Contractor Agreements - Main Types:

There are four basic types of agreements. Some contracts may be a combination of these, with each type lending itself to a particular use.


Fixed Lump Sum - Includes all the labor and materials that are needed for project completion. There can be an additional labor clause stating the terms and conditions for work above and beyond the stated amount.

Labor Only - May be a fixed or hourly sum amount stating the labor exclusively, for performing skilled or unskilled labor. If you go this route, be certain who is responsible for material acquisition and delivery. A cap on the hourly total is not uncommon.

T & M/Cost Plus - Time and Materials, or cost plus, refers to an agreement whereby the project is taken on a time charge with materials separated out. Or - cost plus a percentage of profit, is more commonly used on larger government projects. T & M projects are used where there are likely hidden, concealed aspects that can be revealed during the project that will need to be addressed, which were not apparent before starting.

While arranging for T & M/Cost Plus specify who is responsible for tracking hours while on the job, if these are billed-out for actual hours of skilled performance and if any road time to and from the jobsite is compensated. Also, the possibility of a cap limit not to be exceeded. Design-Build - An instrument, usually for the scope of projects requiring expertise and/or specialization. Here the builder/contractor handles all phases of the process from design through to completion. A variation of this, is for owners that wish to become their own contractors who use the design-build agreement to oversee the project themselves while deriving more competent skill levels from a second, or third party advisor (such as a general contractor who may put out for bid or solicit on the owners behalf to those he or she knows is qualified). However design-build is usually termed to encompass the design and build phase together by a design-build firm who handles all.

Percentage Payment/Retention:
Before committing always see if you agree that there is a basis for partial payment upfront, as per any proposed payment terms to help cover for materials, etc.,


Local laws place limits on amounts of down payment and holdback, and govern contract regulation. To find out more contact your local building department or department of commerce for more details.