Home Improvement Contract

A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contract's full price.

In California, the state limits advance payment at the time of contract signing to 10% of the total estimated job cost or $1,000, whichever amount is lower! All payments thereafter are supposed to be made for work performed or for materials delivered to the job site.

In California, the state limits advance payment at the time of contract signing to 10% of the total estimated job cost or $1,000, whichever amount is lower! All payments thereafter are supposed to be made for work performed or for materials delivered to the job site.

A cost-plus contract, also known as a cost-reimbursement contract, is a form of contract wherein the contractor is paid for all of their construction-related expenses. Plus, the contractor is paid a specific agreed-upon amount for profit.

There is much confusion in the industry whether time and materials or cost-plus contracts are legal for HICs in California.The CLSB declares its interpretation that such contracts are illegal in its newsletter article entitled Time and Material Contracts Not Legal for Home Improvement.

Define and describe the project in detail. Include what materials must be used; be as specific as possible. Include weight, brand name and other identifying features. Specify the work being performed and all equipment being used or installed.

Disadvantages of cost-plus fixed-fee contracts may include: The final, overall cost may not be very clear at the beginning of negotiations. May require additional administration or oversight of the project to ensure that the contractor is factoring in the various cost factors.