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 17:01SamSamSam schrieb:
In many cases, that’s simply not possible! So you are at a disadvantage there. I don’t understand that. I can reject any additional work, review change orders, and withhold payment until everything is properly documented and verifiable. You’d be surprised what’s possible. But only those who have actually learned how this works know that.
M
Myrna_Loy10 May 2021 17:03Let’s put it this way: you don’t even have to show up anymore to wear down homeowners. A reference to unavailable materials or missing machinery or skilled workers can delay any construction project for months. Those who complain have to wait their turn. And construction processes are no fun at all. Even when we as a company are in the right and there are verifiable damages or defects, our lawyers always try to find compromises to avoid legal proceedings. This is the case even for a large company that is otherwise very litigation-prone. Providing evidence is always difficult and expert assessments cost money, so every compromise is cheaper as long as the building is completed in the end.
M
Myrna_Loy10 May 2021 17:07hanghaus2000 schrieb:
I don’t understand that. I can refuse any additional work, review change orders, and withhold payment until everything can be verified. You’d be surprised what’s possible. But only those who have actually learned how this works know that. Yes, I’m amazed every day at what still doesn’t work in the construction industry, even with crystal-clear situations and timely, correctly formulated claims. At least once a week, our department experiences a severe case of disbelief. Unlike ten years ago, people now smile on the phone because they don’t want to look for a new refrigeration, drywall, or plumbing subcontractor given the current market conditions.
Courtesy and cooperation also have the advantage that you’re not left stranded in an emergency, changes are not always immediately invoiced, and you’re alerted to potentially costly planning errors. Playing hardball tends to backfire faster in the trades than a sack of cement.
S
SamSamSam10 May 2021 18:42hanghaus2000 schrieb:
I don’t understand that. I can refuse any additional services, review any extra work requests, and withhold payment until everything is verifiable. You would be surprised what’s possible. But only those who have learned how this works know that. What I meant was that with additional work, such as 10cm (4 inches) more excavation for the foundation slab, I can’t compare whether he is now offering it to me at a more expensive price, since the agreed excavation was only given as a lump sum and the excavation cost is not itemized separately.
Of course, he can’t charge exorbitant prices, but whether he adds 20% I have no way of verifying.
I have mentioned this elsewhere before: my lecturer in administrative law (a specialist lawyer in construction law) always said that, if in doubt, the opposing party usually ends up bankrupt. And in 99% of cases, that party is the builder. The last person here who insisted on a fixed price was @Hausbau0815, and I think most of us know how well that went.
Even if it doesn’t go that far, as has been said many times, one construction site gets priority first. Then a bit of attention to the “troublemaker,” then mainly back to the other site.
In a conversation, I would first try to get a sense of what kind of people I am dealing with. I would also ask where this is regulated in the contract and pretend not to know. From that position, you can still take either direction.
In this case, it’s a simple risk analysis.
Even if it doesn’t go that far, as has been said many times, one construction site gets priority first. Then a bit of attention to the “troublemaker,” then mainly back to the other site.
In a conversation, I would first try to get a sense of what kind of people I am dealing with. I would also ask where this is regulated in the contract and pretend not to know. From that position, you can still take either direction.
In this case, it’s a simple risk analysis.
Well, to sum it up: The construction industry is a lousy sector clearly dominated by idiots.
I mean, here in this country, there are rules down to the exact day about who has to sweep the stairwell and where dogs are allowed to relieve themselves and where not. But in construction, contracts are more like rough guidelines. If it doesn’t suit these people, they just stop showing up, sue you forever, or declare bankruptcy.
If I were @SamSamSam, I would tell the general contractor very clearly that this is their business risk and contractually no adjustment is foreseen. Period. End of story. I mean, where does it start and where does it end? Price fluctuations in building materials have existed since construction began, sometimes with bigger spikes.
How about the reverse?
@SamSamSam has to reduce working hours due to COVID, now it’s hard to pay the installments. Well then, the general contractor should kindly just adjust their prices down accordingly. It’s exactly the same and just ridiculous.
If the guy was an honest businessman, he would just chalk it up as bad luck and move on. To be honest, if my personal situation allowed it, I would even slap the contract in his face and tell him to build with some other fool.
Yeah, he would probably find plenty of those, but only because everyone puts up with it.
Alright, enough ranting, I’m going to grab a beer.
I mean, here in this country, there are rules down to the exact day about who has to sweep the stairwell and where dogs are allowed to relieve themselves and where not. But in construction, contracts are more like rough guidelines. If it doesn’t suit these people, they just stop showing up, sue you forever, or declare bankruptcy.
If I were @SamSamSam, I would tell the general contractor very clearly that this is their business risk and contractually no adjustment is foreseen. Period. End of story. I mean, where does it start and where does it end? Price fluctuations in building materials have existed since construction began, sometimes with bigger spikes.
How about the reverse?
@SamSamSam has to reduce working hours due to COVID, now it’s hard to pay the installments. Well then, the general contractor should kindly just adjust their prices down accordingly. It’s exactly the same and just ridiculous.
If the guy was an honest businessman, he would just chalk it up as bad luck and move on. To be honest, if my personal situation allowed it, I would even slap the contract in his face and tell him to build with some other fool.
Yeah, he would probably find plenty of those, but only because everyone puts up with it.
Alright, enough ranting, I’m going to grab a beer.
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