BUSINESS ALERT: Contract Provision for Times of Inflation

As we all know, prices on raw materials are skyrocketing causing issues with bidding on jobs for anyone in the construction or manufacturing industries. To help our business leader clients throughout these industries, we have created a contract provision as a starting suggestion to their bid process, prime contracts, etc. 

CONTRACT PROVISION

The price or prices stated in this proposal are based on prices for component materials, labor rates applicable to the fabrication and erection of the same and freight rates, in effect as of the date of this proposal. If, at any time prior to the completion of performance of the work to be performed under this proposal, any of such material prices, labor rates, or freight rates shall be increased, then in respect of any of such work performed afterward there shall be a corresponding increase in the prices stated in this proposal.

We write because we are concerned that you may be unnecessarily absorbing price increases instead of passing them on. This letter highlights some positions and resources you may be able to use to successfully pass on price increases. As you know, raw material cost increases and wage inflation over the past year have forced increased prices. These unforeseeable price increases were beyond your control.
Certain material suppliers have asserted the “force majeure” clause in their agreements, which relieves these suppliers of some of their contractual responsibility to provide materials at previously-agreed volumes, prices and lead times.

Similar to these suppliers, you may be able to assert a “force majeure” claim in connection with your contracts, and we urge you to seek legal advice on this subject. For an overall summary of what force majeure is, you can review this online article:

https://www.americanbar.org/groups/litigation/committees/commercial-business/articles/2020/spring2020-force-majeure-construction-real-state-claims/.

First and foremost, you should review your contracts closely, as they may contain provisions that provide relief from cost escalations.

Need a customized version that fits your unique business?

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