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Some of the most popular contracts include fixed-price contracts, cost-plus contracts, and time and materials contracts. While you can use software and other tools to help you generate professional agreements, you should still understand the basics of different types of contracts as a business owner.

The Government contracting officer selects the contract type based on analysis of the most effective way to satisfy mission requirements.

Lesson Summary. A contract is a legal agreement between two or more parties in which they agree to each other's rights and responsibilities. Offer, acceptance, awareness, consideration, and capacity are the five elements of an enforceable contract.

Factors to be considered when determining the contract type include: Realism of cost estimate (either through price or cost analysis). Extent of competition (results in realistic pricing). Risks and uncertainties.

Types of contractsFixed-price contract.Cost-reimbursement contract.Cost-plus contract.Time and materials contract.Unit price contract.Bilateral contract.Unilateral contract.Implied contract.More items...?Sept 4, 2020

Contracts based on validity can come in five different forms, including valid contracts, void contracts, voidable contracts, illegal contracts, and unenforceable contracts. A valid contract is one that is legally enforceable, while a void contract is unenforceable and imposes no obligations on the parties involved.

They include the following:(a) Price competition.(b) Price analysis.(c) Cost analysis.(d) Type and complexity of the requirement.(e) Combining contract types.(f) Urgency of the requirement.(g) Period of performance or length of production run.(h) Contractor's technical capability and financial responsibility.More items...

The three most common contract types include:Fixed-price contracts.Cost-plus contracts.Time and materials contracts.Jan 29, 2021

Fixed Price Contracts. This is the best contract type when someone knows exactly what the scope of work is. Also known as a lump sum contract, this contract is the best way to keep costs low when you can predict the scope.

The following are some factors to consider when selecting the type of contract:The uncertainty of the scope of work needed.The party assuming the risk of unexpected cost increases.The importance of meeting the scheduled milestone dates.The need for predictable project costs.