Contracts are an essential part of any construction project in New Jersey. They outline the expectations and responsibilities of both the contractor and the client to help avoid disputes down the road. Here are the five most common contracts used in construction projects.
A fixed-price contract is one in which the contractor agrees to complete the project for a set amount of money. This type of contract can be beneficial for both the client and the contractor as it helps to avoid cost overruns on the project. It is important to note that this type of contract usually requires a deposit from the client to partly cover the costs of material and labor needed to meet the contract terms.
Time and materials contract
In a time and materials contract, the contractor is paid based on how much time and materials are used to complete the project. Under New Jersey construction law, you should use this contract when you are unable to estimate or anticipate the cost of a project at the time of making the deal.
A cost-plus contract is a type of contract in which the contractor’s fee is calculated based on their costs for labor and materials, plus an agreed-upon markup for profit or overhead expenses. The contractor can provide the client with an estimate, or they can set a fixed fee for the possible cost of the project.
A lump-sum contract is a type of contract in which the contractor agrees to complete the project for a set amount of money regardless of how long it takes them to finish. This type of contract can benefit the client as it guarantees that they will not pay more than what was agreed upon. However, it can be risky for the contractor as they may not be able to recover costs if the project takes longer than expected.
Unit price contract
In a unit price contract, each individual task or phase of work is priced separately. This contract can help a contractor remove the risk of submitting an inaccurate estimate of projects costs during the bidding process.
Each type of construction contract has its own advantages and disadvantages. It is important to understand these differences so that you can make the right decision for your project.