The most common types of construction contracts used in the construction industry include:
- Unit price contract – This contract type is based on anticipated quantities of items which are counted in the project in addition to their unit prices. The final price of the project depends upon the quantities required to carry out the work. Generally, this contract is suitable only for construction and supplier projects which involve accurate identification of different types of items, but not their numbers, in the contract documents.
- Lump sum contract – Under this contract type, the engineer or contractor agrees to perform the specified and described project for a fixed price. This type of contract is also referred to as a “Fixed Price Contract” and is very often used in engineering contracts. A Lump Sum or Fixed Price contract is appropriate where scope and schedule of the project are defined sufficiently thus allowing the contractor or engineer to estimate the costs of the project.
- Cost plus contract – The cost plus contract is an agreement which involves the buyer’s consent to pay the complete cost for material and labor in addition to the amount for contractor overhead and profit. This contract type is favored where the scope of work is highly uncertain or indeterminate in addition to the types of labor, material, and equipment being similarly uncertain in nature.
- Incentive contracts – The incentive contracts feature compensation based on the contracting and/or engineering performance in accord with an agreed target – schedule, quality, and budget. Incentive contracts commonly fall into one of two common categories:Fixed Price Incentive Contracts and Cost Reimbursement Incentive Contracts.
- Percentage of construction contracts- This contract type is common for engineering contracts. The compensation involved in these contracts is based on a percentage of the cost of construction.
The attorneys at Fisher Stark, P.A. use their courtroom experience to review, draft and negotiate clear contracts in order to minimize the likelihood of confusion or disagreements. Call today if you have any questions about your construction project, 828.505.4300.
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Last updated 7/5/2015