Construction Contract Contract can be defined as a written or oral mutually binding promise which is agreed between two parties based on a certain conditions and policies. Construction contracts normally form by at least two reciprocal promises: the contractor promises, which refer to accomplish the works stated in the contract, and the client promises, which undertakes the owner to pay the contractor for carrying out the works agreed in the contract. In addition, the contract generally contains a number of other promises related to the parties’ obligations. The contract should be established based on the five key components of the legal relationship between the contractor and the client, namely the scope of work, the quality of the work,
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A variety of contractual arrangement facilitates the complexity of the circumstances among particular projects. Following this section different types of contractual arrangements are to be explained.
Guaranteed Maximum Price
Guaranteed maximum price or GMP is one of the most popular types of the arrangement in which construction contractor pays the all costs incurred in project, plus a fixed cost or a certain percentage of the total cost of the project as their profit margin. In this type of contract the contractor is fully responsible for the overrunning costs. Any additional scope and changes from client required arrangement of the new contract or must be formally stated in the supplementary section of the …show more content…
Generally this contract uses for the projects in which the scope is established accurately, and the types of items can be identified in the contract document accurately. Normally a schedule of values is provided to breakdown of the works (e.g drywall and flooring) and their costs. The schedule of values allows contractor and client to monitor the progress of the works in balance with payment of the price.
COST PLUS
Cost plus is another type of contract agreement, which is usually referred to costs of works plus the contractor profit margin. In this case the purchaser or contractor agree to pay the cost of the work, including all trade contractor work, labor, materials, and equipment, plus an amount for contractor overhead and profit. These types of contracts appropriate for the projects in which the scope of work is indeterminate or highly uncertain and the kinds of material, equipment and labour force required are also
A variety of contractual arrangement facilitates the complexity of the circumstances among particular projects. Following this section different types of contractual arrangements are to be explained.
Guaranteed Maximum Price
Guaranteed maximum price or GMP is one of the most popular types of the arrangement in which construction contractor pays the all costs incurred in project, plus a fixed cost or a certain percentage of the total cost of the project as their profit margin. In this type of contract the contractor is fully responsible for the overrunning costs. Any additional scope and changes from client required arrangement of the new contract or must be formally stated in the supplementary section of the …show more content…
Generally this contract uses for the projects in which the scope is established accurately, and the types of items can be identified in the contract document accurately. Normally a schedule of values is provided to breakdown of the works (e.g drywall and flooring) and their costs. The schedule of values allows contractor and client to monitor the progress of the works in balance with payment of the price.
COST PLUS
Cost plus is another type of contract agreement, which is usually referred to costs of works plus the contractor profit margin. In this case the purchaser or contractor agree to pay the cost of the work, including all trade contractor work, labor, materials, and equipment, plus an amount for contractor overhead and profit. These types of contracts appropriate for the projects in which the scope of work is indeterminate or highly uncertain and the kinds of material, equipment and labour force required are also