Different Types Of Construction Contracts

Kansas residents who need the services of a construction company should be aware of the different types of construction contracts. The contracts, which are legal agreements with binding terms for the builder and owner, details exactly how much the builder will be paid and the manner in which the payment will be disbursed. Also detailed in the contracts are specifications, quality expectations and the expected duration of the job. The different types of contracts can be customized to address the unique needs of the project.

A fixed-price or lump sum contract details a total price that covers all activities related to construction. The contract can also include an early termination incentive or liquidated damages terms for a late termination. This type of contract is generally preferred when the scope of work and a schedule have been clearly defined, evaluated and agreed to.

Cost plus contracts use the actual purchases, costs and any other expenses for construction-related activities to determine payment. These contracts are required to include information regarding a pre-negotiated amount that covers the contractor’s profit and overhead and that is calculated by taking a percentage of the costs for labor and materials.

If the scope of the project has not yet been determined or is not clear, a time and material contract is typically preferred by the contractor. The owner and contractor must reach an agreement regarding daily or hourly rates as well as any other expenses that could be incurred during the construction process.

Regardless of the type of agreement used, contract disputes are not uncommon. An attorney who has experience in these types of matters might see if negotiating an accord is possible. If not, litigation might be necessary.