Funmilayo Olagunju

Fixed-price is one of the various types of contract. In a time when there is constant inflation and the price of goods and services changes per minute, a well executed fixed-price contract between parties is capable of bringing predictable price certainty.

Black’s Law Dictionary defines fixed-price contract as a contract in which the buyer agrees to pay the seller a definite and predetermined price regardless of increases in the seller’s cost or the buyer’s ability to acquire the same goods in the market at a lower price.

Fixed-price contract fairly protects both the buyer and the seller. If the price of the commodity increases, the buyer shall not pay beyond the predetermined contractual price and if the price of a commodity reduces, the seller shall not sell lesser than the predetermined price.

There is a definite period or time frame for a fixed-price contract and it is no longer enforceable at the expiration of the stipulated time except it is expressly renewed.

It is reasonably expected that a seller who is willing to enter into a fixed-price contract would factor likely increase in arriving at the fixed contractual price. The firm price certainty to be enjoyed by the buyer is likely to come at a higher price.

A fixed-price contract is never implied. In the absence of an agreement to have a fixed contract, the force of demand and supply affects the price. When there is no fixed agreement as to price, a seller or service provider is not under legal obligation to sell or provide service based on a ‘promised’ price. A fixed-price contract is beyond moral norm, it is a legal obligation.

It is advisable that parties to agreement protects their legal interest by having a proper legal review of all documents by their legal practitioner.

“Where there is no guidance the people fall, But in an abundance of counselors there is victory”

Proverbs 11: 14 (NASB)