Final answer:
A cost-plus contract is an agreement in which the customer agrees to pay all costs plus an agreed-upon profit, typically used in construction. These arrangements may include change orders and can be paired with service contracts or warranties for large purchases.
Step-by-step explanation:
In the context of business agreements, particularly within the construction industry, the customer agrees to pay the contractor for all costs (labor, materials, and so forth), regardless of amount, plus some agreed-upon profit under a contract type known as a cost-plus contract. This type of arrangement ensures that the contractor is reimbursed for actual expenses incurred plus an additional sum which is typically represented as a percentage of the overall costs or a fixed fee. Such contracts often include provisions for change orders, where the scope of the work can be adjusted, and additional costs may be negotiated. It is also common for large purchases to be accompanied by the option of a service contract or warranty, providing the customer with a guarantee that any issues will be addressed within a specific time frame at no or limited extra cost.