Who is responsible for material price increase during new construction due to CovID?
Started building our new home in April and since that time my contractor has told me that material prices have gone up due to CovID. He reached out the other day and said the place he gets his materials from called him and said that they would be having another price increase coming soon. The first time he told me this he made a comment that I should go ahead and talk to my bank about options for refinancing because he already thinks he will be over the price he gave me to build the home. My loan is a construction to perm so I can’t add any money to the current loan amount. The contract we signed with the builder states it is a Fixed Price Contract for Xxx,xxx amount of dollars. From my understanding the only extra money we would need to pay is if we made a change to what he already estimated and it cost more than his estimate. Otherwise any other price increase is on him and he has to eat that loss. Is that correct? Would the price increase due to CovID be my or his responsibility? I would like to know before approaching him and bringing this up.
- thebax2006Lv 76 months ago
Smart contractors lock in their prices when getting quotes for job related materials.
- oil field trashLv 76 months ago
There are a couple of things you need to fully understand. One is what the contract actually says about changes in material prices. The other is what will happen to the quality of your new house if you can hold his feet to the fire about material costs. If that happens, he will start finding ways to save costs and you will not get the best quality house.
I was in the construction business for 35 years. One thing I learned is that any contract is only as good as the willingness of the two parties to honor its terms. If a contractor gets his back against the wall on costs he will do and dare you to take them to court. That will cost you more than if you just make a reasonable adjustment to the contract.
- Coffee DrinkerLv 76 months ago
It depends what the contract says. You're interpreting it as a fixed-price contract. But when was the last time you read the entire contract line by line? Even if the first page appears to be worded as a fixed price contract is there a clause later in the contract that allow for price changes due to material costs?
It would be very unusual to find a long term business contract that did not have some provision for price changes caused by significant changes in the market price of materials.
Even if you are correct that the contract is written as a fixed-price you may need to pay extra to get the contractor to finish the job. It isn't going to do you any good to bankrupt the contractor before he finishes.
- ?Lv 76 months ago
This Covid is an "unforeseeable" thing that has to alter the original contract. It's only fair to renegotiate items in the contract that are affected by Covid.
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- Anonymous6 months ago
You're giving us your interpretation of what the contract says and then asking us to verify that you're correct.
You see how silly that is, right?
If you want verification that you are understanding your contract correctly, you need to allow someone else to read the actual contract.