While travelling and outings have been limited due to the pandemic, construction has been booming. Since people are spending more time at home, they want a space that reflects their tastes and is adapted to their new lifestyle. So, they’re using the money they’d normally spend on a vacation to renovate their home.
Due to growing demand, slower material production times, and high import costs, the price of building materials has surged. Lumber, windows, and doors, for instance, have become much costlier. According to the Quebec Hardware and Building Supply Association, some prices have even risen by 20% – and some are still rising.
Since these unpredictable price hikes are likely to affect overall project costs, we recommend that contractors add a clause to their contracts that covers unexpected price increases.
If you’re a member of the Quebec Home Builders’ Association (APCHQ), which is one of our partners, you have access to contract templates that already include these clauses.
If you’re not an APCHQ member, please contact your lawyer or legal advisor to learn how to protect yourself against unforeseeable price hikes.
Below, you’ll find several clauses that you can incorporate into your contracts to protect yourself against unexpected price increases. These clauses have been drafted for specific circumstances, so whether you’re working on a new construction, renovation, or subcontracting project, be sure to choose your clauses carefully.
If you’re drafting a subcontracting agreement for a new construction and renovation project (contract AP-038, which APCHQ members can download in French only), you can add clause 3.3:
“In the event that unforeseen increases in the cost of materials or changes to the terms of employment provided in the collective agreement result in an increase in the subcontractor’s construction costs, prior to the work being delivered, the subcontractor will be entitled to revise the contract price accordingly, as long as the main agreement between the client and/or building owner and the main contractor allows for such a revision. The subcontractor must justify the increase to the main contractor and obtain the client’s written consent. To this end, the main contractor undertakes to sign contract change form AP-048 within fifteen (15) days of having received the client’s written consent to change the contract.’’
If you’re drafting a fixed-price contract for new construction and renovation projects (contract AP-072, which APCHQ members can download in French only), you can add clause 6.3, “Cost Increases”:
“In the event that the Contractor’s construction costs increase due to unforeseeable increases in the cost of materials, prior to the reception of the immoveable, then the Contractor shall be entitled to increase the price of this Agreement, under reserve of providing the Client with justification of same. The Client undertakes to sign any “Change to Contract” form with respect to any such modification of the construction costs, within fifteen (15) days of the Contractor providing the Client with the justification of the increase in the costs of materials. The parties shall be bound by such modification to the Contract Price.”
If you’re drafting a preliminary contract for a new construction project (contract AP-022, which APCHQ members can download in French only), you can add clause 7, “Changes to the Sale Price”:
“In the event that unforeseen increases in the cost of materials or modifications to the terms of employment provided in the collective agreement or the Decree result in an increase in vendor’s construction cost prior to the date of signature of the deed of sale, the latter shall be entitled to revise the contract price accordingly, while justifying said increase to the promissory purchaser. Furthermore, the vendor shall be entitled to increase the contract price in the event that La Garantie de Construction Résidentielle (GCR) prescribes, before the signing of the deed of sale, any fee or any increase of fee. To this end, the promissory purchaser undertakes to sign any document amending the contract price, within fifteen (15) days following production by vendor of supporting documents attesting to the increase. The contract price thus amended shall become the new selling price and shall be binding on the parties.”
If you’re drafting a new condo building contract (contract AP-022, which APCHQ members can download in French only), you can add clause 7, “Changes to the Sale Price”:
“In the event that unforeseen increases in the cost of materials or modifications to the terms of employment provided in the collective agreement or the Decree result in an increase in vendor’s construction cost prior to the date of signature of the deed of sale, the latter shall be entitled to revise the contract price accordingly, while justifying said increase to the promissory purchaser. Furthermore, the vendor shall be entitled to increase the contract price in the event that La Garantie de Construction Résidentielle (GCR) prescribes, before the signing of the deed of sale, any fee or any increase of fee.
To this end, the promissory purchaser undertakes to sign any document amending the contract price, within fifteen (15) days following production by vendor of supporting documents attesting to the increase. The contract price thus amended shall become the new selling price and shall be binding on the parties.”
If you’re drafting a new home building contract (contract AP-026, which APCHQ members can download in French only), you can add clause 12, “Changes to the Contract Price”:
“In the event that modification to the terms of employment provided in the collective agreement or the Decree result in an increase in the contractor’s construction cost prior to the date of delivery of the property, the latter shall be entitled to revise the contract price accordingly, while justifying said increase to the client. Furthermore, the contractor shall be entitled to increase the contract price in the event that La Garantie de Construction Résidentielle (GCR) prescribes, prior to the date of delivery of the property, any fee or any increase of fee.
To this end, the client undertakes to sign any document amending the contract price within fifteen (15) days following production by contractor of supporting documents attesting to the increase. The contract price thus amended shall become the new selling price and shall be binding on the parties.”
If prices have seen an unforeseeable increase and you’ve already signed a contract without any provisions for higher material costs, you’ll need to turn to Quebec’s Civil Code to see what can be done. Changes might be possible depending on the type of contract, but situations vary.
The pandemic has clearly brought about its share of uncertainty and new trends. With the renovation craze showing no signs of slowing down and the cost of materials being difficult to predict, adding a clause to your builder’s contract is the safest way to protect yourself against price hikes.
If you have any questions, contact the APCHQ at 1-800-468-8160.
Contributors – Legal content: APCHQ Legal Services
