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There are three main types of work contracts determined by the mechanism for calculating the amount payable by the employer: lump sum contracts, revaluation contracts and repayable contracts. The different species differ mainly in terms of the risks that the parties must bear to the costs of the races and which part can retain the savings if the cost of the project is less than the estimated costs. [3] A construction contract is a reciprocal or legally binding agreement between two parties on the basis of guidelines and conditions recorded as a document. The two parties involved are one or more landowners and one or more contractors. The owner, often referred to as an „employer” or „customer”[1], has full authority to decide what type of contract should be used for a specified construction period and to set legally binding conditions in a contractual agreement. [2] A work contract is an important document because it describes the extent of the work, risks, obligations and legal rights of the contractor and the owner. Typically, this contract includes the benefits and overheads for the contractor in the tariff. When the contractor presents unit prices, it gives its owner/buyer the opportunity to easily check his fees. These types of construction contracts help the buyer ensure that the prices of goods or services are not inflated. It also allows parties to adjust changes in scope up or down, making it easier to reach an agreement and minimizing infringements. Sometimes incentives are incorporated into these contracts to reward the contractor when the contract is entered into prematurely. These agreements may also include penalties, sometimes referred to as „liquidated damages” for an order that is slow to be concluded.

Owners generally use these types of contracts to avoid change orders for additional or otherwise indeterminate work. If you pay attention to price structures, customers and buyers of site managers may feel safe from possible changes to a project`s construction requirements. While unit pricing and Lump Sum contracts were at the center of this blog, our next post will focus on two other contracts, Time and Materials and Cost Plus. Please visit our next blog post to finalize our summaries on the approaches to these agreements. Are you ready to discuss your own construction offer? Contact BuildRite Construction for an excellent project and customer experience. The single price contract is a construction contract based on estimated quantities and unit prices (hourly rates, rates per unit of work, etc.). In general, the overhead and the benefit of the contractor are included in the sentence. The final cost of the work depends on the total quantities required to carry out and organize the work. The single price contract is only suitable for a project with known resources, but at the time of the agreement, unknown quantities are defined when the design – engineering or construction work is completed.

Time and equipment contracts are used when there is no clearly defined perimeter. Under this type of contract, owners and contractors must agree on a daily or hourly rate that may involve additional costs during the construction phase. In Time and Material Contracts: The construction lawyers at Brown and Charbonneau, LLP has extensive experience representing buyers, developers, builders and other construction professionals. We can help you in all legal aspects of your participation in a construction project, both during the contract negotiation phase and for contracts that go wrong.