Fixed Price Contract Definition

A fixed price contract is a type of agreement between a buyer and seller in which the price for goods or services is agreed upon in advance and is not subject to change, even if the cost of production increases. This type of contract protects the buyer from price fluctuations and ensures that they will pay no more than the agreed-upon amount, regardless of how much it costs the seller to produce the goods or services.

Fixed price contracts can be used for a variety of purchases, including construction projects, commodities, and equipment. They are often used when the buyer is seeking stability and predictability in pricing, and when the seller is confident in their ability to control costs. Fixed price contracts can also be advantageous for sellers, as they can lock in a high price for their product or service.