Which of the following best describes the Stipulated Sum contract?

The Stipulated Sum contract is defined as an agreement where the owner pays a fixed total amount for the completion of a project according to the agreed-upon services and specifications outlined in the contract. This type of contract provides certainty for the owner, as they know the total project cost in advance, allowing for better budgeting and financial planning. It also incentivizes the contractor to complete the work efficiently to maximize profit, as their compensation does not fluctuate with the costs incurred during the project.

In contrast, other options describe different types of contracts. For instance, contracts based on time and materials involve varying payments based on the actual time worked and materials used, which does not provide the fixed total benefit of a stipulated sum contract. Contracts that allow for additional costs as they arise indicate a more flexible arrangement that can lead to unpredictable expenses for the owner. Lastly, contracts with performance guarantees typically relate to specific expectations about the project's completion and quality rather than the payment structure itself.