What are the four types of contracts?

What are the four types of contracts?

• A. Fixed price or lump sum
• B. Time & Material
• C. Cost-type contracts
• D. Unit Price

Answer: (A)

In construction, contracts are typically categorized by how the price is determined and who bears the risk. The four common forms are fixed-price (lump-sum), unit-price, cost-type (cost-plus), and time-and-materials. This option describes fixed-price or lump-sum, which is one of those four fundamental contract forms. In a fixed-price contract, the owner and contractor agree to a single price for a defined scope of work, and the contractor bears most of the risk if costs run over or the scope changes. It’s a classic, widely used baseline form, so recognizing this type shows you understand one of the main contract families. The other terms listed are also valid contract forms, each with its own pricing mechanics and risk allocation. Knowing the four-type framework and identifying fixed-price as one of them demonstrates solid understanding of how contracts are generally categorized in construction.

In construction, contracts are typically categorized by how the price is determined and who bears the risk. The four common forms are fixed-price (lump-sum), unit-price, cost-type (cost-plus), and time-and-materials.

This option describes fixed-price or lump-sum, which is one of those four fundamental contract forms. In a fixed-price contract, the owner and contractor agree to a single price for a defined scope of work, and the contractor bears most of the risk if costs run over or the scope changes. It’s a classic, widely used baseline form, so recognizing this type shows you understand one of the main contract families.

The other terms listed are also valid contract forms, each with its own pricing mechanics and risk allocation. Knowing the four-type framework and identifying fixed-price as one of them demonstrates solid understanding of how contracts are generally categorized in construction.