3 Types of Basic Construction Contracts

There are 3 basic types of construction contracts. Following, we are going to take our time to explain each one of these contracts. So, take the time to read them!

Basic Construction Contracts

this picture shows one of the basic ocnstruction contracts

Lump-Sum or Fixed Price

Such a contract evolves around fa fixed price for every construction-related activity. Lump-Sum contracts cover incentives as well as benefits of early termination including the penalties dubbed liquidated damage (thanks to late termination). Lump-sum contracts are preferred with a clear scope and with a defined schedule which is reviewed and agreed upon.

The contract is used when the risk is transferred to the builder and the owner wants to avoid the change order for any reason. The contractor needs to include a percentage cost related to carrying the risk. Such costs are hidden at a fixed price. In the case this is a lump sum contract, it’s hard to obtain credit back for work not completed, so consider when evaluating your options.

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