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Chapter 014: Types of Building Contract Agreements

Walter Simmons

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Chapter 014, Types of Building Contract Agreements

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A building contract is a legally binding agreement between a client and a contractor that sets out the terms and conditions of a construction project. It is important to choose the right type of building contract for your project, as this will determine the level of risk and liability that each party assumes.

Types of Building Contract Agreements

There are four main types of building contract agreements:

Fixed-price contracts
Cost-plus contracts
Time and materials contracts
Design-build contracts

Fixed-price contracts

Fixed-price contracts are the most common type of building contract. Under a fixed-price contract, the contractor agrees to complete the project for a fixed price. This type of contract is best suited for projects where the scope of work is well-defined and there is little risk of unexpected costs.

Cost-plus contracts

Cost-plus contracts are used when the scope of work is not well-defined or there is a high risk of unexpected costs. Under a cost-plus contract, the contractor is reimbursed for all of their costs, plus a fixed fee. This type of contract is best suited for projects where the client is willing to take on more risk.

Time and materials contracts

Time and materials contracts are used when the scope of work is not well-defined and the client is not willing to take on any risk. Under a time and materials contract, the contractor is paid for their time and materials, plus a markup. This type of contract is best suited for projects where the scope of work is likely to change.

Design-build contracts

Design-build contracts are a type of turnkey contract in which the contractor is responsible for both the design and construction of the project. This type of contract is best suited for projects where the client wants to have a single point of contact for the entire project.

Advantages and Disadvantages of Each Type of Contract

The following table summarizes the advantages and disadvantages of each type of building contract agreement:

| **Type of Contract** | **Advantages** | **Disadvantages** | |---|---|---| | Fixed-price contracts | Lower risk for the client | Higher risk for the contractor | | Cost-plus contracts | Lower risk for the contractor | Higher risk for the client | | Time and materials contracts | More flexibility for the client | Higher cost for the client | | Design-build contracts | Single point of contact for the client | Higher cost than other types of contracts |

How to Choose the Right Type of Building Contract

The best way to choose the right type of building contract for your project is to consult with an attorney. An attorney can help you to understand the different types of contracts and their implications, and can help you to negotiate a contract that protects your interests.

Building contracts are complex legal documents that can have a significant impact on the outcome of your project. It is important to choose the right type of contract for your project and to have an attorney review the contract before you sign it.

Chapter 014, Types of Building Contract Agreements

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