Types of Construction Contracts Recognized in Florida

Florida construction contractors have been busy in recent years, which is great news for profits.

However, with many contractors accepting numerous residential, commercial, and industrial projects, it can become confusing when having to manage different contract types. Understanding what the legal rights and obligations specific to each type of contract are can be a challenge.

Meticulously prepared written construction contracts are the foundations of successful building projects, where the stakes are high and mistakes or omissions can be costly.

While it helps to work closely with a Florida construction contracts attorney on major projects, understanding the main types of construction contracts is a good start if you’re embarking on a busy period of upcoming work.

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What are the main types of construction contracts in Florida?

Following are the five main types of construction contracts used in Florida…

Lump sum contracts

One of the most common types of construction contracts for projects is a lump sum agreement, where a fixed price is applied for the provision of all materials and labor on the project.

This type of contract simplifies the process of comparing bids for the owner and encourages competitiveness. However, for contractors, there are dangers in miscalculations leading to losses rather than profits from the project, especially in larger, high-risk construction projects.

Time and material contracts

A time and material contract is another of the most common types of construction agreement in Florida. These are particularly effective when certain aspects of the project are not well-defined and the contractor is paid for the actual materials supplied and the time spent on the project.

Time and material contracts are flexible agreements but, to protect against exceeding budgets, it’s important to specify the details of what is to be supplied and hourly rates.

Cost-plus agreement contracts

A cost-plus agreement is a contract where the owner of a project pays a contractor for the costs incurred for labor, materials, and other services plus an additional amount that serves as profit for the contractor.

Guaranteed maximum price (GMP) contracts

Guaranteed maximum price contracts are useful for projects on a strict budget as they set a total cap on the costs.

The main risks with these contracts lie with the contractor, who may commit to a contract that costs more to deliver than the maximum agreed amount payable.

Unit price agreement contracts

Unit price contracts are useful where the various parties involved agree to divide the construction project into segments.

For these contracts to be suitable and effective, the contractor must estimate the costs of each project phase. The owner benefits from transparency and oversight of the costs involved in each project phase but the full value of the entire project is not known so budgets can be exceeded.

Types of construction contract specifications in Florida

While there are different ways in which a contractor is paid according to the type of contract, Florida construction contracts also differ in other aspects.

The “specifications” section of a contract lays out the finer details of a project. They are usually written by engineers but standardized by the Construction Specifications Institute (CSI).

The descriptions can be highly technical but contractors and subcontractors need to be aware of (and follow) the specifications detailed as they lay out a framework for the successful completion of the project. Specifications also help to determine liability for defects so it’s essential to have a full understanding of the details.

The more detailed the specifications are, the more likely it is that all parties in the contract have the same expectations and will communicate and coordinate effectively, which leads to less waste, fewer construction defects, fewer budget blowouts, and fewer disputes.

The CSI has established three classes of specifications in construction contracts, as follows:

1. Prescriptive specifications

Prescriptive specifications provide detailed instructions for each step of a construction project. They also outline which products and materials must be used by contractors and, sometimes, installation requirements.

2. Performance specifications

Performance specifications describe the final outcome of the project and what the client expects as far as the end product.

With performance specifications, the details of the materials and installation are left up to the discretion of the contractors rather than being prescribed in the contract.

3. Proprietary specifications

Proprietary specifications are the most detailed of all—and the least common type of specification in construction projects. They cover all of the necessary details of a project, including the type of products, brands of materials, and how each component must be installed. These specifications may be used when a property owner is renovating and needs to match existing structures.

If you have any problems interpreting specifications or need advice on any aspect of a construction project, speak to one of our Florida construction contracts lawyers.

Who is liable for defective specifications in construction contracts?

The three classes of construction specifications outlined above often play a role in construction disputes. Liability for any defects or losses will depend on the class of specification included in the contract—another reason why they must be examined closely before anything is signed.

For example:

• With performance specifications, it is up to the contractor to achieve the desired outcome using materials and products selected by the contractor, so liability rests with the contractor if the performance is sub-standard.
• With prescriptive specifications, the contractor carries out the work according to specifications made by the architect or engineer, who may then be liable for any related defects.
• With proprietary specifications, liability could depend on who developed the specifications and the demands on the owner. Because of problems with liability, engineers rarely include these types of specifications in construction contracts.

For the help you need with construction contracts, call Bennett Legal Group today at 407-734-4559 to arrange a free consultation. Alternatively, complete a short form and let us know the nature of your issue.