What Contractors Need to Know About Price Acceleration Provisions
As of the time of this writing, the Washington Post reports that construction “has been deemed critical or essential in at least 16 states with business-closure orders.” Contractors in these states are no doubt pouring over their construction contracts, trying to decipher if their projects will remain on track in the coming months. Whether or not they emerge successful following the coronavirus disease 2019 (COVID-19) pandemic will depend largely on the contents of these contracts.
In this editorial, we discuss one of the most valuable provisions to have included in your contracts during this time: price acceleration provisions. These provisions are crucial for ensuring that companies like yours can cover costs, even while materials become increasingly scarce. For assistance with contract drafting and reviewing, a construction lawyer in Clarksville, TN, with Cotney Attorneys & Consultants is standing by.
These Provisions Will Become Increasingly Needed
In a recent New York Times article, Chris Heger, a vice president of a construction management firm based in Seattle, put the problem into context. “It’s not like when you build a house and can just go down to a Home Depot and get a different light fixture when you’re short.” Mr. Heger continued, “This stuff is all designed and planned years in advance.”
What do you do when your project needs copper from China or marble from Italy? Although you may have smartly stockpiled materials on your current project (a best practice moving forward), what do you do when your company begins to feel the pinch of delays in materials? A construction attorney in Clarksville, TN, is here to provide you with the answers.
These Provisions Protect Your Company from “Acts of God”
Similar to force majeure contract clauses, price acceleration provisions protect your company from the unexpected. Specifically, these provisions allow you to adjust the contract price to reflect actual project costs, so if your material costs suddenly rise, say from a global pandemic, you would be able to pass the cost along to owners, accordingly. Although these provisions generally apply to material costs, they can apply to labor costs in some instances — consult a construction law attorney in Clarksville, TN, for more details.
These Provision May Provide an Escape Hatch
No contractor wants to abandon a project that could have been a success under normal circumstances. But now more than ever, you must do what you can to protect your company. In some instances, price acceleration provisions can contain a termination for convenience provision — an escape hatch — that allows a contractor to escape a contract if the price of materials rise dramatically or materials become difficult to find.
Of course, owners aren’t going to be thrilled about the inclusion of such a provision, which is why it’s so important to work with a construction lawyer in Franklin, TN, whenever you’re negotiating or drafting contracts. An attorney with our law firm can negotiate on your behalf to ensure that contract provisions necessary to protect your company are always included.
Better Safe Than Sorry
It’s only natural that the industry should change following this unprecedented outbreak. Going forward, it’s best that your company stockpiles materials prior to a project commencing. Review your construction contracts to ensure that they contain price acceleration provisions, force majeure clauses, and other key contract provisions needed to combat coronavirus. And finally, maintain accurate records to ensure that you can support any claims for additional compensation due to rising material costs.
At Cotney Attorneys & Consultants, we understand that the cost of having an attorney regularly review contracts may be too much of a burden for construction companies during this time. This is why we are offering unlimited contract review through our subscription plans at an affordable monthly rate. For a low monthly price, you can also have access to attorney on-demand, unlimited phone calls with CCL, unlimited demand letters, and client portal access, all at our lowest tier.
Although a price acceleration provision is important to have in your construction contracts, it’s only one of many ways that your company can protect itself in the coming months. As the situation develops, we only hope that the construction industry can emerge from this pandemic stronger than ever, but until that time, it’s better to be safe than sorry. For a construction attorney in Franklin, TN, who will fight to protect your company from rising material costs and any construction-related legal issues, partner with an attorney from Cotney Attorneys & Consultants.
If you would like to speak with a construction law attorney in Franklin, TN, 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.