What is an open-end contract and when is it used?

An open-end contract, commonly referred to in construction law as a cost-plus contract, is an agreement between a contractor and a client that sets a maximum amount of money that the contractor will be paid for the completion of the construction project. In exchange for the set maximum, the contractor agrees to complete the project regardless of any additional costs incurred in the construction process. This type of contract is most often used when the scope of a project is too vague or difficult to estimate costs up front. Because the final costs of the project are unknown, an open-end contract allows the contractor to complete the project without the risk of going over budget. The contractor is paid the agreed-upon maximum, plus any additional costs incurred, such as materials, labor, or unforeseen complications. It is important to note that while the maximum payment is agreed upon, the client will never pay more than the estimated costs plus any additional costs incurred by the contractor. This protects the client from unanticipated expenses and ensures the work is done within a reasonable budget. Open-end contracts are commonly used in public works projects and other construction projects that require more flexibility in budgeting and scheduling than more traditional contracts. This type of contract allows for unexpected complications to be handled as they arise, with the client receiving the highest quality of work at a predetermined price.

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What is an open-end contract and when is it used?

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