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.
An Arkansas Construction Contract for Home refers to a legally binding agreement between a homeowner and a construction contractor for the construction or renovation of a residential property in the state of Arkansas. This contract can be categorized into two main types: Fixed Fee and Cost Plus. 1. Fixed Fee Contract: In a Fixed Fee Contract, also known as a Lump Sum Contract, the homeowner and the contractor agree upon a fixed price for the entire project. This price includes all labor, materials, subcontractors, permits, and other project-related expenses. The contractor undertakes the responsibility of completing the project within the agreed-upon budget and timeline. This type of contract is commonly used when the scope of work is well-defined, and there is minimal risk of changes during the construction process. Homeowners prefer this contract type as it provides them with cost certainty and avoids any additional costs unless changes are requested. 2. Cost Plus Contract: A Cost Plus Contract, also known as a Time and Material Contract, is based on the actual cost of the project plus a predetermined fee or percentage. In this contract, the homeowner agrees to reimburse the contractor for all documented project-related expenses, such as labor, materials, equipment, permits, and subcontractors. Additionally, a fee or percentage (often negotiable) is added to cover the contractor's overhead and profit margin. This type of contract is commonly chosen when the project scope is uncertain, and potential changes or modifications are expected. Depending on the requirements and preferences of the parties involved, there can be variations or combinations of both contract types. For example: 3. Cost Plus Fixed Fee Contract: This type of contract incorporates elements of both the Fixed Fee and Cost Plus contracts. The contractor charges a fixed fee (as a flat amount or percentage) that covers the overhead and profit margin. The homeowner reimburses all documented project expenses separately. In summary, Arkansas Construction Contracts for Home can be classified into Fixed Fee Contracts, Cost Plus Contracts, or a combination of both. The choice of contract type depends on the project's complexity, level of risk, scope definition, and the mutual agreement of the homeowner and the contractor. It is essential for both parties to thoroughly review and understand the terms and conditions of the chosen contract type before signing to ensure a successful construction or renovation project.
