ᐅ Is a general contractor's price increase after signing the contract due to raw material shortages legally justified?
Created on: 10 May 2021 11:57
S
SamSamSam
Hello,
I recently had a brief phone call with the general contractor, who plans to start building our single-family home in September.
During the conversation, they casually mentioned the current situation with raw material availability and said that this could lead to price adjustments if the situation is not stabilized by then.
We signed the contract for a turnkey single-family home in mid-January at an agreed fixed price.
I have now reviewed this contract again but found no information that would legitimize an additional charge due to this issue. At least, I could not find anything in the contract about it.
Under the section on compensation, I only found the following passage:
“The contractor’s fee is guaranteed as a fixed price. Costs for utility connections—gas, water, electricity, and sewage—are not included in the fixed price and are to be borne by the client.
This fixed price applies until handover unless construction does not begin within six months from the date of contract signing due to circumstances for which the contractor is not responsible.
Additional costs resulting from special requests, official requirements, force majeure, or circumstances for which the client is responsible, as well as the conditions listed in § 3 (1), are not included in the fixed price.”
I should mention that this is a small company. As a layperson, I cannot gauge how much a 50% increase in the price of wood affects the cost of a solid wood house. It would likely mainly impact the roof structure, but to what extent? 🙄
I recently had a brief phone call with the general contractor, who plans to start building our single-family home in September.
During the conversation, they casually mentioned the current situation with raw material availability and said that this could lead to price adjustments if the situation is not stabilized by then.
We signed the contract for a turnkey single-family home in mid-January at an agreed fixed price.
I have now reviewed this contract again but found no information that would legitimize an additional charge due to this issue. At least, I could not find anything in the contract about it.
Under the section on compensation, I only found the following passage:
“The contractor’s fee is guaranteed as a fixed price. Costs for utility connections—gas, water, electricity, and sewage—are not included in the fixed price and are to be borne by the client.
This fixed price applies until handover unless construction does not begin within six months from the date of contract signing due to circumstances for which the contractor is not responsible.
Additional costs resulting from special requests, official requirements, force majeure, or circumstances for which the client is responsible, as well as the conditions listed in § 3 (1), are not included in the fixed price.”
I should mention that this is a small company. As a layperson, I cannot gauge how much a 50% increase in the price of wood affects the cost of a solid wood house. It would likely mainly impact the roof structure, but to what extent? 🙄
H
hanghaus200010 May 2021 16:40Musketier schrieb:
Even if an external tradesperson could do it for half the price, they are usually not available on short notice. This would cause delays for which the client would be responsible. Additionally, this creates a weak point regarding liability risks.
What other choice does the client have than to accept the overpriced offer from the general contractor? Take it or leave it. Additional costs are often not reported, change orders are incorrectly calculated and usually overpriced. Many people don’t even realize that a change order is invalid if additional costs were not registered. If you like to accept that, feel free. I would definitely take a close look at it. Again, happy to help forum members with this.
[QUOTE="nordanney, post: 495589, member: 14669"]
Yes, it happens. For example, I’ve been managing a developer project for 1.5 years. Neither the shell construction company nor the landscaping contractor showed up anymore. We’re talking about a project with almost 300 apartments. At this point, there is nearly a one-year delay.
That’s actually how construction life is. Even on large sites.
No one denies that. But what do you gain from it? The court ruling is in 2023, the next appeal in 2024. Are you waiting for the end of the lawsuit?
No. That’s not true. Especially small contractors have problems. They now only sell their services or the house and only secure craftsmen and materials in 2022. Until then, costs run away. That’s normal and has been the case for a few years.
No, then you’re the tough guy telling your family, “I’m right – you just have to wait longer for the new house. We can handle paying rent and mortgage interest double. Also the move to a holiday apartment because we have given notice/ sold our current house/ apartment.” Yeah, right.
You still don’t seem to understand – even after the hundredth time – that this was never really my point.
Out of 10 builders, 2 say: “I don’t want to pay that” – 8 pay without issue.
The 2 who don’t pay get away with it because the general contractor just "carries them through." Ultimately, in most cases nothing happens at all, your house gets built as usual, and the GC simply gets paid according to the fixed-price agreement.
It was mainly about post #5. Accepting everything you’re given because you think you HAVE to and otherwise the GC won’t build your house… Typical worst-case scenario thinking out of fear...
We’re already at the point in this thread where I have to tell my kids/my wife and all relatives that we might file for personal bankruptcy in the next 3 years 😀
Keep calm 🙂
Yes, it happens. For example, I’ve been managing a developer project for 1.5 years. Neither the shell construction company nor the landscaping contractor showed up anymore. We’re talking about a project with almost 300 apartments. At this point, there is nearly a one-year delay.
That’s actually how construction life is. Even on large sites.
No one denies that. But what do you gain from it? The court ruling is in 2023, the next appeal in 2024. Are you waiting for the end of the lawsuit?
No. That’s not true. Especially small contractors have problems. They now only sell their services or the house and only secure craftsmen and materials in 2022. Until then, costs run away. That’s normal and has been the case for a few years.
No, then you’re the tough guy telling your family, “I’m right – you just have to wait longer for the new house. We can handle paying rent and mortgage interest double. Also the move to a holiday apartment because we have given notice/ sold our current house/ apartment.” Yeah, right.
You still don’t seem to understand – even after the hundredth time – that this was never really my point.
Out of 10 builders, 2 say: “I don’t want to pay that” – 8 pay without issue.
The 2 who don’t pay get away with it because the general contractor just "carries them through." Ultimately, in most cases nothing happens at all, your house gets built as usual, and the GC simply gets paid according to the fixed-price agreement.
It was mainly about post #5. Accepting everything you’re given because you think you HAVE to and otherwise the GC won’t build your house… Typical worst-case scenario thinking out of fear...
We’re already at the point in this thread where I have to tell my kids/my wife and all relatives that we might file for personal bankruptcy in the next 3 years 😀
Keep calm 🙂
N
nordanney10 May 2021 16:46exto1791 schrieb:
You still don’t seem to understand—even after the hundredth time—that this was never really my point. exto1791 schrieb:
A general contractor can’t just decide not to come anymore starting today and leave the construction site idle for a year, right? That’s complete nonsense… Nobody would do that. exto1791 schrieb:
That only happens if things really escalate badly. I understand what you’re saying. I also wrote that this needs to be handled pragmatically. But what you don’t realize is that these “problems” happen every day. Craftsmen leave homeowners stranded on a daily basis. Even if the craftsmen are at fault, that doesn’t matter at first because the construction site is simply at a standstill.
No one has to accept it, of course, but outright rejecting the situation isn’t necessarily the right or constructive way to go.
H
hanghaus200010 May 2021 16:49Tolentino schrieb:
In the future, I would only work with individual contracts or exit clauses. You never know what kind of general contractor you’ll end up with. Hello, I completely agree with you on that.
nordanney schrieb:
I understand what you're saying. I also mentioned that you have to deal with this pragmatically. But you don’t seem to realize that these "problems" happen every day. That tradespeople leave the homeowners stranded daily. Even if the tradespeople are at fault—it doesn’t matter at first because the construction site is stalled.
Nobody has to simply accept this, but in doubtful situations, outright rejecting everything is the wrong, non-result-oriented approach. Absolutely right. I would argue that this "abandonment"—poor workmanship and so on—has nothing to do with the fundamental discussion here. I also know of projects where everything went wrong, there were only issues with the general contractor (GC), and the subcontractors (subs) didn’t care at all.
All of this has happened and still happens repeatedly—completely independent of the current market situation. So basically, it has little to do with that. This is a typical problem in construction...
This is also why I suspect many GCs are basically looking for ways to squeeze even more money from the homeowner because of the market situation, even when it's only partially justified.
As a rule, I’d always start out skeptical and respond more negatively, insisting on sticking to what I actually agreed upon with the GC. If you have a good relationship with the GC (which is why I always say: the GC should be carefully selected), it will ultimately work out reasonably well.
exto1791 schrieb:
Due to the construction boom, even the smallest construction companies will not go bankrupt, as upcoming projects have already been planned and the order books are full until mid-2022.Insolvency law is a very broad area full of misconceptions ;-)https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
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