Construction contract law governs legal agreements between parties for construction jobs. Types of contracts include unit price, lump sum, and cost plus fixed rent. Contracts must meet legal requirements, and government contracts may have additional regulations.
The section of contract law that deals with construction contracts is known as construction contract law. In such contracts, one party agrees to do a job and the other agrees to pay. It is a legal agreement that can lead to litigation, and a judge or arbitration panel will often refer to the jurisdiction’s construction contract law to determine a legal outcome. National public contracts are often not governed by the regional law on construction contracts, but rather by national statutes and regulations which may or may not directly concern construction contracts. There are several types of construction contracts governed by law, including unit price contracts, lump sum contracts and cost plus fixed rent contracts.
A unit price contract is a legal arrangement in which the contractor is paid a price per unit he delivers. For example, a contractor agrees to excavate land for a certain monetary amount per cubic foot. Many contractors include unit cost estimates in their bids for government contracts. The contractor accepts a fixed fee in a lump sum contract and is obligated under the Construction Contracts Act to perform, even if the work costs more than expected and when there is no legal way to breach the contract. In a cost-plus-fixed-fee contract, the party hiring the contractor pays the contractor’s costs, including labor and materials, plus a percentage markup.
There are legal requirements for writing and signing valid construction contracts, and these requirements are often defined by regional construction contract law. Some of the requirements in many jurisdictions include the involvement of mentally capable parties who understand and are able to enter into a contract, a definite subject matter of the contract which does not violate any local or regional law, and a clear acceptance of a proposal which is binding on both parties and by mutual agreement to enter into the contract with your consent and without coercion or fraud. Courts often rule construction contracts that do not meet all of these requirements invalid, allowing one party to refrain from fulfilling the terms of the contract. For example, a legal contract in which the contractor agrees to construct a commercial building that violates local permit laws and other ordinances will most likely not be considered a valid contract under construction contract law. The other party signing the contract is often able to walk away without legal consequences.
Government contracts often impose additional legal requirements not found in regional construction contract law. For example, a US contractor may be required to hire a number of minority subcontractors. Third parties can often sue contractors who enter into government contracts but fail to comply with government statutes and regulations governing the contractor’s performance.
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