When entering into a construction contract, a provisional sum is an amount of money that is included as an estimate. This estimate is intended to cover any work that may be required but is not fully defined or specified in the contract. In other words, it`s a contingency sum.
Provisional sums can be included for several reasons, including unexpected site conditions or unforeseen work that is discovered after the contract has been signed. The purpose of the provisional sum is to ensure that the contractor has enough money to complete the work, even if it wasn`t initially anticipated.
The use of provisional sums is common in construction contracts, and they can be included for various reasons. For example, if a project involves excavation work, there may be an allowance for provisional sums to cover any unforeseen issues that arise during the excavation process. Similarly, if a project involves extensive electrical work, there may be an allowance for provisional sums to cover any unexpected problems that arise during the installation or testing phase.
It`s important to note that provisional sums are not a fixed amount, and they are subject to change. The final cost will depend on the actual work required, and any amounts not used will be deducted from the total contract price. This means that it`s important for both parties to be clear about what is covered by the provisional sum and what isn`t.
When drafting a construction contract, it`s essential to include clear and concise provisions regarding provisional sums. These provisions should outline what work is covered by the provisional sum, how it will be accounted for, and any procedures for adjusting the amount if necessary.
In conclusion, a provisional sum is an amount of money that is included in a construction contract as an estimate to cover unforeseen work that may be required. It`s important for both parties to be clear about what is covered by the provisional sum and what isn`t, and to include clear provisions in the contract regarding how it will be accounted for. By doing so, the contractor can ensure that they have enough money to complete the work, and the client can avoid any unexpected costs or delays.