Classification of Contracts

892 Words4 Pages
Contracts Not all contracts are equal to buyers and sellers. Rather, there are contracts that tend to be more beneficial to one party or the other. This is especially the case when dealing with contracts between private businesses and the government. The two most common contracts for these two groups are fixed-price and cost-reimbursement contracts (45 Wayne L. Rev.). While both contracts ensure that parties are properly compensated for work, each differentiates certain circumstances that are either more or less beneficial to one side in an agreement. This paper will discuss the advantages and disadvantages of the fixed-price, cost-reimbursement, and labor-hour contracts in light of both private contractors and government agencies. Fixed-price contracts are the first category of contracts typically used by government agencies when seeking bids for jobs. This type of contract sets a specific budget for a project and seeks bidders who are willing to come the closest to this set amount. This contract, in most circumstances, is considered to be less beneficial to contractors. The advantages for contractors with these jobs are that the contract documents the budget and time frame before signing onto the project and when done properly, a contractor can earn a profit from this type of contract (Arye 2000). However, should the cost of supplies be unexpectedly high or there by unexpected delays and setbacks, the job may need to be completed at a loss. This is the most common
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