In New Jersey building projects, the construction contract is a binding agreement between the builder and the owner. This contract is designed to control how the job will be performed and how the builder will be compensated. The type of construction contract involved is usually defined by the way disbursements will be made and by other specific details. The four most common types of construction contract are fixed price, unit pricing, time and material and cost plus.
In a fixed-price contract, also sometimes referred to as a lump-sum contract, one price is included to cover all activities related to construction. These documents might include benefits or incentives for early completion along with liquidated damages for not finishing on time. A fixed-price contract might be advised when the project has an agreed-upon scope and schedule. It transfers project risk to the builder.
Unit pricing contracts are commonly used by federal agencies and builders. Bidding might be used to set unit prices, which can be adjusted up or down if the scope of the project changes. Time and material contracts are often used when the scope of the project is not clear from the outset. The owner and the builder agree upon a rate for the hour or for the day, including expenses.
In a cost-plus situation, the contract calls for payment of actual costs and some negotiated percentage or fee. Sometimes they include a maximum price or call for bonus payments. For builders and owners working on large construction projects, an attorney could provide valuable assistance. New Jersey-New York construction contract lawyers might examine the facts of the situation and draft an agreement that meets the goals and needs of the client. An attorney might help negotiate pricing and payment terms or include language that calls for liquidated damages in the event of a breach.