Types of Construction Contracts

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21 July, 2017

The sole purpose of having a contract is to ensure everything goes well. A contact is meant to legally ensure everyone involved in a project cooperates. A contract will include some very important details such as the costs of the materials involved. When starting a construction project the budget is only an estimate this means that there is a risk of an underestimate or overestimate. The contract you settle on will determine who pays in case of an underestimate.

Why you need a construction contract

Allows you to designate duties among everyone involved. With a well-functioning contact, all parties involved are certain of what they need to do to ensure the success of the project. The type of contact you make will affect the outcome of your project. The contract should, however, depend on the construction to be done.

A contract can be oral or written. A written contract is better for your construction. An oral contract will require the people involved to recall everything that is said. You do not want to rely on a person memory of such a serious project.

A written contract, however, sets the record straight and you can also refer to it anytime. All the parties involved have a clear knowledge of their expectations. Making a contract for a construction project may take a long time that is why they need to be written down. You might also consider getting a construction loan which must be written down too.

When writing a contract you have to be sure that the things written on the agreements are the exact things you agreed on. A written contract will state the terms of payment clearly to avoid any misunderstandings. It should also state what is to be done if anything doesn’t go as planned. The contract can be used in court to make a decision in case the need arises.

Fixed cost

This is a viable option for you if you do not have a well-detailed construction plan. In a fixed contract you have to pay the contractor for all the costs. You have to be ready to pay for any excessive cost.

Stipulate value

This is also known as negotiated lump sum. A stipulated value contact is mostly preferred for a few reasons. One of the reasons is that the owners can exploit the competitive bidding operation. Also, it is preferred because the risk of cost overruns is on your contractor. This means that the contractor has to control the cost of the project. You should know what you are getting into when signing this type of a construction contract. The contractor needs to have precise information about the work to be done. The cost is on the contractor if in case he underestimates the work to be done.

It is important you know who exactly is involved in the construction. Know what is expected from you and what the other people involved expect from you. There are contacts that are very forthright and do not require a lot of paperwork or planning. It is however not so simple with Construction contracts. With all the people involved from architects and designers to contractors and their assistants, there is a lot to be done.

The general contractor is a very important factor of the construction. You need to find a reputable contractor who is not so much into making money for themselves. Let them know their responsibility and make sure there is transparency in the agreement.

Hire a good lawyer for any type of contract

You might think you do not need a lawyer but you do. A lawyer will go through your construction contract. The lawyer can pick up something on the contract that you may not have known. If you have a huge construction project this could be very effective. If you want to get into a contact hire a lawyer first before signing anything. Contracts can be very tricky and risky if you are not careful. Ask some questions too like who is responsible in case the construction is going wrong.

It can make a huge difference if you hire an experienced lawyer for the negotiations. You are not the only one who wants to save some money during a construction. Contractors are always looking for a way to make extra money but having a contract will somewhat make it seem fair.