A fixed-price contract is a type of agreement where the payment amount is set and does not change, regardless of the actual costs incurred by the contractor. This means that the contractor must complete the project within the agreed budget, which can encourage efficiency and cost control. These contracts are commonly used in various industries, including construction and software development. They provide clarity for both parties, as the client knows the total cost upfront, while the contractor has a clear financial target to meet. However, they also carry risks, as unexpected expenses can affect the contractor's profit margin.