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 Minnesota Construction Contract for Home — Fixed Fee or Cost Plus is a legal agreement that outlines the terms and conditions between a homeowner (also referred to as the "Owner") and a licensed contractor (also known as the "Contractor") for a residential construction project in the state of Minnesota. This contract type is commonly used in the construction industry to establish the cost structure and define the scope of work for a home construction project. In a Fixed Fee contract, the Contractor agrees to complete the project for a predetermined, fixed amount, which is agreed upon by both parties before the project begins. This means that regardless of any unforeseen circumstances or additional work required, the Contractor is responsible for completing the project within the agreed budget. This contract type provides the homeowner with more cost certainty, as the total project cost is pre-determined, and any unexpected expenses are to be borne by the Contractor. On the other hand, a Cost Plus contract involves the homeowner paying for the actual costs incurred by the Contractor, plus an agreed-upon percentage or fee (known as the markup or overhead) to cover the Contractor's profit and administrative costs. The actual costs include labor, materials, and other direct expenses directly related to the construction project. This contract type gives the homeowner more flexibility as it allows for additional work or changes to the project scope if desired, but also carries the risk of cost overruns if not properly managed. It's worth noting that within each contract type, there can be variations and specific terms that may differ from project to project or from contractor to contractor. Some contracts may also include clauses for a combination of both fixed fee and cost plus, allowing for certain parts of the project to be completed using one method while others use the alternative. The Minnesota Construction Contract for Home — Fixed Fee or Cost Plus typically includes various essential elements, such as the project description, detailed scope of work, project timeline or schedule, payment terms, insurance requirements, dispute resolution mechanisms, and any relevant permits or regulatory compliance obligations. It is crucial that both parties carefully review and fully understand the contract before signing to ensure that their rights, responsibilities, and expectations are covered adequately. It is recommended that homeowners consult with legal professionals or construction experts familiar with the specific laws and regulations in Minnesota to ensure compliance and protection of their interests. Moreover, the specific terms and contract types may vary depending on the complexity, size, and nature of the home construction project.
