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.
In Pennsylvania, a Construction Contract for Home can be categorized into two main types: Fixed Fee or Cost Plus. These contracts outline the terms and conditions between a homeowner (or client) and a contractor for the construction or renovation of a residential property. A Fixed Fee contract is a common option where the contractor agrees to complete the project for a set or fixed price. This means that regardless of any unexpected expenses or changes in scope, the contractor is responsible for completing the project within the agreed-upon budget. However, it is crucial for the homeowner to provide detailed specifications and plans to avoid any misunderstandings regarding what is included in the fixed fee. On the other hand, a Cost Plus contract allows for more flexibility in terms of pricing. In this type of contract, the contractor is reimbursed for the actual costs incurred during the construction or renovation process. These costs typically include materials, labor, and subcontractors, with an additional percentage (often a specified profit margin) applied as a fee. This type of contract provides transparency to the homeowner, as they have visibility into the actual expenses and can have more control over the project's scope and budget. Both types of contracts have their advantages and considerations. The Fixed Fee contract provides the homeowner with certainty regarding the total project cost, whereas the Cost Plus contract allows for more flexibility in case of design changes or unforeseen circumstances. It is important to note that within these two contract types, there can be variations and specific terms depending on the agreement between the homeowner and contractor. Each contract should include essential components such as project timelines, payment terms, warranty provisions, dispute resolution procedures, and an outline of the work to be completed. When entering into a Pennsylvania Construction Contract for Home, it is advisable to consult with legal professionals or experienced construction contract attorneys to ensure that the terms are fair, protect the interests of both parties, and comply with local laws and regulations.
