ADVANCE

CONSTRUCTION
METHODS AND
EQUIPMENT

Group 6
PC 2
CONSTRUCTION
CONTRACTS
WHAT IS THE
DEFINITION OF A
CONTRACT?
A contract is basically an agreement
between two parties creating a legal
obligation for both of them to
perform specific acts.
In order for the contract to be
enforceable, each party must
exchange something of value (called
“consideration”).

They may be either oral or written,

though courts prefer that agreements
be put in writing.
WHAT ARE THE
REQUIREMENTS FOR A
VALID CONTRACT?
Mutual Assent: Each party must have a shared
understanding regarding what the subject matter
of the contract is.
Offer and Acceptance: One party must make an
offer by clearly communicating their intent to be
bound in a contract. Likewise the other party must
render their acceptance in clear terms.
Consideration: This where both parties mutually
exchange something of value in order to make the
agreement binding.
Sometimes contracts can be enforced in a one-
sided promise where only one party renders
consideration.
 HOW CAN A CONTRACT BE
BREACHED?
The entire formation of the contract begins
with negotiations and may undergo several
modifications before a final agreement is
reached.
This means that there are several points in
time when the contract may be breached.
A breach of contract means that one or both
parties has failed to perform their duty.
A breach may either be total or partial, and
each will yield different legal consequences.

Source: CATHY CARDOZA

WHAT IS A
CONSTRUCTION CONTRACT?
▪ A construction contract provides a
legal binding agreement, for both the
owner and the builder, that the
executed job will receive the specific
amount of compensation or how the
compensation will be distributed.
▪ Construction contract types are
usually defined by the way, the
disbursement is going to be made and
details other specific terms, like
duration, quality, specifications, and
several other items.
4 COMMON TYPES OF CONTRACTS
1. Lump Sum Contract
Pros of Lump Sum Cons of Lump Sum
Contracts Contracts

•Owners avoid paying •Can result in lost profit if

unexpected project costs project goes over scope
•Builders have a clear •Budget constraints may
expectation of the scope limit project outcomes

2. Unit Price Contract

Pros of Unit Price Cons of Unit Price
Contracts Contracts

•Easy to evaluate costs of •Difficult to estimate

different categories costs for large projects
•Easy to adjust prices •Final cost isn’t defined in
when scope changes the beginning
3. Cost Plus Contract

Pros of Cost Plus Contracts Cons of Cost Plus Contracts

•Project is more likely to be •Project can go over scope if

completed as planned caps aren’t applied
•Reduces risk for builders •Difficult to manage and track
4 Types of Cost Plus Contract
• Cost plus fixed percentage
• Cost plus fixed fee
• Cost plus with guaranteed maximum price (GMP) contract
4. Time and Materials Contract

Pros of Time and Cons of Time and

Materials Contracts Materials Contracts

•Builders are not completely •Project can go over scope if

limited by budget caps aren’t applied
•Easy to use for small •Difficult to estimate final
projects cost
CONTRACT DOCUMENTS
 Agreement
 Conditions of the Contract
 Drawings
 Specifications
 Addenda
 Modifications
SUPPLEMENTARY (SPECIAL)
CONDITIONS
SUPPLEMENTARY (SPECIAL)
CONDITIONS
DRAWINGS (PLANS, BLUEPRINTS)
SPECIFICATIONS
SPECIFICATIONS
End of Presentation