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.
Oakland Michigan Construction Contract for Home — Fixed Fee or Cost Plus: A Comprehensive Guide In Oakland County, Michigan, construction projects for residential properties often require a well-defined contract to outline the terms and conditions between homeowners and contractors. Two common types of contracts used in Oakland Michigan are the Fixed Fee contract and the Cost Plus contract. Here, we will delve into the details of each type and shed light on their differences. 1. Oakland Michigan Construction Contract for Home — Fixed Fee: The Fixed Fee contract, also known as a lump sum contract, is based on a predetermined fixed price agreed upon by the homeowner and the contractor. In this type of agreement, the contractor bears the risk of any cost overruns or unforeseen expenses, as long as the project scope remains unchanged. Key aspects of a Fixed Fee contract include: a. Scope of Work: This section explicitly defines the nature and extent of the construction work to be performed. It covers everything from architectural drawings, materials to be used, and the overall timeline. b. Payment Terms: The contract stipulates that the homeowner will pay the contractor a fixed sum upon completion of predetermined project milestones or a final payment upon completion. c. Change Orders: If any modifications or alterations are requested by the homeowner during the construction process, a change order is issued. The change order outlines the extra costs associated with the change and requires approval from both parties before proceeding. d. Warranties: The Fixed Fee contract usually includes provisions outlining the warranty terms and conditions, typically covering workmanship and materials for a specified period. 2. Oakland Michigan Construction Contract for Home — Cost Plus: The Cost Plus contract, also known as a cost reimbursement contract, differs from the Fixed Fee contract in terms of payment structure and risk distribution. Instead of a set price, the homeowner agrees to reimburse the contractor for all costs incurred during construction, along with an agreed-upon percentage or fee on top of those costs. Key elements of a Cost Plus contract include: a. Cost Estimation: This contract includes a detailed breakdown of the estimated costs for labor, materials, equipment, permits, and any additional expenses needed to complete the project. The contractor is usually required to provide supporting documentation for each cost incurred. b. Contractor Fee: A predetermined fee or percentage of the total project cost is added to the reimbursement amount. This fee compensates the contractor for their services and management of the project. c. Payment Process: The homeowner reimburses the contractor for the actual costs incurred, typically on a monthly or periodic basis. The payment includes the costs, any approved change orders, and the contractor's fee. d. Transparency and Reporting: Since the client reimburses the contractor for all costs, the Cost Plus contract usually requires detailed reporting on expenses, providing transparency and facilitating accountability. It is essential for homeowners in Oakland Michigan to carefully review and understand the terms specified within their construction contract. Whether opting for a Fixed Fee contract or a Cost Plus contract, thorough comprehension of the agreement can ensure a successful construction project that meets all expectations and avoids potential disputes.Oakland Michigan Construction Contract for Home — Fixed Fee or Cost Plus: A Comprehensive Guide In Oakland County, Michigan, construction projects for residential properties often require a well-defined contract to outline the terms and conditions between homeowners and contractors. Two common types of contracts used in Oakland Michigan are the Fixed Fee contract and the Cost Plus contract. Here, we will delve into the details of each type and shed light on their differences. 1. Oakland Michigan Construction Contract for Home — Fixed Fee: The Fixed Fee contract, also known as a lump sum contract, is based on a predetermined fixed price agreed upon by the homeowner and the contractor. In this type of agreement, the contractor bears the risk of any cost overruns or unforeseen expenses, as long as the project scope remains unchanged. Key aspects of a Fixed Fee contract include: a. Scope of Work: This section explicitly defines the nature and extent of the construction work to be performed. It covers everything from architectural drawings, materials to be used, and the overall timeline. b. Payment Terms: The contract stipulates that the homeowner will pay the contractor a fixed sum upon completion of predetermined project milestones or a final payment upon completion. c. Change Orders: If any modifications or alterations are requested by the homeowner during the construction process, a change order is issued. The change order outlines the extra costs associated with the change and requires approval from both parties before proceeding. d. Warranties: The Fixed Fee contract usually includes provisions outlining the warranty terms and conditions, typically covering workmanship and materials for a specified period. 2. Oakland Michigan Construction Contract for Home — Cost Plus: The Cost Plus contract, also known as a cost reimbursement contract, differs from the Fixed Fee contract in terms of payment structure and risk distribution. Instead of a set price, the homeowner agrees to reimburse the contractor for all costs incurred during construction, along with an agreed-upon percentage or fee on top of those costs. Key elements of a Cost Plus contract include: a. Cost Estimation: This contract includes a detailed breakdown of the estimated costs for labor, materials, equipment, permits, and any additional expenses needed to complete the project. The contractor is usually required to provide supporting documentation for each cost incurred. b. Contractor Fee: A predetermined fee or percentage of the total project cost is added to the reimbursement amount. This fee compensates the contractor for their services and management of the project. c. Payment Process: The homeowner reimburses the contractor for the actual costs incurred, typically on a monthly or periodic basis. The payment includes the costs, any approved change orders, and the contractor's fee. d. Transparency and Reporting: Since the client reimburses the contractor for all costs, the Cost Plus contract usually requires detailed reporting on expenses, providing transparency and facilitating accountability. It is essential for homeowners in Oakland Michigan to carefully review and understand the terms specified within their construction contract. Whether opting for a Fixed Fee contract or a Cost Plus contract, thorough comprehension of the agreement can ensure a successful construction project that meets all expectations and avoids potential disputes.
