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Construction Contract basics

If you are about to embark on a new construction project and have found the contractor that you want to hire, you can use this customizable document to set the terms so that both parties are on the same page.

This Construction Contract accounts for things such as how weather delays and material shortages will be handled. It also covers how much you will have to pay for the project, and the terms for work hours on site, as well as much more.


How do you write a Construction Contract?


The Rocket Lawyer Construction Contract is built using a free step-by-step interview process that enables anyone to make a Construction Contract quickly. Once completed, you can save, sign, print, and download the final document that has been tailored to your unique construction project and needs.


What are the different types of Construction Contracts?


The five main types of construction contracts are:

  1. Lump Sum - A lump sum is agreed upon for a project, e.g. $20,000 to remodel the kitchen.
  2. Time & materials - The customer pays for the actual costs of time and materials.
  3. Costs plus - This is similar to time and materials, except that it also includes a "plus" for profit.
  4. Unit price - The project is broken up into smaller chunks, or units, rather than one overall price.
  5. Guaranteed Maximum Price - As it sounds, there is a guaranteed maximum, and the contractor becomes responsible for any cost above that guaranteed maximum.

What are the essential elements of a Construction Contract?


Contract law varies by state. Generally speaking, however, some of the essential elements of any Construction Contract include:

  • Description of services
  • Scope of work
  • Plans, specifications, and construction documents
  • Compliance with laws
  • Work site information
  • Materials & Labor Provided
  • Payment information
  • Term
  • Permits
  • Insurance
  • Subcontractor information, if applicable

Additional terms can be found in the Rocket Lawyer Construction Contract template.


How do you recognize revenue in a construction contract?


As this is an accounting question, you may want to consult with an accountant or certified public account for information specific to your unique situation. As a general matter, however, revenue recognition can be done either under a prorated manner based upon the percentage-of-completion method, or once the project is substantially completed, following the completed-contract method.

If you have questions making Construction Contracts or structuring your payment terms, talk to a lawyer.


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Sample Construction Contract

More than just a template, our step-by-step interview process makes it easy to create a Construction Contract.

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