A cost-plus contract is one in which the purchaser agrees to pay the cost of all labor and materials plus an amount for contractor overhead and profit (usually as a percentage of the labor and material cost). This type of contract is often used when the scope of the work is undermined or highly uncertain and the kinds of labor, material and equipment needed are also uncertain. It is important that the contractor maintain complete records of all time and materials spent by the contractor on the work.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
A Maryland Home Improvement or Remodeling Construction Contract on a Cost Plus Basis of Payment is a detailed agreement between a homeowner and a contractor outlining the terms and conditions pertaining to the construction or renovation project. This type of contract involves the homeowner paying the contractor for the actual costs of labor, materials, and expenses incurred during the project, along with an additional percentage typically called the "mark-up" as compensation for the contractor's services. Key Elements of a Maryland Home Improvement or Remodeling Construction Contract — Cost Plus Basis of Payment: 1. Project Scope: The contract should clearly define the scope of the project, specifying the work to be completed, materials to be used, and any other relevant details. 2. Payment Terms: Maryland Home Improvement or Remodeling Construction Contracts on a cost-plus basis generally state that the homeowner will bear the actual costs of labor and materials. The mark-up percentage, often a percentage of the total project cost, should also be specified in the contract. 3. Responsibilities: The contract should outline the responsibilities of both the homeowner and the contractor throughout the project, such as obtaining necessary permits, adhering to local building codes, and ensuring timely completion. 4. Change Orders: Procedures for processing change orders should be included in the contract. Change orders are modifications to the original contract and may affect the project cost or timeline. The contract should specify that change orders be made in writing and approved by both parties before implementation. 5. Insurance and Indemnity: The contractor should provide proof of liability insurance and workers' compensation coverage to protect the homeowner from potential damages or injuries during the project. Indemnity clauses may be included to address any legal claims arising from the construction or renovation. Types of Maryland Home Improvement or Remodeling Construction Contract — Cost Plus Basis of Payment: 1. Standard Cost Plus Contract: This is the most common type of cost plus contract, where the contractor charges actual costs plus the agreed-upon mark-up percentage. It provides flexibility, transparency, and accountability for both parties. 2. Guaranteed Maximum Price (GMP) Contract: In this variation, the contractor sets a maximum limit (GMP) to the overall project cost. If the actual costs exceed the GMP, the contractor bears the additional cost. Conversely, if the actual costs are lower than the GMP, the homeowner may receive a refund. 3. Cost Plus Fee Contract: In contrast to the percentage-based mark-up, this agreement includes a fixed fee that the homeowner pays the contractor in addition to the actual costs incurred. 4. Open Book Contract: With an open book contract, the contractor shares detailed cost information and receipts related to the project with the homeowner, ensuring transparency and trust between both parties. In Maryland, it is essential for homeowners and contractors to enter into a written contract for home improvement or remodeling projects valued at $500 or more. Consulting with a legal professional experienced in construction law is recommended to ensure compliance with Maryland's regulations and to protect the rights and interests of both parties involved in the contract.
