When using an agile approach, the project manager should use a contract type that allows for flexibility and adaptation to changing requirements and priorities. A fixed-price contract with increments based on user stories is a suitable option, as it aligns the payment with the delivery of value to the customer. The other options are not appropriate for an agile project, as they either do not provide enough flexibility (A and B) or do not link the payment to the value delivered (D). References: PMBOK Guide, 6th edition, page 374; Agile Practice Guide, page 97.