Construction Contracts: Why You Need to Know the Differences

Construction contracts

Construction contracts should protect both the owner and the contractor.

Contracts make the construction world go round, but do you know which is the right contract for your different jobs? Construction contracts come in different forms, and no single type works for every project.

With some good fortune, you’ll fulfill a lot of contracts. Knowing up front which one applies will help you protect your company, and also the owner who makes the project possible.

Lump Sum or Fixed Price

Of the three types of construction contracts used more often than the rest, the Lump Sum or Fixed Price type is probably the most common of all. This is part of the “Design Bid Build” system where the property owner presents the project details to several different contractors to secure the best bid possible.

The law offices of Peckar and Abramson explain that a Lump Sum or Fixed Price contract is best used when the full scope of the project is known in advance. If there are a lot of variables, it won’t work. The contract should contain a clear outline of budget and costs, scheduling and deadlines, and as many other critical factors of the job as possible. With this contract, the more you know in advance the better.

Construction contracts

Cost Plus contracts keeps the work flowing, even while some details are still being ironed out.

Cost Plus Contracts

A Cost Plus contract leaves more of the details open. Where the timeframe and the cost of materials are unknown or at least partly unknown, this type of contract ensures that the money will be there to cover materials, often fitting within a predetermined budgetary range. The payment to the contractor for fulfilling the contract can be negotiated.

A Cost Plus contract is an arrangement that promises to pay for the cost of job materials plus a payment to the contractor for the work performed. The contractor’s payment might be a percentage fee or a set amount, depending on the job. The contract might also include the potential for a bonus if the job stays under a certain budget or is completed within a certain timeframe.

Construction contracts

Sometimes an owner doesn’t know everything that he wants, but he needs the project to get started.

Time and Material

Time and Material contracts work when many of the project details are unknown. Maybe the owner hasn’t sourced materials and doesn’t know the costs involved. Maybe the project deadline isn’t set yet because of other variables that haven’t been nailed down yet. For whatever reason, a Time and Material contract works when there’s still more to learn about the project scope.

Sometimes seen as the least favorable type, Time and Material contracts agree that the contractor will be paid based on a set hourly rate for labor, and that the actual cost of materials and other incidentals will be paid by the owner. Additionally, Business Dictionary explains that the contractor’s profit and overhead are agreed on as a separate fee. When the project doesn’t really have a clear scope and many details are unknown, this type of contract is suitable.

Construction contracts help keep work flowing and contractors paid. They’re a necessary element in any job, since you never truly know what will happen on a job site. The right type of contract covers the work at hand, and that’s why there’s more than one. Even if you built the same house on two separate lots, no two jobs are ever identical.

PDH Contractors is another way for you to protect your business. We offer the necessary educational courses required to maintain licensure, insurance and association membership. When you’re ready to take on your next continuing education courses, click here and see how PDH Contractors makes it hassle free.

Trackbacks/Pingbacks

  1. Houston Texas Classified Ads - September 16, 2016

    … [Trackback]

    […] There you will find 88268 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  2. melanie matthews - September 17, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  3. سفارش سایت - September 18, 2016

    … [Trackback]

    […] There you will find 85454 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  4. seo singapore - September 18, 2016

    … [Trackback]

    […] There you will find 77926 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  5. http://www.linhchitp.com/nam-linh-chi-cong-dung-va-cach-su-dung-hieu-qua Nấm linh chi - September 18, 2016

    … [Trackback]

    […] Informations on that Topic: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  6. mobile optin 2 bonus - September 20, 2016

    … [Trackback]

    […] Read More Infos here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  7. spin rewriter bonus - September 21, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  8. klettersteigset info - September 21, 2016

    … [Trackback]

    […] Informations on that Topic: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  9. boxing trainer Seattle - September 21, 2016

    … [Trackback]

    […] Informations on that Topic: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  10. best wart remedies - September 24, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  11. Bitimart Bitcoin Market - September 24, 2016

    … [Trackback]

    […] Informations on that Topic: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  12. glamour photography - September 26, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  13. advertising photography detroit michigan - September 26, 2016

    … [Trackback]

    […] Informations on that Topic: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  14. personal trainer Capitol Hill Seattle - September 27, 2016

    … [Trackback]

    […] There you will find 94117 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  15. zip line accessories - September 29, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  16. full service digital marketing - September 30, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  17. jenifas - October 1, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  18. Australian Business Directory - October 2, 2016

    … [Trackback]

    […] There you will find 28757 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  19. jadwal bola malam ini - October 2, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  20. make money skillshare - October 2, 2016

    … [Trackback]

    […] Informations on that Topic: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  21. Find Dentists in Australia - October 4, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  22. Internet Services in Australia - October 4, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  23. auto shipping - October 5, 2016

    … [Trackback]

    […] There you will find 37711 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  24. Wodonga Musical Instruments Retailers (Victoria) - October 6, 2016

    … [Trackback]

    […] There you will find 86723 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  25. ptv sports - October 7, 2016

    … [Trackback]

    […] Find More Informations here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  26. Ashwagandha bienfaits - October 10, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  27. deals on printers - October 10, 2016

    … [Trackback]

    […] Find More Informations here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  28. White Rock - October 11, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  29. see it here - October 11, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  30. Coupons Australia - October 11, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  31. venus factor - October 12, 2016

    … [Trackback]

    […] Find More Informations here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  32. live help software - October 12, 2016

    … [Trackback]

    […] There you will find 30954 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  33. florists westwood ma - October 13, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  34. colfire trinidad - October 13, 2016

    … [Trackback]

    […] Find More Informations here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  35. John - October 13, 2016

    … [Trackback]

    […] Read More here: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  36. Imprimiss for 2017 - October 14, 2016

    … [Trackback]

    […] There you will find 67488 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  37. New Singles - October 14, 2016

    … [Trackback]

    […] Read More: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]

  38. dicks - October 14, 2016

    … [Trackback]

    […] There you will find 62347 more Infos: pdhcontractors.com/uncategorized/construction-contracts-why-you-need-to-know-the-differences/ […]