Understanding Impact of Increasing Construction Costs on Contract Termination

In the article on construction contracts and increasing costs, the author discusses the implications of rising construction costs on contract termination. It is emphasized that mere cost escalation might not serve as a valid reason to terminate a contract. The piece elaborates on the distinction between price and cost, highlighting that cost increases, which often result from unforeseen factors beyond the contractor’s control, should not automatically justify contract termination.

The author provides insights into relevant contractual clauses that pertain to cost escalation scenarios. It is noted that standard forms of contracts commonly address cost fluctuations, attributing them to the contractor’s responsibility under defined circumstances. The article underlines the importance of carefully examining the contract terms and obligations before contemplating termination based on cost escalation.

Furthermore, the piece delves into the legal perspective, emphasizing the need to assess the impact of cost increases on the fundamental purpose of the contract. It is suggested that parties should explore alternative resolution mechanisms and negotiate in good faith to mitigate the effects of rising costs rather than resorting to immediate termination.

Overall, the article presents a nuanced argument that challenges the automatic assumption that escalating construction costs warrant contract termination. By drawing attention to contractual nuances, legal considerations, and negotiation strategies, it offers a comprehensive analysis of the complexities involved in addressing cost escalation within the construction industry.

Read the full story by: Mondaq