What is a fluctuation clause in a contract

What is a fluctuation clause in a contract?

Sometimes when you are agreeing the price of a project with a builder they will ask for a fluctuation clause to be inserted into a contract

This is to protect the builder from unexpected price rises in materials

A developer wants to know their build costs before a project starts

This is to help with cashflow planning

It is also a good way to track spending on a project

What is a fixed price contract?

Many developers ask a builder to sign a fixed price contract

This means that no matter what happens the builder cannot ask for more then the agreed sum to finish the project

But this means that the builder will assume all the risk of potential increased costs

And the developer will  assume none

As you can see this is a very one sided arrangement

This is one of the reasons a builder puts a mark up on his prices

Negotiating fairly with the builder

Some people try and fight the builder tooth and nail to get his price down as much as possible

They try to pick n mix from a builders quote

But a builder can’t be expected to work for a small profit and assume all the risk of potential future problems and costs

contract is meant to protect both parties

Its always advisable to use a contract on a refurbishment project

One of the most common contracts used is the JCT contract

Contractual negotiations should be carried out in a spirit of transparency and fairness

Its important that every detail is ironed out before work begins

It makes for a better working relationship if both parties know where they stand

A builder walking off a project halfway through due to contractual disputes is a common event

And it is not a good place for a developer to be

Be careful of contractual disputes with a builder

Just remember if you want to play hardball with a builder at the contract negotiation stage he has probably been doing it a lot longer then you

And if you think you are going to pin him down with the contract think carefully

If you don’t keep to your end of it he can do the same to you

 

If you need advice on deciding which contract to use contact us here

Contract Administration is one of the many services  we offer

 

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