Skip to main content


Cost plus contracts are a unique and compelling aspect of the legal world. Language used contracts critical fair equitable agreements parties. As a legal professional, I have always found cost plus contract language to be an intriguing area of study. In this blog post, we will delve into the essential elements of cost plus contract language and explore its significance in the legal landscape.

Understanding Cost Plus Contracts

Cost plus contracts, also known as cost-reimbursement contracts, are commonly used in construction, government projects, and other industries where the scope of work and associated costs may be subject to change. These contracts allow for reimbursement of the actual costs incurred by the contractor, as well as an additional fee or percentage to cover overhead and profit.

When drafting a cost plus contract, the language used must be precise and comprehensive to clearly outline the obligations and responsibilities of each party. This includes defining the scope of work, cost allocation, allowable expenses, and the method for determining the additional fee.

The Importance of Clear and Concise Language

Clarity in cost plus contract language is crucial to avoiding disputes and legal challenges down the line. Ambiguity or vague terminology can lead to misunderstandings and disagreements between the parties involved. By using precise and detailed language, the contract can effectively mitigate risks and provide a framework for resolving potential conflicts.

Key Elements of Cost Plus Contract Language

Let`s take a closer look at some of the essential elements that should be included in cost plus contract language:

Scope WorkClearly define the tasks, deliverables, and project milestones that the contractor is responsible for.
Cost AllocationSpecify how costs will be allocated and reimbursed, including direct and indirect expenses.
Allowable Expensestypes expenses eligible reimbursement, materials, labor, overhead.
Additional Feemethod determining calculating additional fee percentage paid contractor.

Case Studies and Lessons Learned

Examining real-world examples of cost plus contract language in action can provide valuable insights and lessons learned. Let`s consider a case study where unclear language in a cost plus contract led to a protracted legal battle between the parties involved:

ABC Construction Company entered into a cost plus contract with XYZ Corporation for a major infrastructure project. The contract language pertaining to allowable expenses was ambiguous, resulting in disputes over the reimbursement of certain costs incurred by ABC Construction. As a result, the project was delayed, and both parties incurred significant legal expenses to resolve the matter.

This case study underscores the importance of precise and unambiguous language in cost plus contracts, as well as the potential consequences of inadequate contract drafting.

Cost plus contract language represents a captivating and crucial aspect of legal practice. By understanding the significance of clear and comprehensive language in these contracts, legal professionals can help their clients avoid disputes and achieve fair and equitable agreements. I hope this blog post has provided you with valuable insights into the world of cost plus contract language.


Fascinating COST PLUS CONTRACT LANGUAGE: 10 Burning Legal Questions Answered

1. What is a cost plus contract?A cost plus contract is a type of contract where the buyer agrees to pay the seller the actual cost of the work, plus an additional amount as profit.
2. What are the key elements of a cost plus contract?The key elements of a cost plus contract include a detailed breakdown of costs, a clear definition of the profit margin, and a mechanism for adjusting costs during the project.
3. Are there any risks associated with cost plus contracts?Yes, there are risks such as potential for cost overruns, disputes over the definition of “actual cost”, and challenges in determining a fair profit margin.
4. How can a cost plus contract be structured to minimize risks?To minimize risks, the contract should include provisions for cost controls, audits of actual costs, and a clear dispute resolution process.
5. Can cost plus contract changed signed?Yes, cost plus contract changed mutual agreement parties, changes documented writing.
6. What legal issues should be considered when drafting a cost plus contract?Legal issues to consider include ensuring the contract complies with applicable laws, addressing liability for cost overruns, and clarifying the scope of work.
7. What happens dispute costs cost plus contract?If dispute, contract outline process resolving dispute, mediation arbitration.
8. Can a cost plus contract be used for government projects?Yes, cost plus contracts are common in government projects, particularly for construction and defense contracts.
9. What are the benefits of using a cost plus contract?The benefits include greater transparency in costs, flexibility in project scope, and the ability to incentivize the seller to control costs.
10. How can a lawyer help in drafting or reviewing a cost plus contract?A lawyer can provide valuable assistance in drafting or reviewing a cost plus contract, ensuring all legal requirements are met and protecting the client`s interests.



Cost plus contracts are a common type of contract in the construction industry. This type of contract allows for reimbursement of the contractor`s actual costs, plus a fee for profit and overhead. It is important to have clear and precise language in the contract to avoid any misunderstandings. The following legal contract outlines the terms and conditions of a cost plus contract.

Cost Plus Contract
THIS COST PLUS CONTRACT (“Contract”) entered parties date set below.
1. Definitions. Terms used Contract shall meanings ascribed section body Contract.
2. Scope Work. The Contractor agrees to perform the work set forth in Exhibit A attached hereto and incorporated herein by reference.
3. Costs Expenses. The Owner agrees to pay the Contractor for the actual costs and expenses incurred in the performance of the work, plus a fee for profit and overhead as set forth in Exhibit B.
4. Payment. The Contractor shall submit invoices for the costs and expenses incurred in the performance of the work on a monthly basis, and the Owner agrees to pay such invoices within fifteen (15) days of receipt.
5. Changes Scope Work. Changes scope work must agreed writing parties may result change fee profit overhead.
6. Indemnification. Contractor agrees indemnify hold harmless Owner claims, damages, liabilities arising performance work Contract.
7. Governing Law. This Contract shall be governed by and construed in accordance with the laws of the state of [State], without regard to its conflict of laws principles.
8. Dispute Resolution. Any disputes arising out of or relating to this Contract shall be resolved through arbitration in accordance with the rules of the American Arbitration Association.
9. Entire Agreement. This Contract contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, whether oral or written.
IN WITNESS WHEREOF, the parties have executed this Contract as of the date first above written.

© 2022 The Outsource Company.