A fixed-price contract is an agreement where the payment amount is set and does not change, regardless of the actual costs incurred by the contractor. This type of contract is commonly used in construction and service industries, providing clarity and predictability for both parties involved. In a fixed-price contract, the contractor assumes the risk of cost overruns, meaning they must manage their expenses effectively to maintain profitability. This arrangement can benefit clients by ensuring that the project stays within budget, as the total cost is agreed upon upfront, allowing for better financial planning.