This form is a Construction Contract. The form contains the following subjects: scope of work, work site, and insurance. The contractor's warranty is limited to defects in workmanship within the scope of the work performed by the contractor.
What is a Construction contract agreement?
If you’re planning to build, renovate or reconstruct your house, you will need to enter into a contract for home construction with the building contractor, defining your mutual rights and responsibilities. This agreement contains project specifics, the contractor’s license and insurance details, the requested scope of work, etc. It may also determine the potential lien on the property should the work not be paid in full.
Types of construction contracts
Depending on the payment arrangements determined by parties, there are four basic types of home builders’ contracts:
1. Fixed price (or lump-sum) agreements set the price for the completed job right from the start. Although fixed, the document may also include provisions defining penalties (for example, if the constructor fails to finish the work on schedule).
2. Cost plus construction agreements set the price for the finished work based on building materials and labor with additionally mentioned “plus” (a percentage of the total costs or a fixed fee).
3. Time and material agreements set the price for the work without a “plus,” but the client pays the contractor a daily or hourly rate while they are under contract.
4. Unit-price agreements are standard in bidding, particularly for federal building projects. Both owner and contractor define the price that the contractor charges for a standard unit without any specific extra fees for other units.
The first two types of contract for home construction mentioned are the most popular ones. Let’s take a closer look at them.
Fixed price vs. cost-plus contract benefits
The fixed price agreement benefits owners more than builders, as it determines at the moment the parties seal the deal the exact price the contractor will get after they complete all the work. Builders risk not getting the estimated profits they initially anticipated, as expenses may increase significantly but remain the constructor’s responsibility.
The cost-plus construction deal contains the evaluation of the final project cost; however, it doesn’t determine the final contract price until the contractor completes all the work. Unlike the fixed-price agreement, it separates expenses and sets the profit rate (as a percentage of the final project cost or as a flat amount), so contractors prefer this type of agreement; it is riskier for homeowners.
Information you should provide in the construction contract agreement
The presented Construction Contract for Home is a universal multi-state construction contract template. This sample describes typical terms for a home building contract. Download a printable document version from our website or amend and fill it out online. Make sure to provide the following information:
• Name and contact details of the contractor and their license number;
• Name and contact details of the homeowner;
• Property legal description from county clerk’s records;
• Project description with blueprints and building specifications;
• Scope, description of work, and its estimated final dates;
• Costs of work and responsibilities of parties for any breach of contract.
A construction contract agreement in Ethiopia refers to a legally binding document that outlines the terms, conditions, and obligations between a client and a contractor for a construction project. This agreement serves as a guide for both parties and covers various aspects of the project, including the project scope, time frame, payment terms, responsibilities, and dispute resolution mechanisms. In Ethiopia, there are different types of construction contract agreements based on the nature and scope of the project. Some commonly used types are: 1. Lump Sum Contract: This type of agreement establishes a fixed price for the entire construction project. The contractor is responsible for completing the project within the agreed-upon budget, and any additional costs are typically borne by the contractor. 2. Cost Plus Contract: In a cost-plus contract, the client agrees to reimburse the contractor for the actual costs incurred during the construction process. The contractor is entitled to a predetermined profit margin or a fee on top of the incurred costs. This type of agreement provides flexibility in adapting to changes and unforeseen circumstances during the project. 3. Unit Price Contract: A unit price contract involves the establishment of fixed prices for specific construction tasks or items. The contractor is paid based on the number of units completed or the quantities of specific items used. This type of agreement is commonly used when the exact scope of work cannot be precisely determined at the contract stage. 4. Design-Build Contract: In a design-build contract, the contractor is responsible for both the design and construction aspects of the project. This integrated approach allows for a streamlined communication process and can often result in time and cost savings. 5. Construction Management Contract: Under a construction management contract, the client hires a construction manager who provides advisory services and oversees the entire construction project on their behalf. The construction manager works closely with the client and coordinates multiple contractors and subcontractors involved in the project. It is important for both clients and contractors in Ethiopia to carefully review and understand the construction contract agreement before signing. Seeking legal advice and clarifying any ambiguous clauses or terms is crucial to avoid disputes and ensure a successful construction project.
