Progress Payments in Contracts Are Based as a Percentage of

When entering into a contract, it is important to include provisions for progress payments – payments that are made throughout the project as certain milestones are reached. Here`s what you need to know about progress payments and how they are typically calculated.

In most cases, progress payments are based on a percentage of the total contract amount. For example, if a contractor is hired to complete a $100,000 project, they may receive 20% of the contract amount ($20,000) after completing the first phase of work.

The exact percentage that is used for progress payments can vary depending on the nature of the project and the preferences of the parties involved. Some contracts may specify a higher percentage for early stages of work, while others may spread the payments out more evenly throughout the project.

One advantage of progress payments is that they help ensure that both parties are on the same page when it comes to expectations and deadlines. By breaking the project down into smaller stages, it becomes easier to measure progress and ensure that each party is fulfilling their obligations.

It`s worth noting, however, that progress payments can sometimes be a contentious issue, particularly if the project is delayed or the work quality is not up to par. In some cases, the contract may include provisions for withholding progress payments if certain conditions are not met.

Overall, progress payments are an important part of many contracts and can help ensure that the project stays on track and that both parties are satisfied with the outcome. As with any contract provision, it`s important to carefully review and negotiate the terms to ensure that they meet the needs of everyone involved.