This form is a Construction Contract. The form contains the following subjects: scope of work, work site, and insurance. The contractor's warranty is limited to defects in workmanship within the scope of the work performed by the contractor.
What is a Construction contract agreement?
If you’re planning to build, renovate or reconstruct your house, you will need to enter into a contract for home construction with the building contractor, defining your mutual rights and responsibilities. This agreement contains project specifics, the contractor’s license and insurance details, the requested scope of work, etc. It may also determine the potential lien on the property should the work not be paid in full.
Types of construction contracts
Depending on the payment arrangements determined by parties, there are four basic types of home builders’ contracts:
1. Fixed price (or lump-sum) agreements set the price for the completed job right from the start. Although fixed, the document may also include provisions defining penalties (for example, if the constructor fails to finish the work on schedule).
2. Cost plus construction agreements set the price for the finished work based on building materials and labor with additionally mentioned “plus” (a percentage of the total costs or a fixed fee).
3. Time and material agreements set the price for the work without a “plus,” but the client pays the contractor a daily or hourly rate while they are under contract.
4. Unit-price agreements are standard in bidding, particularly for federal building projects. Both owner and contractor define the price that the contractor charges for a standard unit without any specific extra fees for other units.
The first two types of contract for home construction mentioned are the most popular ones. Let’s take a closer look at them.
Fixed price vs. cost-plus contract benefits
The fixed price agreement benefits owners more than builders, as it determines at the moment the parties seal the deal the exact price the contractor will get after they complete all the work. Builders risk not getting the estimated profits they initially anticipated, as expenses may increase significantly but remain the constructor’s responsibility.
The cost-plus construction deal contains the evaluation of the final project cost; however, it doesn’t determine the final contract price until the contractor completes all the work. Unlike the fixed-price agreement, it separates expenses and sets the profit rate (as a percentage of the final project cost or as a flat amount), so contractors prefer this type of agreement; it is riskier for homeowners.
Information you should provide in the construction contract agreement
The presented Construction Contract for Home is a universal multi-state construction contract template. This sample describes typical terms for a home building contract. Download a printable document version from our website or amend and fill it out online. Make sure to provide the following information:
• Name and contact details of the contractor and their license number;
• Name and contact details of the homeowner;
• Property legal description from county clerk’s records;
• Project description with blueprints and building specifications;
• Scope, description of work, and its estimated final dates;
• Costs of work and responsibilities of parties for any breach of contract.
Building contract agreement format is a legally binding document that outlines the terms and conditions between the client and the contractor for the construction or renovation of a building or structure. It ensures that all parties involved are aware and agree to their responsibilities, rights, and obligations during the construction process. The building contract agreement format typically includes the following key components: 1. Parties involved: It identifies the client, usually the property owner, and the contractor who will undertake the construction work. This section may also mention any subcontractors or consultants involved in the project. 2. Scope of work: This section provides a detailed description of the construction project, including the specifications, plans, and materials to be used. It outlines the specific tasks to be performed by the contractor and may also include a timeline for completion. 3. Payment terms: The agreement specifies the payment structure, including the total contract sum, how and when payments will be made, and any penalties for late or non-payment. It may also include provisions for progress payments based on completed milestones. 4. Insurance and liability: This section details the insurance requirements for both the client and the contractor. It outlines the types of insurance coverage required, such as public liability, workers' compensation, and property damage insurance. It also addresses liability and indemnification for any damages or injuries that may occur during the construction process. 5. Variations and changes: This clause allows for any changes or modifications to the original scope of work. It outlines the procedures for requesting and approving changes, as well as how costs and time adjustments will be handled. 6. Dispute resolution: In the event of a disagreement or dispute, this section specifies the methods of resolving conflicts, such as mediation, arbitration, or litigation. It may also mention the jurisdiction where legal actions would be initiated. 7. Termination and suspension: This section outlines the circumstances under which either party may terminate or suspend the agreement. It includes provisions for notice periods, reasons for termination, and any penalties associated with early termination. Different types of building contract agreement formats are commonly used, including: 1. Lump sum contract: This type of agreement specifies a fixed price for the entire construction project. The contractor is responsible for completing the work within the agreed-upon budget. 2. Cost-plus contract: In a cost-plus agreement, the client agrees to reimburse the contractor for all the costs incurred during the construction process. Additionally, a previously defined percentage or fee is added to cover the contractor's overhead and profit. 3. Unit price contract: This format is used when the project involves repetitive tasks or items that can be easily quantified. The contract establishes a fixed price per unit for each item or task. 4. Design-build contract: This type of agreement combines the design and construction phases. The client enters into a contract with a single entity or contractor responsible for both the design and construction aspects of the project. By utilizing a comprehensive building contract agreement format, all parties involved can ensure transparency, mitigate risks, and establish a clear framework for a successful construction project.
