New Jersey Construction Contract Cost Plus or Fixed Fee
Understanding this form
This Construction Contract provides a framework for engaging contractors under either a cost plus or fixed fee arrangement. This form is tailored specifically for use in New Jersey and covers essential components such as the scope of work, work site specifications, warranties, and insurance requirements. Unlike standard contracts, this form accommodates flexibility in payment structure, making it suitable for various construction projects.
What’s included in this form
- Work site details, including property location.
- Requirements for permits and regulatory approvals.
- Provisions regarding soil conditions and contractor responsibilities.
- Insurance coverage terms for general liability and workers compensation.
- Procedures for making changes to the scope of work.
- Terms related to payment, including late payment penalties.
- Warranties and conditions for completion and damages.
When to use this document
This form is appropriate when a property owner wishes to contract a builder or contractor for a construction project and has selected either a cost plus or fixed fee payment method. Use this form when initiating construction on new projects, undertaking renovations, or when flexibility in project costs is desired. It is particularly useful for projects in New Jersey.
Who should use this form
- Property owners looking to hire a contractor for construction or renovation projects.
- Contractors seeking a legally binding agreement with clients on project terms.
- Real estate professionals involved in home improvement contracts.
- Homeowners needing to define payment structures with their contractors.
Instructions for completing this form
- Identify the parties involved, including the owner and contractor.
- Specify the work site address and project location.
- Outline the scope of work and any specific requirements.
- Detail the payment structure as either cost plus or fixed fee.
- Include signature and date fields for both parties to formalize the agreement.
Does this document require notarization?
Notarization is not commonly needed for this form. However, certain documents or local rules may make it necessary. Our notarization service, powered by Notarize, allows you to finalize it securely online anytime, day or night.
Typical mistakes to avoid
- Failing to detail the scope of work, leading to misunderstandings.
- Not specifying the payment arrangement clearly, resulting in disputes.
- Neglecting to obtain necessary permits before commencing work.
Why complete this form online
- Easy access to customizable templates tailored to New Jersey law.
- Convenient downloading and printing options for immediate use.
- Reliability in having a professionally drafted agreement ensuring legal compliance.
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FAQ
Disadvantages of fixed-price Therefore the biggest issue is usually around project scope and change requests. Lack of flexibility. A fixed-price project has a defined scope (requirements). As the cost cannot change, the scope of work is much less flexible.
In the cost plus a percentage arrangement, the contractor bills the client for his direct costs for labor, materials, and subs, plus a percentage to cover his overhead and profit. Markups might range anywhere from 10% to 25%.
Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.
Disadvantages of cost-plus fixed-fee contracts may include: The final, overall cost may not be very clear at the beginning of negotiations. May require additional administration or oversight of the project to ensure that the contractor is factoring in the various cost factors.
Cost-plus-fixed-fee tends to me more advantageous to the buyer as opposed to the seller as it caps the fee and the fee will not swell or grow based on the future expansion or fluctuations of the budget. However, it also can protect the seller because, in the event the budget tightens, it provides a fixed fee.
A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contract's full price.
Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.
Advantages of Cost-Plus Contract to the Contractor: (i) There is no risk of loss arising from changing prices, wrong estimates and underestimated quotation.(ii) It provides an automatic or ready escalation clause, so that increase in cost is automatically adjusted and recovered; (iii) There is no bargaining problem.
