A percentage agreement contract is used in the construction industry to protect the interests of the client and contractor. The main type of percentage agreement contract is the cost-plus contract.

What Is a Cost-Plus Contract?

A cost-plus contract is used in construction. In it, a client agrees to pay a contractor the direct cost of the work, in addition to a percentage of the cost of the project to cover profit and overhead expenses. Cost-plus contracts ensure the contractor receives a fair return, and also allows more flexibility in the scope of work.

Despite the fair return cost-plus contracts guarantee the contractor, most general contractors or construction project managers find it difficult to determine the final cost of the project after completing the initial scope of work beyond the terms of the initial contract. Nevertheless, contracts offer several benefits for the execution of construction projects.

What Are the Importance of Contracts in Construction Management?

Contracts in construction management like cost-plus contracts serve as protection for contractors working on projects and guarantees they will receive payment for the job and overhead costs.

Construction management contracts also help provide an estimated cost of work done on projects, which can be used as a guide when additional work is required or expenses increase.

What Are the Cornerstones of the Commission Agreement?

The following defined terms make up the cornerstone of the commission agreement:

  1. Trigger Event: The event that initiates the payment obligation.
  2. Base Amount: The benchmark price that will be used to calculate the commission.
  3. Commission: An amount derived by applying a specific percentage to the base amount.

Advantages of a Commission Agreement

Commission agreements can be beneficial in the following ways:

  • Commission agreements are highly flexible and applicable to a variety of circumstances, as they are formulated with abstract concepts.
  • Commission agreements provide a mechanism that requires that one party communicate the amount of commission due to the other party at regular intervals for the duration of the agreement.
  • The agreement also provides for an audit, which enables the receiving party to determine the validity of the paying party's calculations.

According to the results of a survey of 2,000 U.S. consumers conducted by Deloitte, 91 percent of the respondents don't read legal terms and services conditions before consenting. The study also found that 97 percent of younger people between the ages of 18-34 don't read conditions before consent.

Legal terms and conditions are written in a long and complicated language most people can't comprehend. Most consumers believe the worst a company can do is trade their personal information with third parties, which is why they are not afraid of any consequences arising from this act.

Two researchers from Toronto York University and the University of Connecticut conducted a study to test how gullible consumers can be. The researchers created a fictitious social network site called Name Drop and created a terms and services agreement to which users must consent before signing up. About 98 percent of participants consented to the agreement, even though it disclosed that the user's firstborn child would be used as payment and that their information would be shared with the NSA.

The study shows that consumers don't have the willingness to put up any fight to protect their rights. However, consumers have limited alternatives. Companies force them to agree to these terms, however unfavorable, if they want to have access to their products and services.

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