When the builder works for you on a labour-only contract you manage the whole process and the builder is only responsible for building. People take this option in the belief that they will have better control over the building process or because they want to save money. With this type of contract you either pay your builder by the hour, by the week, or a set price. Paying a set price will be incentive for the builder to work steadily to finish the job in a reasonable timeframe as the job would have been priced on a set number of hours.
The drawbacks of the labour-only contract are:
- You become the main contractor which means you are responsible for the work meeting Building Code requirements and for any defects in construction. Just how much you are responsible for the builder’s work would depend on the facts in each case.
- The responsibility for coordinating the whole project, i.e. making sure everything happens when it should, rests with you. It will probably take a huge amount of your time and energy to hire contractors, buy materials and manage the project, and at times it could be inconvenient to you, your family and your employer.
- You are responsible for health and safety on the building site.
Time and materials
- Standard phrase in a contract for construction in which the buyer agrees to pay the contractor based upon the work performed by the contractor's employees and subcontractors, and for materials used in the construction (plus the contractor's mark up), no matter how much work is required to complete construction. This is opposed to a fixed-price contract in which the buyer agrees to pay the contractor a lump sum for fulfillment of the contract no matter what the contractors pay their employees, sub-contractors and suppliers.
- Time and materials contracts are not common because of the lack of an upper limit for the price paid by the buyer. However, if there is no time to send the job out for bids and complete construction, a time and materials arrangement can save time. It is also a common arrangement where the original fixed price contractor abandons the work and another contractor must repair any damage caused by the first contractor and complete the work.
- Many time and materials contracts also carry a guaranteed maximum price, which puts an upper limit on what the contractor may charge, but also allow the buyer to pay a lesser amount if the job is completed more quickly.