Contracts for Construction Projects

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What Are Some Different Contract Types for Construction Projects?

There are many different contract types that are used for construction projects and other similar endeavors. These different contract types are usually based on the manner in which payments are made, as well as the motivations behind the contractor’s payments. 

Some common contract types for construction and other projects may include:

There are many other different types of contracts; however, these are the most common contract types for contractors and engineers. The laws governing construction contracts may vary from state to state. 

How Do I Know Which Type of Contract to Use?

This depends mainly on the ability to foresee and predict costs, including any potential variations in cost. Fluctuations in project costs usually have to do with market conditions involving inflation, as well as any other increases/decreases in values.

For example, if the overall cost of a project is relatively easy to calculate, the parties may choose to use a lump sum (fixed-fee) contract. Since there will be little changes in costs during the project, the parties may feel comfortable enough to charge a fixed fee for the entire project.

In contrast, if the parties suspect that there may be many changes in pricing during the project, they may choose to sign a unit-price contract. That way, the contractor gets paid only for the amount of units that they actually complete, which can help reduce risks for both parties.

Incentive contracts can be used in order to stimulate the contractor to perform more rapidly or to complete the project at a high standard of quality. Lastly, cost-plus and percentage contracts may be used when there are unique circumstances to be considered, such as when the contractor is known for their distinct skill or creativity in their field. 

If you are unsure of which contract is best for you, it’s helpful to contact a contracts lawyer, who can advise you on the pros and cons of each contract type. 

Should I Contact a Lawyer for Assistance With the Different Contract Types?

Dealing with different contract types can present many legal challenges to buyers and contractors. It is in your best interest to contact a competent lawyer for help with contract drafting and review. Your lawyer can ensure that you’re using the best type of contract for your specific needs. Also, in the event that a dispute or lawsuit arises over the contract terms, your attorney will be able to represent you in court. 

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Last Modified: 12-18-2013 02:44 PM PST

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