Final answer:
The lump sum contract is the most common type in residential construction, offering a fixed price for all activities, transferring cost overrun risk to the contractor.
Step-by-step explanation:
The most common type of contract used in residential construction is the lump sum contract. This type of contract involves a single fixed price for all construction-related activities.
Lump sum contracts are popular because they provide a clear and concise financial agreement between the homeowner and the contractor, where the risk of cost overruns is placed on the contractor.
Additionally, this type of contract is straightforward to manage, as it doesn't require constant monitoring of labor costs and materials to the same extent that other contract types would.
This type of contract is commonly used when the scope of work is well-defined and the client wants a predictable cost for the project.