I would like to comment about fixed-price contract and my understanding of the concept involved. I understand that fixed-price is the same as lump-sum contract, which from my point of view is mainly related to the risk of quantities and prices and not necessarily to the changes of scope of work; therefore not intended to take all related risks about construction. For this latter scope I prefer to use the turnkey contract type, which also includes design and a wider range of risks, but at any case, also some could be dismissed.
Supporting my view, suppose A wants to build a house, and has the place for construction and has a specific and detailed design for it; A calls for a bid and uses fixed-price option. When C started the construction, C discovers that the design for the foundations is not suitable for the construction since supporting ground is not good enough, but C only gave a price for the construction of a specific and existing design, so if C was wrong about quantities or cost at the time of survey, it is C’s mistake; but if foundations need to be different due to technical reasons, then mistake is not related to quantities or costs, but design performed by A. In the same circumstances, but A asking to bidders to verify soil conditions and propose a suitable solution into their price; the situation changes, because in this case C has to include into its price the ground risk. On the other hand, if A has the construction place and requirements but not a design, then A can call for a turn-key contract and in this case: design, construction and related risk belong to C; C has to evaluate all circumstances about design and construction, including ground condition.
About mutual mistake, my understanding is that “per-se” a fixed-price contract not necessarily assigns any sort of risks to contractor, and situation needs to be verified in accordance with details of the scope of work. In the case I mentioned, in the first scenario, if both parties had the mistake of assuming that the design was suitable for construction but finally it was not, due to soil conditions, then a mutual mistake could be considered; but for the second (also fixed-price) or third (turnkey) scenarios, mutual mistake is not applicable since risk is assigned to the contractor.
Supporting my view, suppose A wants to build a house, and has the place for construction and has a specific and detailed design for it; A calls for a bid and uses fixed-price option. When C started the construction, C discovers that the design for the foundations is not suitable for the construction since supporting ground is not good enough, but C only gave a price for the construction of a specific and existing design, so if C was wrong about quantities or cost at the time of survey, it is C’s mistake; but if foundations need to be different due to technical reasons, then mistake is not related to quantities or costs, but design performed by A. In the same circumstances, but A asking to bidders to verify soil conditions and propose a suitable solution into their price; the situation changes, because in this case C has to include into its price the ground risk. On the other hand, if A has the construction place and requirements but not a design, then A can call for a turn-key contract and in this case: design, construction and related risk belong to C; C has to evaluate all circumstances about design and construction, including ground condition.
About mutual mistake, my understanding is that “per-se” a fixed-price contract not necessarily assigns any sort of risks to contractor, and situation needs to be verified in accordance with details of the scope of work. In the case I mentioned, in the first scenario, if both parties had the mistake of assuming that the design was suitable for construction but finally it was not, due to soil conditions, then a mutual mistake could be considered; but for the second (also fixed-price) or third (turnkey) scenarios, mutual mistake is not applicable since risk is assigned to the contractor.
