Four common types of construction contracts
Construction contracts form the backbone of any large construction project in Irvine. It is through construction projects that our state’s infrastructure is maintained and improved, adding to our state’s economy and quality of life. Construction contracts also provide the framework for the scope of the project, which property owners, contractors and subcontractors may find valuable. There are four common types of construction contracts. Type one: lump sum or fixed price contracts A lump sum or fixed price contract lays out the total cost for the entire construction project. This includes incentives for earlier completion or penalties for late completion. A lump sum contract is a good choice for situations where the parties have a clear idea on the scope of the project and have worked out a schedule that they both agree to. Type two: cost plus contracts Cost plus contracts cover the actual payment of costs and expenses derived from the construction project itself. These contracts contain specific terms laying out a percentage of material and labor costs as well as profit. These costs may be direct or indirect. A cost plus contract is a good choice when the scope of the project is outlined but not completed and