As construction attorneys in Orlando, we understand that the point of a construction contract is to assign the responsibilities of the two parties, acknowledging the risks to both parties, and decreasing the unpredictability encompassing the project to allow the parties to begin planning. There are many types of construction contracts available, and with the right researching you can find the type that suites your needs the best.
1. Written Or Oral Contracts
Contracts have the option of being oral, although we highly recommend that they are in writing. Having a written contract ensures something solid to look back at if problems arise. Verbal contracts rely on the parties’ memory, while a written contract is the best way to show a record of the agreement.
2. Stipulated Value (Lump Sum)
A Stipulated Value contract is commonly negotiated with a lump sum price. Typically, these contracts are more partial to the owner for the following reasons:
- Owners that have a stipulated value contract can employ a competitive bidding system
- The general contractor has a motive to control costs and operate productively
- The insecurity of cost overruns is handed over to the general contractor
Before a general contractor enters into a Stipulated Value, it’s important to make sure the owner has a formulated plan for the project, to ensure that as a contractor, you have very clear instructions and a scope of work.
3. Unit Price
Unit Price contracts tend to be used when the owner already knows what type of work is needed, however they do not know the quantity of work needed. In this case, the payment to the contractor is determined on the quantity of work and unit price combined.
4. Cost-Plus (Time And Material) With Fixed Fee
In the case of a Cost-Plus contract, there is typically a lack of detailed plans. With this contract, the general contractor is paid for all costs accumulated, and paid a fee for overhead and profit as well as general conditions while the owner assumes all risks of excessive costs. It’s common for the general contractor to use an incentive provision to motivate cost savings.
5. Cost-Plus With A Fixed Fee (Up To A Guaranteed Maximum Price)
A Cost-Plus With A Fixed Fee contract is cooperative to the design build situation, and the general contractor carries out the designer duties.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.