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
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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? 🙄
SamSamSam schrieb:
I believe it always depends on the situation when it makes sense to stand firm and when it’s better to be accommodating.
We’re talking about amounts here that will probably be in the four-figure range. That’s not the biggest issue in house construction.
Don’t get me wrong, I’m not saying to just give things away.
But insisting on paying absolutely nothing is, in my opinion, nonsense. Even though it’s a fixed price, it is based on assumptions that don’t always hold true and can lead to additional costs. For example: the contract specifies an excavation depth of 40cm (16 inches) for the foundation, but the soil is only truly load-bearing at 50cm (20 inches) depth. That’s when extra costs arise because additional work is required that isn’t covered by the contract. If I had already taken a firm stance on not covering any extra costs before, the contractor will now try to recover those costs. I can’t even compare the prices for the additional excavation and bringing in extra material because these items were never listed separately.
I think you have to approach this with a bit of tact and not immediately insist on your rights. But these are actually two different matters... These are typical additional costs in housebuilding that almost everyone faces—in very different areas—but ultimately this has nothing to do with the discussion at hand.
Sometimes I wonder why contracts are even signed if they are not going to be followed? 😀
As I said, it’s also a matter of attitude—and it always depends on the individual collaboration, like which general contractor (GC) you are working with.
In the end, though, I wouldn’t just casually shell out $5,000 just because the GC says, “Well… you know the current market prices… everything’s a bit more expensive now, it could be around $5,000 more” — and I’m like: Hmm, yeah, sure, you can’t help that—I’m willing to contribute. 😀
It doesn’t always have to go to court, but often a proper conversation and firmly insisting on your rights can get you through just fine. Otherwise, that would be quite problematic, wouldn’t it?
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Reinhard84.210 May 2021 14:38You could bring the boss a freshly brewed latte macchiato every morning and polish his X5, then he might like you even more 🙄
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nordanney10 May 2021 14:39hanghaus2000 schrieb:
Now ask yourself why. I'll say "because he's the fool." The contractors do this professionally. The customer is 90% of the time an amateur. Why? The customer is at the end of the food chain. They have the most to lose. They face time pressure. They face financial pressure. And so on.
This has nothing to do with professional or amateur (P.S. The customer is not borrowed ;-) )
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SamSamSam10 May 2021 14:40exto1791 schrieb:
But these are actually two different things... These are typical additional costs in house construction that almost everyone encounters—in various areas—but ultimately, this has nothing to do with the current discussion. That is true, but having the right and actually getting it are two different things, which my post was meant to illustrate. The typical additional costs you mentioned often end up being a few percent higher.
If he really wants those extra euros from you, he will get them. No contract is ever airtight enough to prevent someone from squeezing out a few percent more. We’re not talking about huge sums here; those have already been defined by the contract.
nordanney schrieb:
Why? The client is at the end of the food chain. They have the most to lose. They are under time pressure. They are under financial pressure. And so on.
This has nothing to do with being a professional or a layperson (P.S. The client is not a layperson ;-) ) No... I think you might be working in the wrong industry to understand this - no offense intended!
Sure, there are companies that operate like that – which is why I always say: "You should choose your general contractor wisely."
You don’t just lose a client... and you definitely don’t lose half a million euros (or dollars) “just” over 10,000€ (about 11,000 USD) – absolutely not!
This construction project will very likely no longer be completed within the planned timeframe.
The inconveniences that arise afterward, which ALSO (clearly, the client ultimately has a “fucking” problem too 😀) affect the general contractor, are not proportional to the amount requested. For this exact reason, the general contractor will never take this stress on, hire a lawyer, simply not show up at the site, or any other such drama. That would be completely unnecessary.
In the end, they just pay. Three out of five clients pay the requested amount – the other two just slip through, plain and simple.
You wouldn’t believe how much in the private sector runs on “goodwill” to keep a client or improve one’s reputation. That is worth so much more than a 10% lower margin on the whole contract for the general contractor.
You wouldn’t believe how many jobs at certain companies in the private sector go through without making a single cent of profit. Other factors are more important there.
With such a special market situation as we have right now, the general contractor simply has to factor in less profit on 3 to 5 houses. A healthy company will definitely survive that.
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