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 Tennessee Construction Contract for Home can be categorized into two types: Fixed Fee and Cost Plus. These contracts are legal agreements between a homeowner and a contractor, outlining the terms and conditions for a construction project. 1. Fixed Fee Contract: This type of contract establishes a predetermined amount for the construction work. The contractor provides a fixed price estimate, which includes all costs associated with labor, materials, and equipment. This contract places the responsibility for any cost overruns or unexpected expenses on the contractor. The homeowner pays the agreed-upon fixed fee, regardless of the actual costs incurred by the contractor. 2. Cost Plus Contract: In a Cost Plus contract, the homeowner agrees to reimburse the contractor for the actual costs of construction, along with an additional fee or percentage that covers the contractor's overhead and profit. This contract allows for more flexibility in terms of budget, as the homeowner has a clearer understanding of the actual expenses incurred during the construction process. Regardless of the type of contract chosen, certain key elements should be present: 1. Scope of Work: The contract should clearly define the scope of work to be performed, detailing the specific tasks and materials required for the project. 2. Payment Schedule: The contract should outline the payment schedule, including any upfront deposits, progress payments, and final payment upon completion. It should also mention any retain age (a portion of payment held until project completion) required under Tennessee law. 3. Timeline: The contract should include a start and completion date for the project, providing a realistic timeline for completion. It may also include penalties or incentives for early or delayed completion. 4. Change Orders: It should outline the process for handling any changes to the original scope of work, including how costs and timelines will be adjusted. Change orders should be documented in writing and signed by both parties. 5. Permits and Licenses: The contract should require the contractor to obtain all necessary permits and licenses required by Tennessee state or local authorities. 6. Warranties: The contract should outline any warranties provided by the contractor for materials, workmanship, or specific components of the project. 7. Dispute Resolution: It should include a clause specifying the method for resolving any disputes that may arise during the project, such as mediation, arbitration, or litigation. It is essential for homeowners and contractors to carefully review and understand the terms of the contract before signing. Seeking legal advice or consulting with an experienced construction professional is recommended to ensure that all requirements and protections are in place.
