Understanding Contracts

Understanding Contracts

Understanding Contracts


Why are contracts so important? The contract is the legal document  between a contractor and a client that spells out the terms of the agreement for a construction project. Contracts detail the responsibilities of the

contractor and what they will be providing the client.

Are there different kinds of contracts? Contracts may be a cost plus or

a fixed sum. A cost plus contract will vary according to any changes made

during the progress of the project but the administration costs and profit

margin will be agreed upon in advance. In either case contracts should be

tied to the specifications and the plans.

How do change orders relate to contracts? Change orders affect the

scope of work and the costs. How change orders are handled should be

agreed upon before the work is initiated. In general, work above and

beyond the contract amount is not done before a change order is signed. In

the field small changes may need to be initiated immediately to expedite

the completion of the project.

What else do you need to know? The contract should also spell out

the date by which the contract price must be accepted and details such as

responsibilities for insurance. A well thought out and executed contract is


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