Rising tile prices: can a roofer pass this price increase on to the client?

Due to high energy prices, roof tile prices are rising. Some factories have even shut down tile production because it costs too much to keep the drying kilns running. These cost increases also affect the roofer. In practice, in the roofing contractor-supplier relationship, general terms and conditions of the supplier or the HIBIN terms and conditions of sale commonly used in the industry often apply. These conditions state that the supplier may pass on price increases to the roofer. Can the roofer then pass this price increase on to the client? Noreen Sturris answers that question in this article.

Price increases and new contracts

To start with an open door: for new contracts, it is important to discuss the consequences of possible price increases with the client at an early stage and make specific agreements about them. There are several ways to do this.

Bouwend Nederland has prepared a model contract provision that explicitly leaves open the possibility of price compensation during the execution of the work (by mutual agreement). More explicit is to include a provision whereby the tender is based on the cost price level as it applies on the date of the tender and that price increases (from a certain percentage) of cost-determining factors are passed on. In this way, price increases in the contract are accommodated.

Price increases and existing contracts

In the case of existing contracts, the starting point is that the agreements of the contract apply. Has the roofer made no agreements with his client in the contract? Then the rules on price increases in the law or agreements in any applicable building conditions such as the UAV 2012 can be invoked. This is a common set of building conditions used in contracts with professional clients. The law and the UAV 2012 have options for passing on a price increase.

Price increases and the law

Article 7:753 BW (cost-increasing circumstances).

The law, specifically article 7:753 BW, provides for a possibility to pass on price increases. According to the law, these must be:

• cost-increasing circumstances not attributable to the contractor;
• that arise or come to light after the conclusion of the contract of engagement ; and
• which did not require the contractor to take those circumstances into account when determining the contract price.

Note! The legal text states that the court "may adjust the agreed price in whole or in part to the increase in costs," but in practice it is more likely that the price increase will be partially discounted. The judge will take into account the circumstances of the case and the contractor's entrepreneurial risk.

The 2013 AGM has a similar provision.

Section 47 UAV 2012

If the roofer works for a professional client, it is common for the UAV 2012 to apply. The UAV has a similar provision (para. 47 - the UAV applies only if the parties have agreed to it), but has the additional requirement of cost-increasing circumstances that:

• significantly increase the price of the entire work.

Different from the statutory provision is:

(i) the absence of a necessary judicial intervention; and
(ii) the presence of the requirement of a significant cost increase of the entire work.

What then is significant? Case law occasionally uses a threshold of 5% (of the entire contract sum). However, this is not a fixed figure.

Both Article 7:753 BW and Section 47 UAV are of regulatory law. This means that they can be deviated from in the contract. If these provisions are excluded, then the roofer has a last straw: an appeal to unforeseen circumstances.

Article 6:258 BW (unforeseen circumstances).

The statutory regulation of contingencies is of mandatory law and thus cannot be excluded in a contract. At the request of a contracting party, the court can modify or dissolve the contract. This can only be done if there are unforeseen circumstances "which are of such a nature that the other party may not, according to standards of reasonableness and fairness, expect unchanged maintenance of the contract."

The contingency rule is intended for extreme cases. Only when it is unacceptable or extremely inconvenient to one of the contracting parties for a contract to remain unchanged can the court modify or dissolve the contract. In a recent ruling, the Board of Arbitration ruled that the War in Ukraine counts as an unforeseen circumstance. As a result, continued unchanged performance of a contracting agreement was no longer considered justified. Unfortunately, it does not follow from the ruling how the pain is subsequently distributed. What is clear is that when there are huge price increases caused by the War in Ukraine, the contractor can claim an adjustment of the contracting agreement.

In all cases: alert the principal and engage in conversation!

In all cases, it is very important to substantiate the price increases (in writing) as quickly and as concretely as possible and to start the conversation. In the event of a justified warning, the client also has the option of simplifying or limiting the work. In short, start talking to each other!