset significantly enhances the likelihood of a successful construction process and a final result aligned with the original expectations.
At Lang & Asociados, we assist clients in structuring and negotiating construction agreements that provide clarity, protection, and practical solutions, ensuring that projects are carried out efficiently and with legal certainty.