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.
A works contract agreement format is a legally binding document that outlines the terms and conditions between two parties involved in a works contract, which is a type of agreement where one party agrees to provide certain services or perform specific work for another party. The works contract agreement format typically includes various important details to ensure clarity and mutual understanding between the parties involved. It includes elements such as the names and addresses of both parties, project description, project duration, scope of work, materials to be used, payment terms, terms for termination or cancellation, dispute resolution mechanism, and any other relevant terms and conditions. There are different types of works contract agreement formats, depending on the nature of the project and the parties involved. Some commonly used formats are: 1. Lump Sum Agreement: This type of agreement specifies a fixed amount to be paid by the employer to the contractor for the completion of the entire project, regardless of the actual cost incurred. 2. Cost Plus Agreement: In this format, the employer agrees to reimburse the contractor for the actual cost incurred in completing the project. It often includes an agreed-upon percentage as the contractor's fee or profit margin. 3. Time and Material Agreement: This format involves the payment of the contractor based on the actual hours worked and materials used, along with an agreed-upon hourly rate and material cost. 4. Target Cost Agreement: This type of agreement sets a target cost for the project, and the contractor is incentivized to complete the project within the target cost. Any savings achieved below the target cost are shared between the employer and the contractor. 5. Turnkey Agreement: In this format, the contractor takes full responsibility for delivering a completed and fully functional project as per the specifications provided by the employer. The contractor is responsible for the design, procurement, construction, installation, testing, and commissioning of the project. Each type of works contract agreement format carries its own advantages and considerations. The choice of format depends on the complexity of the project, the level of risk-sharing desired, and the preferences of the parties involved. It is essential to carefully review and customize the format to ensure it accurately reflects the intended agreement and protects the interests of both parties involved.
