Different Types Of Building Contracts

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Published by Preston Law on 10/05/2023

Making improvements to your home can be an exciting time, and depending on the size of the job, the finished result could have a life-changing impact. After you make the decision to make improvements to your home you will choose a builder and then enter into an agreement with them. This agreement will cover off the type of work that is to be completed, by whom the job will be undertaken and a timeline for when the work should be carried out. It will also cover the cost.

When it comes to building contracts there is no one-size-fits-all approach, and various styles exist to suit the range of undertakings a builder may be tasked with. It is important for homeowners who are embarking on modifications to their home – no matter how minor – to understand the differences between each of these building contracts so they are clear about which one is relevant to their situation and the legal and financial implications each different contract could have on their project.

Lump sum contracts

A lump sum contract locks the builder and homeowner into a fixed price for the whole build or renovation. A detailed quote, which outlines all of the included work, will accompany the agreement so that both parties are clear about everything that is involved and exactly how much it will cost. Once the work and the price have been agreed upon, any additional costs incurred for the same work will be the builder’s responsibility, meaning the onus is on the builder to quote correctly and factor in any scope creep which may occur.

Cost plus contracts

A cost plus contract allows for some flexibility as to the final cost of the project. Typically, a cost plus contract will involve the builder charging an initial cost, plus an additional percentage of that cost as a fee. A homeowner who is unsure about the full scope of the project or who expects that some variations will need to be made will benefit from this type of agreement as it allows the homeowner to have more control over the ultimate cost of the project.

Large jobs contracts

A large job contract is usually accompanied by a quote which lays out all of the work that is to be completed, including a payment schedule advising when payment should be made as different project milestones are reached. These types of contracts are suitable for homeowners who have large, complex and multi-stage renovations or construction projects.

Small jobs contracts

A small job contract typically outlines a fixed price for a small amount of work (such as minor renovations, maintenance or a repair job). The exact work covered by the contract should be listed in a detailed quote which will accompany the contract.

Swimming pool construction contracts

Swimming pool construction contracts are specific to the installation of swimming pools and are between the homeowner and the contractor. They are typically fixed-price contracts which cover the entire project.

Preparing a building contract

Although organisations like Housing Industry Association provide contract templates online, to avoid misunderstandings and serious disputes, homeowners should ensure they have their building contract(s) reviewed by a lawyer before work commences. An experienced building and construction lawyer will be able to pick up on any discrepancies or red flags the homeowner should be wary of and will be able to offer recommended changes to protect the homeowner.

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