Contract Types\n\n- Lump sum / stipulated sum — fixed price; contractor carries cost risk.\n- Cost-plus — owner pays actual cost plus a fee.\n- GMP (guaranteed maximum price) — cost-plus with a cap.\n- Time & materials — billed by labor + materials.\n- Unit price — priced per unit of work.\n\nThe contract type sets who carries the risk — choose it deliberately.

In Practice

A homeowner wants a fixed price but the scope keeps changing — a lump-sum contract would bury you in losses. A cost-plus or time-and-materials arrangement fits uncertain scope. Match the contract type to the job.

Common Mistakes to Avoid

• Using lump-sum on an undefined scope
• Not understanding who carries the cost risk
• Signing a contract type you don't understand

Takeaway: The contract type decides who carries the cost risk — choose it on purpose.