Building on my land - Will contractor mistakes make my house cost more?

Plumber installing sink

 

 

Everyone, contractors especially, make mistakes while building a home on your land. Sometimes it's due to poor communication, other times poor documentation is to blame, and other times it's just simple human error. But when mistakes happen, who pays for them?

That generally depends on the type of contract you have in place with your builder.

Cost-plus contract

In a cost-plus contract, the customer pays for the actual labor and material cost to build the house, plus a fee to the builder to manage the process. Since mistakes are part of the process, the customer pays for the mistake (assuming the cause isn't blatant negligence by the contractor or builder).

Let's say you, the customer, supply the house plans. In the plan details, there's some ambiguous detail that the plumber interprets one way, which is a reasonable interpretation, but it really should have been a different way. It's hard to make the argument that the plumber should have known, because the plans weren't clear and his interpretation was reasonable. So we chalk it up to unavoidable error, pay the plumber to do it again, and go on down the road.

Fixed-price contract

In a fixed-price contract, the builder has agreed to provide the specific house plan with a specific set of features in exchange for a fixed price. Since the customer has bought a finished product rather than a process, the process belongs to the builder, along with all the errors. In this case, the builder has a huge incentive to minimize errors since he's the one paying for them.

Other situations

There are, however, some situations where the contractor will pay for the mistake regardless of the type of contract. The first is when the contractor does work that doesn't match the plans or the specs, such as a plumber who puts in the sink drain two feet off and has to come back and move it, or the carpet supplier who installs the wrong color carpet.

The second situation is if the contractor damages something in the course of doing his work. For example, an electrician drops a hammer into a porcelain sink and chips the sink. If you know that's how the damage happened (either because someone else saw it or the electrician tells you about it), then he pays to replace the chipped sink. But if the sink ends up chipped somewhere along the way and no one knows how it happened, it falls under either the cost-plus or fixed-price contract examples above.

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Tim Turner

Written by Tim Turner

A home builder for 18 years, Tim is the "son" in Turner & Son Homes. He is the CEO of the company and partners with his dad, Ben, who has been building since 1964.

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