A lump sum contract is one in which a stated amount is fixed upon, before the execution of the contract, to be paid for all the work to be done and materials to be furnished under the contract. Such an arrangement is not advisable for a sewer contract, as the cautious contractor will bid high enough to protect himself in the event of any probable emergency. The principal must therefore pay whether the emergency or unforeseen difficulty is met or not. The advantage of this type of payment is that the principal knows exactly the cost of the work to him before construction is commenced. Cost-plus contracts are those in which the cost of the work to the contractor is to be paid by the principal, plus, (_a_) a fixed sum of money, (_b_) a percentage of the cost of the work, (_c_) a percentage of the cost of the work but with a fixed limit, (_d_) a percentage of the difference between the cost of the work and some fixed sum, or other variations of this principle. Such contracts have the advantage that the principal assumes all the risk in construction and therefore pays for only those contingencies which actually arise. Except for the last named form, they have the disadvantage that there is little or no incentive for the contractor to keep the cost of the work down. They are most successful where the contractor can be selected by the principal, but where it is necessary to let contracts to the lowest bidder, the “cost-plus” contract is not easily managed. In most states a municipality cannot make a cost-plus contract. A unit-price contract is one in which the amount to be paid is fixed in proportion to the amount of work done or materials supplied. This type of contract is the most suitable for sewer construction for a municipality where the contract must be let to the lowest bidder. The contractor is protected in the event of many unforeseen emergencies and the principal is protected against a raise in bids to cover such emergencies and against increase in the cost of the work in order to increase the profits under a “cost-plus” contract. It is sometimes desirable for the principal to furnish a portion of the materials, the bidders being notified beforehand that this material will be furnished. In this manner the quality of material is assured, contractors with the necessary skill but small capital may be attracted to bid, and uncertainties in the procuring of materials is eliminated. =109. The Agreement.=—A contract is an agreement between two or more interested parties to do a certain thing. A contract for the construction of a sewer is an agreement between a municipality or individual desiring sewerage facilities and a company or individual engaged in the construction of sewers. The latter promises to construct a sewer in return for which the former promises to pay a certain amount of money.