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What are the different contracts for builders and construction?

When there is a construction project in New Jersey, there should be a contract to list the expectations. This is true whether it is a public or private project; large, medium or small. Understanding the different types of construction contracts available is essential. This is because if there is a breach of contract or if litigation is necessary, the contract itself will be imperative to settling the matter.

With construction contracts, both sides will be shielded from any issues such as a delay, how much it costs, when it should be completed and if there will be penalties for delay. The project itself will determine which contract is preferable. A lump sum or fixed price contract means that there will be one payment for the work prior to construction. There can be incentives in the contract if the project is completed early and damages if there are issues that make the project late. The builder should have an accurate estimate of the costs prior to the agreement. This can keep costs lower, but there are dangers such as underestimating costs.

A cost plus a fee contract is generally shortened to "cost plus." The owner will agree to cover the costs that the builder incurs and a fee for the builder to profit. This if often used when there is a clear understanding of what costs are such as the rental fees for equipment. This can be beneficial as there is greater transparency than there is in a lump sum contract. A unit price contract will often hinge on what will be needed to complete the project. This is exemplified by a road-building project, as there will be a set price for every mile. This is often used with a public project, but can also be used with a large scale private project.

An integrated project delivery -- also known as an alliance -- is considered collaborative between all parties across the board. Those involved are on the same playing field and all will have influence on the project. This raises transparency and risk. This is beneficial for those who can work together and avoid blaming others if problems arise. When there is a construction project planned, knowing the different types of contracts available is vital. Having legal assistance from a law firm that can help with the contract from all sides is a smart way to avoid disagreements.

Source: FindLaw, "Types of Construction Contracts," accessed Nov. 7, 2017

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