A cost-plus contract is a contract under which a contractor is paid for all construction-related expenses, including materials and subcontractor charges, plus an agreed percentage or fixed sum to allow for a profit.
This type of contract was previously prohibited for domestic building work, unless certain strict conditions were met.
Under new legislation, cost-plus contracts are now treated like any other contract and are therefore subject to the usual Level 1 and Level 2 contract requirements, depending on the estimated value of the work.
Contractors should be very careful if using cost-plus contracts as they frequently lead to cost over-runs (which the owner may not have budgeted for) and disputes.
Download a contract for domestic building work.