How to Write a Construction Contract

Video Transcript

"Hey, my name is Gavin McKenzie with BuildMcKenzie.com in Miami Beach, Florida. Let's talk a little bit about writing a construction contract. First of all, what is a construction contract? A construction contract is a document that's going to bind yourself and the owner in an agreement based on the project that you're bidding on. The construction contract is one of three elements associated in a bid typically. And it's the construction contract, line item sheet which is the breakdown of all your costs associated with the job and a scope of work document, which outlines every item within the line item sheet. A construction contract can be set up in multitude of ways. One of the most popular and standard, standards in the industry is an AIA construction contract. Which in fact is an agreement between the owner, the architect and the construction manager, general contractor, builder. What an AIA contract is, it's a standard form, that basically let's you input specifics based your specific jobs. So you'll have a space for your name, days the job's supposed to take, payment terms, things of that nature. Within the AIA construction round, there's several types of construction contracts. So there's one with construction without a guaranteed maximum price, but it's a cost plus contract. So this is an application if were to say, start a job, you don't know exactly how much, because there's too much unforeseen conditions on the job site. So you have a reasonable idea of how much you're going to bid the job for, but you know there's unexpected coming. So that would be a perfect application for a cost plus contract. another form the AIA contract is a lump sum. A lump sum contract is basically, you see the job, you feel comfortable bidding it with a specific price, and you put a price label on that job. You have to stick to that price that you've given the job, so it's important to not underbid the job, because we can all really get hurt underbidding jobs."