A more thorough explanation:

Definition: Labor and materials, also known as time and materials, is a type of contract where the customer agrees to pay the contractor for the cost of labor and materials used in a job, plus a predetermined percentage markup. This type of contract is useful when it is difficult to estimate the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. In contrast, a fixed price contract is where the parties negotiate a lump sum price for the entire job prior to work commencing.

Let's say you want to remodel your kitchen, but you're not sure exactly what you want or how long it will take. You might enter into a labor and materials contract with a contractor. The contractor will charge you for the time they spend working on your kitchen, as well as the cost of any materials they use, plus a percentage markup. This way, you only pay for the work that is actually done and the materials that are actually used.

Another example could be a landscaping project. If you want to redesign your backyard, but you're not sure how much it will cost or how long it will take, you might enter into a labor and materials contract with a landscaper. The landscaper will charge you for the time they spend working on your backyard, as well as the cost of any plants, soil, or other materials they use, plus a percentage markup. This way, you can make changes to the project as it progresses without having to renegotiate the entire contract.

These examples illustrate how labor and materials contracts are useful when the scope of the work is uncertain or subject to change. By paying for the actual time and materials used, the customer can avoid overpaying for work that was never done or materials that were never used.