What is a primary characteristic of a Lump-Sum Contract?

A primary characteristic of a Lump-Sum Contract is that the total price is agreed upon upfront. This type of contract requires the builder to provide a fixed price for the entire scope of work at the outset of the project. It establishes a clear and definitive financial expectation for both the client and the builder, which helps in budgeting and financial planning.

This arrangement means that the homeowner knows exactly what they will be paying for the construction service, reducing the risk of unexpected cost overruns for them. The builder, in turn, takes on the risk of completing the project within that fixed budget. This financial predictability can be advantageous for both parties when executed well.

The other options describe different contracting methods. For instance, payments based on time worked refer to time and materials contracts, where costs can fluctuate based on the actual labor and materials used. Sharing costs according to expenses incurred typically aligns with cost-plus contracts, which provide reimbursement for actual costs plus a fee. Lastly, stating that a contract has no defined duration could pertain to open-ended contracts rather than a lump-sum agreement, which usually has a set timeline for completion.