Tennessee Construction Contract Cost Plus or Fixed Fee
What this document covers
The Construction Contract Cost Plus or Fixed Fee is a legally binding document that outlines the terms and conditions for a construction project. This form can be utilized under two payment arrangements: cost plus or fixed fee. It is specifically tailored to meet the legal requirements of the State of Tennessee and includes important sections such as scope of work, work site details, warranty, and insurance provisions. This form distinguishes itself from other construction agreements by allowing flexibility in payment structures based on the specific needs of the project and the parties involved.
When to use this document
This form should be used when engaging a contractor for a construction project where the parties wish to establish clear payment arrangements, either based on actual costs incurred (cost plus) or a set amount (fixed fee). It is ideal in situations where the scope of work may change during the project, as it provides a structured process for modifications and associated costs.
Who can use this document
- Homeowners planning a construction or renovation project.
- Contractors seeking a formal agreement for work with clients.
- Individuals or businesses overseeing substantial construction projects that require clear contractual terms.
- Property owners who want to ensure compliance with state regulations regarding construction contracting.
Instructions for completing this form
- Identify the parties involved, including the Contractor and the Owner.
- Specify the property details where the project will be executed.
- Clearly outline the scope of work and any specific project requirements.
- Include the agreed payment structure, indicating whether it is cost plus or fixed fee.
- Ensure both parties sign and date the contract to make it legally binding.
Notarization guidance
Notarization is generally not required for this form. However, certain states or situations might demand it. You can complete notarization online through US Legal Forms, powered by Notarize, using a verified video call available anytime.
Common mistakes
- Failing to clearly define the scope of work, leading to potential disputes.
- Not specifying the payment terms clearly, which can cause misunderstandings.
- Omitting necessary insurance requirements, risking liability.
- Forgetting to document changes through formal Change Orders.
Why use this form online
- Convenience of instant download and access from anywhere.
- Editability allows for customization to meet your specific project requirements.
- Reliability with forms drafted by licensed attorneys to ensure compliance with legal standards.
Form popularity
FAQ
Firm Fixed Price (FFP) The price will be set on the buyer's request. A FFP should be used for a product or service that is a repeated process. As an example, a car manufacturer would enter into a FFP contract for a standard model car. The manufacturer knows what it takes to complete the car and the associated cost.
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.
A fixed-price contract is a type of contract where the payment amount does not depend on resources used or time expended. This is opposed to a cost-plus contract, which is intended to cover the costs with additional profit made.
Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.
A fixed price contract sets a total price for all construction-related activities during a project. Many fixed price contracts include benefits for early termination and penalties for a late termination to give the contractors incentives to ensure the project is completed on time and within scope.
Advantages of Cost-Plus Contract to the Contractor: (i) There is no risk of loss arising from changing prices, wrong estimates and underestimated quotation.(ii) It provides an automatic or ready escalation clause, so that increase in cost is automatically adjusted and recovered; (iii) There is no bargaining problem.
In the cost plus a percentage arrangement, the contractor bills the client for his direct costs for labor, materials, and subs, plus a percentage to cover his overhead and profit. Markups might range anywhere from 10% to 25%.
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.
