Price increase for additional work: Supreme Court finally provides clarity

In a judgment dated July 1, 2022, our highest court, the Supreme Court, has provided the hoped-for clarity on the content of the contractor's duty to warn in the event of additions or changes desired by the client to the agreed work (in other words, additional work). Since 2012, several courts have ruled that there is only a claim to compensation for a price increase if the contractor has also concretely disclosed that price increase. If not, additional work claims were regularly rejected completely for that reason. The Supreme Court now rules differently.

What was the case about?

In a matter concerning the making of castellated beams (a castellated beam is a steel main beam), a dispute arose between the contractor and the client over an invoice for additional work. The job was to make castellated beams. When asked by the contractor if any machining was desired, the client sent further detailing to the contractor. The cost of this additional work: €42,564.36. The client thought that was far too high. He did express his understanding that the eventually delivered castellated beams could not be made for the original price of € 9,000.00.

How did the district court and the court of appeals rule?

The parties do not reach an agreement and the contractor brings the case to court. It ordered the client to pay the invoice of €42,564.36. The client appeals.

Important to know is what the law (mandatory) rule about additional work. This states that if the client wants additions or changes to the agreed work, the contractor must notify the client in a timely manner of the need for and price increase, unless the client should have understood that need by itself.

Talk is silver, silence is gold

The trial court also agreed with the contractor and affirmed the court's ruling. The court finds that the client understood the need for a price increase by itself. This is evidenced by the fact that the client said that he did understand that the castellated beams could not be made for the original price. Thereby, he also understood the necessity of a price increase by himself.

Reasonable price increase?

The question that then remains is what size can that price increase be? After all, no specific amount had been mentioned by the contractor beforehand. The client had argued that the amount charged of €42,564.36 was not a "reasonable price."

Why a reasonable price? Because the law also regulates that if the price is not determined a reasonable price is due. In determining such a reasonable price, account is taken of what the contractor would normally stipulate as a price for similar work or the expectations created by the contractor regarding the price. With that in mind, the trial court ruled that there was a reasonable price that the client could also expect.

Supreme Court cuts knot

The principal disagrees with the ruling and takes the matter to the Supreme Court. The principal remains convinced that the claim should be dismissed because he had no concrete prior knowledge of the price increase. In doing so, he cites considerations of some judges in other cases.

The Supreme Court agrees with the rulings of the district court and the court of appeals. If the client should have understood the necessity of the price increase by itself then it is not important whether the client then also had insight into the (concrete) expected additional costs.

According to the Supreme Court, it is up to the client, if he has been made aware of the necessity of the price increase or had to understand the necessity by himself, to contact the contractor about the extent of the price increase. The client can then decide whether to actually commission the desired addition or change.

Moreover, the Supreme Court confirmed that if the amount of the price increase is not determined or a target price is set, the law provides that then because of those desired changes or additions, a reasonable price is due.

In short, the principal himself must take action!

Future

Of course, even this ruling does not resolve all potential disputes, but it does give the contractor much more leeway in additional work claims due to additions or changes desired by the client.

The advice remains to draw the client's attention to the need for a price increase as early as possible. If it is not yet possible to name a concrete price, then the contractor has the claim to compensation for a reasonable price behind him.

Are you facing additional work and price increases yourself and want to know the implications of this ruling or have other questions? If so, please contact our team. We will be happy to help you further.