Construction Information

Owners of construction companies know just how vital
construction contracts really are. They protect both the homeowner and
the contractor in the case of unforeseen events occurring during a
project. These contracts should be able to stand up in a court of law
since that is exactly what they’re intended for.

This means that a company should bring on a
construction lawyer to at least oversee the creation of their contracts.
According to our New York construction lawyer, many construction
company owners make the mistake of thinking contracts are simple and
straightforward, but there are actually several types of construction
contracts that they may need to use in their day-to-day work activities.

Lump Sum Contracts

A lump sum contract
is typically beneficial for a homeowner. The contractor agrees to a
lump sum that will be paid for the completion of the project. This
usually means that a company can charge a bit more for their work in
order to cover any unforeseen events that frequently seem to arise
during these projects.

Lump sum contracts put risk upon the
contractor performing the work. If they happen to spend more time or
money than they initially expected, they will likely lose profit on the
job. On the other hand, if they finish before schedule or under cost,
they will earn a profit greater than usual. It’s important to be
careful, however, since higher quotes could mean a homeowner chooses a
lower bidder for their project.

Cost Plus Contracts

Cost plus contracts entitle contractors to do projects at their direct
cost while also receiving additional payment for the work they are
doing.

Guaranteed Maximum Price Contracts

Guaranteed maximum price contracts are a bit complex. The contract sets
forth a maximum price that will be paid by the homeowner, and the
contractor is set to receive a fixed fee for their work. If the direct
costs of the job go over what is expected, then the contractor only
receives their full fixed fee if the remaining funding for the maximum
price is sufficient. If it isn’t, they end up losing money from their
profits. This contract also differs from a lump sum contract in the fact
that money left over from an under cost project goes back to the
homeowner.

Construction contracts are a vital tool for
construction companies and contractors. They ensure that all of the
ground rules are laid out before work begins on a project. As mentioned
earlier, it is imperative to have a construction lawyer draft these
contracts to ensure that they’re airtight if the need for litigation
ever arises. These attorneys can ensure that construction companies
receive all of the money that they’re due if a homeowner tries to
backtrack on the preset contract.