Depending upon the estimated budget and our preferences, one could choose from the two types of contracts: a) labour contract and b) contract which includes the cost of materials and labour wages.
1) Labour contract
In this type of contract it is the responsibility of the owner to purchase the construction materials like cement, iron rods, blocks, mettle, sand etc, and transport it to the construction site. He/she would only pay the wages of the labourers.
Daily wages: The wages of the main workers and helpers on site can be given either at the end of a day or a week. This method is practical only if the owner is able to visit the site regularly and oversee the construction. Tools required for the construction too have to be supplied by the owner. It is the responsibility of the owner to arrange on rent materials like sheet, planks, Jackie, span and scaffolding which are required for the construction.
Labour contract based on the area of the house in square feet: The plinth area should be determined as per the plan of the house. The wages have to be decided on the basis of square feet of the area.
Many choose to complete the structure of the house (which includes plastering the roof and walls, building the floor and painting of the basement) by executing a contract based on the area of the house. The rest of the finishing touch-ups would be done as per the labour contract. However, the owners have to make sure that the contractors bring their concrete mixtures, vibrator, Jackie, span and planks which are required for the construction.
Labour contract according to the cost of the piece work: After each stage of construction like building the foundation, structure, concreting, plastering and flooring, the wages would be determined by measuring the area in cubic feet/square feet/running feet. The advantage of this method is that the labour wages can be correctly determined after each stage of construction and the dues, if any, can be paid without delaying the work on site.
2) Contract with cost of materials and the labour wages
This type of contract includes the cost of the construction materials as per the specifications and the labour wages determined according to it.
Contract according to the area in square feet: The contract covers the construction of the entire house. The wages and other costs are determined according to the area of the house in square feet. The contract should be finalized only after making sure that it includes all the works involved in the construction of the house. The reliability and trustworthiness of the contractor is important as the owner would have a say only when the contractor hands over the key when the entire construction of the house gets over.
The works could be completed by paying an advance and the remaining 10% could be settled after the construction. It is the responsibility of the contractor to do the maintenance works that are required to be done within a year of constructing the building. Even the structural jobs involved in the construction can be completed by entering into a contract based on the area of the structure in square feet.
Contract based on wages for piece work: When each stage of the construction gets over, the dues could be settled after determining the wages and cost of the construction materials according to the area in cubic feet/square feet / running feet. The advantage of this method is that the owner can make sure the contractor is paid only the amount that is previously agreed upon. However, the owner has to pay regular visits to the construction site to see that the works are done properly as per the terms and conditions in the contract.
The trustworthiness of the contractor, quality of the building materials and the duration taken to complete the construction are the main factors that need to be the basis of any contract.
Here are a few things to be considered while entering into contracts for the construction:
A contractor should be chosen after analyzing the quality of the houses whose construction he/she has already undertaken.
You could choose the appropriate type of contract after discussing with the designer as well.
Make sure that the amount to be paid after each stage of construction matches the estimated cost as per the specifications.
The construction of the house could be made stress-free if a good contractor is hired, who offers a contract that suits your needs.