Published 31 Jan 2023
What is a Construction Contract Template
A construction contract template is used by contractors and subcontractors to document the agreement between their companies and project owners. It set forth the legally binding terms and conditions agreed between parties including the scope of work, liabilities, budget costs, construction risks, and payment terms.
A construction contract agreement template is used to specify the agreement clauses that have been enumerated by project owners and contractors. It helps validate the agreement of liabilities and responsibilities of each party to identify accountability in case of an incident. It is used by contractors to keep a record of compensation, contingencies, and additional provisions to avoid conflicts and disagreements.
This article will briefly discuss:
- the importance of construction contract agreement;
- details of contract agreement for construction work;
- basic types of the construction contract;
- advantages of using construction contract agreement with iAuditor; and
- free download of customizable construction contract templates.
Importance of Construction Contract Agreement
A written contract agreement prevents any verbal transactions and requests within construction projects. It serves as evidence of an agreement between parties to avoid lawsuits in case of an incident. It clearly defines the policies, construction costs, and liabilities of each party of the contractual agreement that they have to adhere to. Also, it can prevent any forced payment for damaged properties and built-up construction costs without the project owner’s approval.
Details of the Contract Agreement for Construction Work
To ensure smooth transactions between contractors and project owners, a contract agreement for construction work should be validated by both parties. A detailed construction contract agreement would help settle the negotiation. The following are the important details of the contract agreement for construction work.
Scope of work
It is vital to identify the scope of construction work to keep projects within agreed-upon boundaries. It helps identify the inclusions and exclusions of the services within the construction project and serves as an outline of the critical details including procurement elements, deliverables, tasks, manpower, materials, cost, and timeline of the construction projects. It helps manage the client’s expectations and establish project deliverables and workers’ responsibilities.
It is important to clarify the payment schedule and terms of compensation between contractors and project owners. Payments can be made on a daily, weekly, or monthly basis depending on the terms of the agreement. It should also specify the payment due dates, late payment penalties, accrued interest, and other applicable situations related to budget costs and invoicing terms. This is to also avoid additional incurred expenses for the project.
A contract agreement for construction work should define how the project schedule will be divided according to the total number of working days and the projected deadline to finish the construction. It should vary depending on the manpower, amount of work, and availability of materials. All changes that occur during the construction can be added to the timeline.
A contingency plan should be in place to avoid any disagreements or disputes between contractors and project owners. It should include the details of the governing laws, lien requirements, claims procedures, arbitration procedures, insurance, and liquidated damages.
3 Basic Types of Construction Contract
Construction contract depends on the needs of the project owners. The following are the basic contract types for construction.
Lump sum Contract
A lump sum contract or also known as a stipulated sum contract is the most common contract agreement for construction work. It involves a single payment transaction with a fixed price to build the project within the agreed schedule and scope of work. It is used when the project owner wants to transfer liabilities to the contractor and avoid change orders for unspecified work.
A cost-plus contract is a negotiation that allows the project owner to pay for all the costs associated with the construction project including materials and labor costs with the additional agreed-upon fee for the contractors. It is usually used when the scope of the construction project is not clearly defined.
Unit Price Contract
The unit price contract is based on estimated quantities of items and their unit prices. The cost is based on the agreed price for every unit of work including the number of working hours and the type of construction materials.
Advantages of Using Construction Contract Agreement with iAuditor
The possibility of losing a paper-based construction contract agreement can be burdensome for contractors and project owners. It can put the business at risk and create misunderstandings and process errors. Drafting construction contract forms on your own can also sometimes be time-consuming and prone to mistakes
A digital solution like SafetyCulture (formerly iAuditor) can replace a paper-based construction contract agreement with a mobile app and cloud-based solution. With SafetyCulture, contractors can:
- effortlessly store the contract agreement in the cloud;
- document contract agreement using a handheld device anytime, anywhere;
- capture photos of client identification and other needed documents;
- easily share contract forms with sub-contractors or any member of the organization;
- generate a comprehensive contract PDF report with a tap of a finger; and
- seal the contract with a digital signature including a timestamp to validate the transaction.
To get you started, we have prepared ready-to-use construction contract templates you can download or customize for free.
Featured Construction Contract Templates
A subcontractor construction contract agreement is a binding negotiation between the contractors and subcontractors. This covers the covenant and conditions of both parties including the scope of work, payment terms, timeline of completion, and cleaning up. This contract is validated through digital signatures.
This template can be used by contract managers to document any modifications to the original plans of project construction. Use this document as a supporting record to initial construction agreements such as construction contracts, Scope of Work (SOW), and general conditions, among others. With this template, you can:
- Specify planned works in detail and describe how to execute them.
- Indicate the reason for the change with photo evidence of the item or area concerned.
- Provide estimated costs, and a new project schedule (if any).
- Gather digital signatures from parties involved.
- Confirm the quality of finished work with photo evidence and add recommendations or comments (if any).
Use this project commissioning checklist to ensure that the terms and conditions in your construction contract are being followed and met consistently. This template also enables commissioning teams to monitor the progress of the project in its planning, designing, construction, and post-construction phases with the goal of achieving the project’s desired outcome.