Labor And Materials Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Labor And Materials, written in plain English, along with examples of how it is used.

What is Labor And Materials?

(n) Labor and materials type is the contract in which the payments are made for the actual material and labor used in that work. Specialty of this type of contract is that, benefit of all saving in material and labor portion goes to the owner. Contractor cannot make any profit from material and labor savings. Here material wise and labor wise records are required to be maintained.

History and Meaning of Labor And Materials

Labor and materials is a type of construction contract where the owner only pays for the actual cost of the labor and materials used in the project. The contractor cannot make any profit from material and labor savings, which means that any cost savings go to the owner. This type of contract is commonly used when the scope of the project is unclear or may change significantly throughout the construction process.

Examples of Labor And Materials

  1. A homeowner hires a contractor to renovate their kitchen using a labor and materials contract. Throughout the project, the homeowner and contractor work together to select building materials and make design changes that can impact the scope of the project. The homeowner pays for the actual cost of the labor and materials used, plus a fee negotiated upfront with the contractor to cover overhead and profit.

  2. A municipal government hires a contractor to repair and resurface a road using a labor and materials contract. The contract specifies that the contractor must provide detailed records of the hours worked by all laborers and the amount and cost of all materials used. The government only pays for the actual cost of the labor and materials used, plus any agreed-upon management and overhead fees.

  3. A nonprofit organization hires multiple contractors to build a community center using labor and materials contracts. The organization pays each contractor for the actual cost of the labor and materials used, plus a negotiated fee to cover the cost of managing the project.

Legal Terms Similar to Labor And Materials

  1. Fixed-price contracts - contracts where the contractor agrees to complete the project for a set price, regardless of the actual cost of labor and materials.
  2. Cost-plus contracts - contracts where the owner pays for the actual cost of labor and materials used in the project, plus a fee negotiated with the contractor to cover overhead and profit.
  3. Time and materials contracts - contracts where the owner pays for the actual cost of labor and materials used in the project, plus an hourly rate for labor and a markup on materials.