Construction Law

Can My Company Be Held to Honor a Contract If It’s Underbid?

It’s extremely difficult to create an estimate or bid that accurately predicts exactly what the project will cost. Cost overruns and estimating errors happen. It’s an unfortunate part of the process that you should do everything in your power to avoid.

In the event that your company underbids a project, you may be wondering if your company will be held to honor the contract and to absorb the extra costs. This can be a complicated question with answers that vary based on the terms of your contract and state. To know if your company has a chance of being forced to honor such a contract, contact an Asheville construction lawyer.

Related: Approaches to Cost Estimation

The Contract

Ideally, the executed contract lays out who is responsible for costs not covered by the initial bid. This is who will ultimately be responsible for the necessary funding for added materials costs. The clearer the contract is, the better. Having an Asheville contractor attorney available to review your contacts can prevent future underbidding issues.

Related: 5 Tips on Drafting Your Construction Contract

Fixed Bid vs. Time and Materials Arrangement

In a fixed bid arrangement, the construction company is responsible for paying for extra costs within the scope of work. This often reduces the profitability of the project. It can be legally enforced. On the other hand, if you have a time and materials arrangement, you can charge the client for the extra materials costs. Just be careful that your project doesn’t go so far over what you quoted or the client will not be happy about the added costs.

Hidden Conditions 

It’s sometimes impossible to know what kind of conditions you’ll find on the job site, especially with construction projects. Sometimes, you will find conditions that can cancel a project. For example, if you start the project only to discover an endangered species that would need to undergo a costly relocation first, your company should not be held responsible for these added costs. Speak with a construction lawyer to see what your options are. It may be possible to break the contract.

You should do everything in your power to avoid underbids whenever possible. In the event you have an underbidding situation, it may be helpful to get legal assistance before paying for extra costs. If you have questions about honoring contracts and underbidding, contact an Asheville contractor attorney from Cotney Attorneys & Consultants.

If you would like to speak with an Asheville contractor attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.