When dealing with a cost-plus contract, cover your bases

In the business world, contracts are common. Because of the costly consequences that a poorly written contract can have on a company, it is extremely important that all business owners in Orlando protect themselves by scouring every word of any contract they sign. Even better is to have someone familiar with contract law read it over as well.

As many businesspeople in Orlando know, however, not all contracts are the same. One particular contract to be cautious of is the cost-plus contract. Most commonly, cost-plus contracts are used in remodeling projects, but may be used in other instances as well. What makes a cost-plus contract unique is that the individual who signs agrees to not only pay for the remodel work but also for other overhead costs that can sometimes arise during a remodel. If you are not careful upon signing the contract, you could end up being liable for much more than you anticipated. Fortunately, there are ways to protect yourself.

First, you must ask the contractor to provide you with the maximum amount you will be expected to pay. Next, you should receive from the contractor a timeline of when certain parts of the project will be completed and a detailed list of the expected cost of materials and time. On top of these things, include in the contract that the contractor must provide you with a cost report each month. Your job is to review these carefully to ensure the contractor is staying within the bounds of the agreement.

Cost-plus contracts are fairly common, but that does not mean they don't get confusing. Making sure every detail of the contract makes sense is not always easy -- especially if you have no experience with cost-plus contracts. Those who stand to lose something if a contract is not followed should consider having an attorney review it before signing.

Source: Florida Today, "As a Business Expert: Cost-plus contracts require close attention to the deal's details," Ed Kinberg, Oct. 1, 2013