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Types of construction contracts in California

The construction industry is one of the most important in the state of California and the entire country for obvious reasons. When a contractor or construction company has a bid accepted, it can then begin to work on the contract. There are four common types of construction contracts used in the industry today.

A cost plus contract is one that includes the actual costs of materials purchased, costs of construction and any other expenses incurred from the activity. There must be detailed information included in the contract, including costs classified as indirect or direct. The four types of cost plus contracts are cost plus fixed fee, cost plus fixed percentage, cost plus with guaranteed max price and bonus and cost plus with guaranteed max price.

A lump sum construction contract involves a fixed price contract for all construction activities. These contracts typically utilize clauses for early completion or benefits for early termination. They can also carry clauses for late termination or liquidated damages.

A unit pricing contract is one that is used commonly by federal agencies and builders. It involves setting the unit prices when the bids are submitted, which are for specific quantities and unitized items.

A time and material contract is one where the scope of the project is not known. This contract is popular when the entity hiring the construction company does not have a clear definition for the project. The contract creates a rate for hourly or daily work.

Are you preparing to sign a construction contract in Irvine? Visit our site to learn more about our firm and how a contract disputes attorney can guide you through the process of picking a contract type for your project.

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