Oregon Construction Contract for Home - Fixed Fee or Cost Plus

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Multi-State
Control #:
US-00462
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Word; 
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Description

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 Oregon Construction Contract for Home — Fixed Fee or Cost Plus is a legal agreement between a homeowner and a contractor for the construction or renovation of a residential property in the state of Oregon. This type of contract specifies the terms and conditions under which the construction project will be carried out, including the scope of work, cost, payment terms, and other important details. A fixed fee contract is one type of Oregon Construction Contract for Home, where the contractor agrees to complete the project for a predetermined fixed fee. This means that the homeowner will pay a set amount for the entire project, regardless of any unforeseen expenses or changes in the scope of work. The fixed fee is usually determined after a consultation and assessment of the project requirements. On the other hand, a cost plus contract is another type of Oregon Construction Contract for Home. In this arrangement, the contractor will be reimbursed for the actual cost of materials, labor, and other expenses incurred during the construction process. Additionally, a predetermined percentage or fee for overhead and profit is added to the final cost. Both fixed fee and cost plus contracts have their own advantages and considerations. In a fixed fee contract, the homeowner has a clear idea of the final cost from the beginning, which helps with budgeting and financial planning. However, any changes or unexpected issues that arise during the project may incur additional costs, and the homeowner may need to negotiate change orders with the contractor. In a cost plus contract, the homeowner has more flexibility in making changes to the project scope or design, as the cost is based on actual expenses. This type of contract can also allow for more transparency, as the homeowner has access to all the receipts and invoices. However, the final cost can be uncertain until the completion of the project, and there is a risk of potential cost overruns if proper monitoring and communication between the homeowner and contractor are not maintained. It is crucial for both homeowners and contractors to carefully review and understand the terms and conditions included in Oregon Construction Contracts for Home — Fixed Fee or Cost Plus. Important elements typically covered in these contracts include project details such as a description of the work to be done, specific materials to be used, project timeline, payment terms, change order process, dispute resolution mechanisms, and termination clauses. Always consult with a legal professional before signing any construction contract to ensure that your rights and interests are protected throughout the project.

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FAQ

Cost-plus contracts are generally used if the party drawing up the contract has budgetary restrictions or if the overall scope of the work can't be properly estimated in advance. In construction, cost-plus contracts are drawn up so contractors can be reimbursed for almost every expense actually incurred on a project.

(also fixed fee) an amount that is charged or paid that does not change according to the amount of work done, or the number of times something is used: She agreed to do the work for a flat fee, rather than charge an hourly rate.

A cost plus arrangement is better for homeowners who are less concerned with budget and more motivated by the builders reputation. They are comfortable with more unknowns about the construction of their house.

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.

Buyers may prefer a fixed-price arrangement over cost plus because the former provides certainty on what they will be charged for a project. Contractors should ensure they carefully track and itemize materials and overhead.

Advantages and Disadvantages of Using Cost-Plus ContractsThey eliminate some risk for the contractor. They allow the focus to shift from the overall cost to the quality of work being done. They cover all the expenses related to the project, so there are no surprises.

In a cost-plus contract, the profit is calculated separately before construction and written into the contract as an additional fee. A fixed-price contract establishes a single lump sum cost for a construction project upfront.

Unlike a fixed-cost construction contract, a cost-plus construction agreement is a contract in which the owner pays the contractor the actual costs of the materials and labor plus an additional negotiated fee or percentage over that amount.

Fixed-price contracts tend to be best suited for when a project's scope can be clearly determined upfront, and the costs of the materials and labor needed to meet the contract's terms can be estimated with reasonable certainty.

Under a fixed price contract, there is the risk that the costs will be greater than the price and thus the contractor will take a loss. For the buyer, the cost plus contract offers a better product since the contractor has no incentive to cut costs on lower end materials.

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Oregon Construction Contract for Home - Fixed Fee or Cost Plus