Name a common type of construction contract.

A fixed-price contract is a common type of construction contract because it allows for a clear and predetermined cost for the entire scope of work. This type of contract is advantageous for both the owner and the contractor, as it establishes a firm budget and timeline. Contractors typically prefer fixed-price contracts because they can effectively manage costs and risk by estimating the total expense needed to complete the project upfront. This predictability can also benefit the owner, who can plan their finances knowing the maximum amount they will pay for the work.

In construction, fixed-price contracts are frequently used for projects where the scope is well-defined, and the material and labor costs can be accurately estimated. They help minimize disputes related to payment amounts since both parties agree on the price before the project begins. The contractor assumes the risk for any cost overruns, which incentivizes them to complete the project efficiently and within budget.