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.
Alaska Construction Contract for Home — Fixed Fee or Cost Plus refers to a legal agreement between a homeowner (client) and a construction contractor (builder) in the state of Alaska. This contract determines the terms and conditions under which the construction project will be carried out, including the pricing structure and payment terms. A fixed fee contract is a type of construction contract where the builder charges a predetermined, fixed amount for the entire project. This means that regardless of any fluctuations in labor or material costs, the homeowner agrees to pay the builder a set amount. The advantage of a fixed fee contract is that it provides the homeowner with predictability and reassurance regarding the project's cost. However, the disadvantage is that any unforeseen expenses or changes in scope may result in additional charges to the homeowner. On the other hand, a cost-plus contract is an alternative pricing structure where the builder charges the client for the actual costs incurred during construction, along with an additional fee or percentage (often termed "overhead" or "profit margin") that covers the contractor's profit and management costs. Under a cost-plus contract, the homeowner is responsible for paying the actual costs of materials, labor, subcontractors, and any additional expenses related to the project. This contract type provides transparency as the homeowner has access to actual receipts and invoices, ensuring that they only pay for the project's true cost. However, the downside is that the homeowner may have less cost predictability, as there is no fixed price established at the beginning. It's important to note that within the broader categories of fixed fee and cost-plus contracts, there can be various subtypes designed to meet specific project requirements. For instance, there may be lump-sum or unit-priced fixed fee contracts, where the builder charges a fixed amount per specific unit or item of the construction project. Similarly, with cost-plus contracts, there could be a cost-plus-percentage fee arrangement or a cost-plus-fixed-fee structure. In summary, an Alaska Construction Contract for Home can be based on either a fixed fee or a cost-plus pricing structure. Each contract type has its own implications in terms of budget predictability, cost transparency, and flexibility. It is crucial for homeowners to carefully review and discuss these options with potential contractors before entering into any construction agreement to ensure that the chosen contract aligns with their specific needs and expectations.
