Firm Fixed Price Contract Definition

In the world of contracts, a ‘firm fixed price’ contract is a type of agreement between two parties in which the price for a product or service is set in advance and will not change, no matter what. This type of contract is often used when the buyer knows exactly what they want and there is little to no room for negotiation on price.

There are some risks associated with firm fixed price contracts, as they can often lead to cost overruns if the seller underestimated the amount of work required to complete the project. However, these contracts can also be beneficial for both parties, as they provide certainty and clarity around pricing from the outset.