When starting a construction project, whether it’s building your dream home or remodeling one, a solid construction contract is a must. This agreement will be the backbone of your project, laying out the foundation for a successful partnership between a client and a contractor.

What is a construction contract?

A construction contract is a legally binding agreement between the client and the general contractor. The agreement outlines the general scope of work, including the work to be performed, the materials to be used, the project timeline, payment, and other essential details. This document ensures transparency and accountability, making it essential for both parties involved.

What is the best type of contract for construction?

The choice of type of contract depends on the project’s scope, budget, and complexity. However, construction contracts can be divided into 4 categories, depending on the payment type:

  • Fixed price – this type is perfect for a well-defined project scope. The price includes all the material and labor and will be paid upon a pre-determined payment schedule. 
  • Time and material – ideal for smaller projects when estimating the full extent of work is hard. The price includes a specific amount that is paid only for the material or labor used; in this case, the contractor’s profit comes from the markup on labor and materials.
  • Cost plus – suitable for projects where the scope is not entirely clear. The price includes a fixed fee plus the cost of the material and labor.
  • Unit pricing – the price is set per square (or other measures). For instance, $15/SF (square foot).

How to write a construction contract

Whether you’re creating a remodeling agreement or a new home construction contract template, it can be a challenge. But it’s all about ensuring all aspects are clearly defined and agreed upon. Here’s a simple guide on what to do before you write a construction contract:

  1. Set the budget. Communicate with designers, architects, and project managers to choose the construction contract type that best fits your needs.
  2. Outline the timeframes. Find out when it’s best to start the project (summer or autumn, for instance).
  3. Create a design concept. With a finalized concept, it’s easier to ensure the project sticks to the set plan without overpassing the limited budget or space.
  4. Get a construction permit. Your local authority should issue one with a set timeframe within which you’re allowed to build a house, an apartment complex, or a condominium.
  5. Find a contractor. Of course, you need a reliable partner for your future project. It’s best to use friends’ recommendations or word-of-mouth when choosing. However, checking reliable websites is also a great practice when searching for a reputable contractor. Make sure to verify everything before signing a contract.

Here’s what your construction contract should include:

  1. List both parties of the contract (the project owner and contractor), as well as their names and contact details.
  2. Define the project’s work, including materials to be used and the quality expectations.
  3. Set precise start and end dates of your project. Additionally, you can mention any key milestones that need to be hit along the way.
  4. Clearly mention the payment schedule, cost, and terms for any scope changes.
  5. Include a dispute resolution process for resolving potential conflicts that may occur during the project.
  6. Finish with the signatures to legally bind the agreement.

Construction Contract Sample

* The template here is provided for reference only, and you should always talk to a professional for all legal matters

A well-drafted construction contract will help you prevent misunderstanding and ensure that both parties know the project’s details. If you don’t know where to start creating your construction contract, download the sample directly from this page.

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