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.
The Mississippi Construction Contract for Home — Fixed Fee or Cost Plus is a legal agreement between a homeowner (client) and a construction contractor (builder or contractor) that outlines the terms and conditions for the construction or renovation of a home in Mississippi. This contract can be divided into two main categories: fixed fee and cost plus. Each category has its own variations, which can be tailored to meet specific project requirements. 1. Fixed Fee: The fixed fee contract specifies a predetermined amount that the homeowner will pay to the contractor for completing the construction project. This fee is agreed upon and remains the same regardless of the actual costs incurred during the construction process. The contractor assumes the risk of any cost overruns and is responsible for managing the project within the agreed-upon amount. a) Lump Sum Contract: Also known as a fixed price contract, this type of contract outlines a specific total amount for the entire project. It includes all labor, materials, permits, and any other costs required for completion. The contractor is responsible for managing the project to stay within this fixed budget, and any cost overruns are their responsibility. b) Guaranteed Maximum Price (GMP) Contract: This contract guarantees that the project will not exceed a maximum price agreed upon by both parties. However, unlike a lump sum contract, the actual costs incurred during the construction are shared between the homeowner and the contractor. If the project costs are lower than the agreed maximum price, the homeowner benefits from the savings. 2. Cost Plus: In a cost plus contract, the homeowner agrees to reimburse the contractor for the actual costs incurred during the construction, including labor, materials, equipment, permits, and management fees. The contractor is also entitled to an agreed-upon profit or percentage of the costs. a) Cost Plus Fixed Fee (CUFF) Contract: This agreement reimburses the contractor for the actual costs incurred, similar to a cost plus contract. However, in addition to the costs, the contractor receives a predetermined fixed fee or a percentage of the total costs as their profit. This contract provides more transparency as the homeowner has visibility into the actual costs incurred. b) Cost Plus Percentage Fee (CPF) Contract: In this type of cost plus contract, the contractor's profit is based on a percentage (agreed upon in the contract) of the total costs incurred during the construction process. While this contract may lack transparency in terms of specific costs, it provides the contractor with a proportional fee linked to the project's overall expenses. Mississippi's Construction Contract for Home — Fixed Fee or Cost Plus is a crucial legal document that protects the rights and interests of both the homeowner and the contractor involved in a construction project. It clearly outlines the scope of work, responsibilities, payment terms, warranties, dispute resolution mechanisms, and other pertinent details to ensure a smooth and successful construction process while complying with Mississippi's construction laws and regulations.
