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Will construction litigation stem from 1 of 3 common contracts?

Most South Florida general contractors know that their best marketing strategy is to do good work. Making quality structures for clients may bring in more business than any advertisement ever will. However, the business gained through word of mouth does not mean contractors will forgo payment for their services. When payment problems or other issues arise, the construction litigation that may follow will most likely stem from one of three common contracts used in the industry.

Some contractors favor a cost plus contract. This agreement needs to specify information regarding the payment of the contractor's profit and overhead. This type of contract involves payment of purchases, actual costs and other expenses stemming directly from the construction project.

Another common option is the fixed price or lump sum contract. As the name implies, the contract includes a fixed price for the entire project. However, it could include incentives for the contractor to complete the work early, but it could also contain penalties for not finishing on time. In contrast, time and material contracts establish a daily or hourly rate, along with the inclusion of additional expenses that may arise during the construction process. This is the preferred contract when the scope of work is not clearly defined.

When it comes to construction litigation, the contract often serves as the most important piece of evidence. For this reason, it is essential to choose the correct type of contract each job. Having one standard contract may not serve the best interests of a South Florida company. Instead, tailoring each contract to each specific job could help protect a general contractor should a dispute arise.

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