Essential Elements in Construction Contracts Part 4
In this five-part series, the Orlando construction attorneys at Cotney Construction Law are discussing essential elements that should be featured in construction contracts. In parts one, two, and three, we covered everything from change orders to excused delays. In this section, we will focus on one of the most crucial elements in a contract: pricing.
Types of Payment
When you provide quality work on a project, you want to be paid accordingly. If you are not intimately familiar with construction contracts, there’s a decent chance you may not be compensated fairly. There are several ways an Orlando construction attorney can structure payment for a project including:
- Lump Sum Price: The traditional and straightforward approach to construction payment is the lump sum price meaning that the total payment price is proposed by the contractor and agreed to by the owner before work commences. If the contractor can manage their overhead costs and meet deadlines, the lump sum payment is an effective form of payment.
- Cost-Plus Price: Another contract agreement is cost-plus pricing meaning that the owner pays for the building expenses (material, labor, equipment, etc.) and also the services of the contractor (overhead and profit) to provide the work. A cost-plus contract often has a spending cap to ensure that the owner doesn’t exceed a certain amount for the project. This spending cap is referred to as a guaranteed maximum price contract. These contracts require great attention to detail and significant documentation of expenses during the project and should be reviewed by an Orlando construction attorney.
- Unit Price: The pricing of the contract can be segmented by the unit price. Typically, these contracts are created for transportation construction projects where the overall square footage can be accurately assessed. Unit price contracts are usually not featured for the entire duration of a project, but are a common form of payment for hiring subcontractors.
The Right Type of Contract for Your Project
When you consult with one of our Orlando construction attorneys, they can ensure that the most effective pricing structure is implemented into your contracts. Since all projects are different, an experienced attorney will know what type of payment method is the most suitable for your construction contract.
For more information on essential elements in construction contracts, please read the final section.
If you would like to speak with an Orlando construction attorney, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.