Types of Contracts Used in Construction in the US Introduction: In the dynamic world of construction, contracts lay the foundation for successful projects. A construction contract is a legally binding agreement between two parties that outlines the scope of work, responsibilities, and terms of payment. Understanding the types of contracts used in the construction industry is crucial for all stakeholders involved. This review will discuss the most commonly used types of contracts in construction in the United States, providing an expert and informative analysis. 1. Lump Sum Contract: The lump sum contract, also known as a fixed-price contract, is one of the most prevalent contract types in construction. Under this agreement, the contractor agrees to complete the entire project for a predetermined fixed price. This type of contract places the risk of cost overruns on the contractor, as they must absorb any additional expenses. Lump sum contracts are often used when the project scope is well-defined and the owner desires a predictable cost. 2. Cost-Plus Contract: A cost-plus contract, as the name suggests, involves reimbursement of the contractor's actual costs plus an agreed-upon fee or percentage. This type of contract is commonly used when the project's scope is uncertain or subject to change. It allows for greater flexibility and transparency in terms of costs, but places a greater burden
What are the 4 types of construction contracts?
Here are four main construction contracts to choose from, plus their pros and cons:
- Lump-Sum Contracts.
- Cost-Plus-Fee Contracts.
- Guaranteed Maximum Price Contracts.
- Unit-Price Contracts.
What are the 4 types of contract?
4 Different Types of Contracts
- Sales Agreements.
- Non-Disclosure Agreements and Intellectual Property Management.
- Professional Service Agreements – Fixed-Price, Time and Materials, and Retainer-Based Contracts.
- Adhesion Contracts.
What is the most commonly used contract in construction?
Lump sumFixed price construction contracts, also commonly referred to as “lump sum” or “stipulated sum” contracts, are the most common types of construction contracts. As its name suggests, under a fixed price contract a contractor agrees to construct a project for a “fixed” or agreed upon price.
What are the 4 types of construction?
The four main types of construction are: residential construction, commercial construction, industrial construction, and infrastructure construction.
What are the three most commonly used types of construction contracts?
Though there are several types of construction contracts, some of the most commonly used ones in the industry are:
- Cost-plus contracts.
- Lump sum contracts.
- Unit price contracts.
- Time and materials contracts.