Construction contract

A construction contract is a mutual or legally binding agreement between two parties based on policies and conditions recorded in document form. The two parties involved are one or more owners, and one or more contractors. The owner has full authority to decide what type of contract should be used for a specific development to be constructed and to set forth the legally-binding terms and conditions in a contractual agreement.^[1]

Types

The six types of contracts are:

• Lump sum contract
• Item rate contract/schedule contract
• Lump sum and scheduled contract^[2]
• Cost plus fixed fee contract
• Cost plus percentage of cost contract
• Special contracts^[3]

Lump sum contract

In a lump sum contract an owner agrees to pay a contractor a specified lump sum after the completion of work without a cost breakdown.^{[4] [5]}

Item rate contract

In this contract the contractor is required to quote a rate for each item of work. This type of contract is mainly done in Railway and Public Work Departments. It allows a thorough rate analysis. yes mostly

Lump sum and scheduled contract

This is a lump sum contract that requires a cost breakdown.

Cost plus fixed fee contract

In cost plus fixed fee, the owner pays the contractor an agreed amount over and above the documented cost of work.^[6]

Cost plus percentage of cost contract

In cost plus percentage, the owner pays greater than 100 percent of the documented cost, usually requiring detailed expense accounting.^[7]

Special contracts

Special contracts are further classified into five types:

• Turn key contract
• Negotiated contract
• Package contract
• Continuing contract
• Running contract^[8]

See also

• Economics
• Engineering, procurement and construction

References

1. "Main types of contracts". Retrieved 23 October 2014.
2. "Common types of construction contracts". Retrieved 23 October 2014.
3. Dr. B.C Punmia (2014). A text book of Production Planning and Management.
4. "Business dictionary". Retrieved 17 October 2014.
5. "Lump sum contract". Retrieved 17 October 2014.
6. "India study channel". by Owais Khursheed. Retrieved 17 October 2014.
7. "Cost plus percentage of cost contract". by Owais Khursheed. Retrieved 20 October 2014.
8. Dr. B.C. Punmia (17 October 2014). Production Planning and Management.