Can Your Builder Increase the Price of a Fixed-Price Building Contract?

With the rise in building material costs and delays due to labour shortages, many property owners are asking if their builder can increase the price on a fixed-price building contract. In most cases, the answer is no. However, there are some exceptions, including:

1. Rise and Fall Clauses

Some contracts include a "rise and fall" clause, which allows the price to change based on material and labour cost fluctuations. If this clause is part of your contract, the builder may be able to adjust the price according to the agreed-upon terms.

2. Prime Costs and Provision Sums

Prime costs and provision sums are set aside for specific items, like fixtures and materials. If the cost of these items increases during the build, the builder may pass on the additional cost to the property owner.

3. Contract Clauses or Special Conditions

Certain special conditions or clauses may allow the builder to adjust the price. It's crucial to review your contract to understand whether any specific clauses allow for such adjustments.

Unless your contract specifically allows for price increases, a builder cannot increase the price of a fixed-price contract.

What Happens if There's a Delay in Construction?

A delay is generally classified as any stoppage or event that affects the builder's ability to complete the work on time as agreed in the contract. There are many potential causes of delays, including weather, staff shortages, material shortages, and financial difficulties. Some delays can be claimable under the contract, while others are not.

Claimable Delays Include:

• A variation requested by the property owner or builder
• Acts of God (fire, explosion, earthquake, civil commotion)
• Industrial disputes
• Disputes with adjacent property owners or residents
• Delays due to the owner's actions or inactions
• Delays in approvals or material supply
• Survey requirements
• Industry shutdowns during Christmas (over three weeks)

Disputed Delays

If there’s a dispute over a delay, the builder may need to provide evidence (such as supplier correspondence) to support their claim. If a resolution is not reached, they can seek mediation services through the Queensland Building and Construction Commission (QBCC).

Builders Demanding Extra Payment for Materials and Labour

The QBCC has warned that some building contractors are demanding additional funds to cover increased material and labour costs. Under a fixed-price contract, there may not be any legal basis for this, and property owners should seek legal advice before agreeing to any price increases.

Need Legal Advice?

As building delays and material price increases continue to be an issue, it’s crucial to understand your rights. The contract and commercial experts at GLG Legal can help you navigate these challenges.

📞 Phone: (07) 3161 9555
📧 Email: info@glglegal.com.au