Legal Definitions - unit pricing

Unit pricing refers to a method of determining the total cost of a contract where individual items, services, or quantities are priced based on a specific unit of measure, rather than a single, fixed price for the entire project or agreement. This approach means the final contract value adjusts according to the actual amount of work performed or goods delivered, as measured by the agreed-upon units.

• Example 1: Commercial Building Construction

  A property developer hires a construction company to build a new office complex. Instead of agreeing on one lump sum for the entire project, the contract might specify unit prices for various components. For instance, the agreement could state $50 per square foot for concrete slab pouring, $150 per linear foot for exterior wall framing, and $25 per electrical outlet installed. The final payment would then be calculated by multiplying the actual measured square footage of concrete, linear feet of framing, and number of outlets by their respective unit prices. This illustrates unit pricing because the total cost is derived from the quantity of each specific item or task completed.

• Example 2: Event Catering Services

  A company organizing a large corporate event contracts with a catering service. Rather than a flat fee for the entire event, the caterer might use unit pricing. For example, they could charge $75 per guest for a plated dinner, $25 per person for an open bar package, and $10 per dessert station. The final invoice would depend directly on the confirmed number of attendees and the specific services (units) chosen and consumed. This demonstrates unit pricing because the total cost is directly tied to the number of guests (a unit) and the specific service packages (also units) provided.

• Example 3: Software Development Project

  A startup hires a software development firm to build a new mobile application. While some parts might be fixed-price, certain aspects could be handled with unit pricing. For instance, the contract might specify a rate of $150 per hour for custom coding, $50 per bug fix, and $200 per user interface screen designed. The total cost for these components would then be determined by the actual number of hours worked, bugs resolved, and screens developed. This is an example of unit pricing because the payment for specific development tasks is based on measurable units of effort or output.