Factory Building Agreement

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Factory Building Agreement

A Factory Building Agreement is a legal contract which is created when a company or an organization wants to a factory to be built by a construction company. In this legal document, in which the first party is the organization who assigns the tender for the factory to be built, and the second party is the real estate agent or construction company who takes the tender and agrees to build a factory for the said company or organization. This document is a legal proof of a transaction taking place and outlines the specifications of the factory to be built along with the details of the terms and conditions which are mutually decided by the organization and the construction company.

This legal document contains details such as the name of the organization which wants to build the factory, the name of the construction company who is building the factory along with specifications of the factory that is to be built along with other important details.

When Do You Need a Factory Building Agreement?

The most common use of this legal document is found when a parent organization wants a factory to be constructed and therefore issues a tender notice to invite contractors for the same. Whichever contractor is selected to be the construction agent for the organization is issued the tender and this legal document acts as a proof of a transaction happening and also contains the specifications as mentioned by the parent organization.

Inclusions in Factory Building Agreement

  • Parties Involved: In this contract there are usually two parties involved, the first one being the organization who has issued a tender for the factory to be made and the second party is the construction company who has taken on the role to construct the factory as per the specifications mentioned earlier.
  • Effective Date: The dates which hold high significance in the context of this agreement are mentioned in this section. Details such as when the construction of the factory will start, by when it needs to end and the total number of days in between are mentioned as well.
  • Where does it Apply: This contract is legally binding within the premises of the state, city or county wherein it was drawn.   

How to Draft a Factory Building Agreement

Kindly follow the below mentioned steps to draw a Factory Building Agreement:

  • Once the construction agent has been selected, organize a meeting between the agent and the company. Discuss upon the specifications of the factory to be built and also other terms and conditions.
  • Once the terms and conditions and all other finer details have been discussed, reach out to a legal term and ask them to draft a Factory Building Agreement for your organization.
  • Cross verify and check all the details with both organizations, after which collect the required signatures from both the stakeholders.

Benefits of Factory Building Agreement

The benefits of having a Factory Building Agreement are many. Mentioned below are the most significant ones.

Pros of having a Factory Building Agreement

  • This document is a legal proof of a transaction taking place between two organizations and therefore can be produced in court if need be.
  • This legal agreement protects both the stakeholders from any possible chance of fraud and also makes sure that the factory gets built as per the mutually decided specifications while abiding all the terms and conditions.

Cons of not having a Factory Building Agreement

In the absence of this legal agreement, both the parties stand to lose if the matter is ever taken in court due to lapse in terms or in specifications mentioned.

Key Terms & Clauses in a Factory Building Agreement

  • Disclaimers: When such a legal agreement is being drawn, both the parties need to produce certain disclaimers to each other and this section of the contract outlines the details of the same.
  • Notices: Certain notices need to be issued to both the concerned parties and this section mentions the details of the same.
  • Remedies: In the case of lapse in payment or not abiding to the terms and conditions, this section of the contract comes into effect and outlines what the remedy will be for both the parties involved.
  • Obligations: Both the organizations will have certain obligations to each other and this section contains the details of the same.

[Also Read: Construction Contract]

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Factory Building Agreement

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