Construction Contract Cost

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What does a construction contract cost? If you are a general contractor or someone looking to have construction work completed, you may ask this question. Let’s explore this question and review some available information about construction contracts and what they entail.

How Much Does a Construction Contract Cost?

A construction contract, also known as a construction agreement, is a legally binding contract between a party who needs construction work completed and a general contractor who has agreed to do the work. A construction contract will include:

  • Details about the job
  • The cost of labor and materials
  • How will the contractor charge for their time
  • Any liabilities that go along with the work

There are four main types of construction contracts.

  1. Fixed price: A fix-priced contract is the most straightforward construction contract. The contractor will quote a lump sum fee for all services, including all labor and materials.
  2. Unit pricing: A unit pricing contract outlines the cost per unit, like the cost per square foot or another measurement unit.
  3. Time and material: A time and material contract that requires the client to pay the contractor for all labor and materials at a pre-negotiated rate.
  4. Cost-plus: A cost-plus contract requires the client to pay the actual cost for the labor, materials, and other expenses, as well as a fixed fee or percentage of the total costs.

These construction contracts will vary based on the job and the individual contractor’s preferences. Construction contracts can be complicated, so it is recommended that a contractor hires an attorney familiar with construction contracts to draft the agreement.

An attorney will know what needs to be included in the contract to protect all parties and ensure that the contract is legally binding should a dispute arise.

Based on ContractsCounsel's marketplace data, the average cost of a construction contract is $543.75.

What's Typically Included in a Construction Contract

Construction contracts will vary based on the type of contract used. Even though the terms and conditions may change, most construction contracts will include these basic clauses:

  • Contact information for both parties: Both parties should be identified in the contract. This consists of the contractor's license number, company details, the homeowner’s contact information, and the property address where work is to be completed.
  • Property description in legal terms: The property description can be copied straight from the deed on record in the county clerk's office.
  • List attachments to the contract: Many construction contracts include attachments like blueprints. These should be included in the agreement.
  • The cost: The total cost of the completed project must be clearly stated. This section can also detail whether the homeowner can pay in installments and when each payment will be due.
  • Description of the work and the completion date: Including a scope of work and completion date is vital to a construction contract. This allows the homeowner and contractor to be on the same page throughout the job.
  • Right to stop the project: A stop-work clause is necessary to protect the contractor. The contractor can terminate the contract if the homeowner fails to make payments.
  • Right to withhold payment: This clause protects the homeowner. For example, if work is not being completed in accordance with the agreed-upon schedule or the work is not up to standard, the homeowner can refuse to pay an installment.
  • Requirements for proper licenses, permits, and insurance: Depending on state laws, contractors must carry certain licenses, permits, and insurance. This clause ensures that the contractor is operating legally.
  • Change orders: If either party wants to deviate from the contract, they can submit a change order. This needs to be agreed upon by both parties and signed.
  • Warranties: Contractors warrant that their work is free from defects, that they are performing in a “workmanlike manner," and that they will fix any defects within the time listed explicitly in the contract.
  • Signature and date by both parties: To make the contract legally binding, both parties must sign it. Some states may require notarization as well.

Examples of Construction Contract Projects

Construction Contract Drafting

Construction contracts are usually provided by the contractor completing the work. It is recommended that the contractor hires a lawyer familiar with construction contracts to draft the agreement.

A lawyer will be able to draft a comprehensive construction contract that is legally binding and abides by all state and local laws. After learning about the proposed job and scope of work, the attorney can create a contract that protects both the contractor and the homeowner.

Construction Contract Review

Construction contracts can have lasting repercussions for both parties, especially if the contract isn’t correctly drafted. Therefore, whether you are a contractor that prepares your contract, or a homeowner faced with signing it, it is always recommended to have a lawyer review the agreement before putting it to us.

When a lawyer reviews a construction contract, they will check for mistakes, fairness, and whether it follows local and state laws. This ensures that both parties are protected under the construction contract.

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Drafting a Construction Contract Cost

When a contractor hires a lawyer to draft a construction contract, they incur legal fees. A lawyer will charge their client for:

  • Time spent preparing the contract
  • Consultations
  • Revisions

According to ContractsCounsel's marketplace data, the average construction contract drafting costs are $782.00 across all states.

Reviewing a Construction Contract Cost

Hiring a lawyer to review a construction contract will also incur legal fees. While the lawyer isn’t drafting a document from scratch, they will still use their time and legal expertise to ensure the contract was drafted correctly.

ContractsCounsel's marketplace data shows the average construction contract review costs $521.00 across all states.

How Do Lawyers Charge for a Construction Contract?

Hourly Rates for a Construction Contract

Many lawyers across all legal fields use hourly rate billing structures. Under this fee agreement, the lawyer charges the client a set hourly rate for the time spent working on their case or project.

If the project is short, like drafting a construction contract, the client will most likely be billed after the project. For more prolonged cases, the attorney may require monthly payments.

The marketplace data for ContractsCounsel shows that the average hourly rate for a contract lawyer specializing in construction contracts ranges from $250 to $400 per hour.

Flat Fee Rates for a Construction Contract

Flat rates are a more straightforward fee agreement and are often used for short-term projects. The lawyer will quote the client a lump sum price for legal services when using a flat fee structure. This fee is typically paid upfront before the attorney begins work.

ContractsCounsel's marketplace data shows that the average flat fee rate for a construction contract costs $543.75.

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