Material price adjustment clauses in construction contracts - high risk?

Hello everyone!

My wife and I are currently looking for a house construction company and have received a sample contract from our favorite - a smaller, local provider.

It concerns the wording in the contract:

EXCERPT:

§2 Remuneration

Lump sum contract:

A lump sum price of €510,204.00 gross (before discount), in words: five hundred ten thousand two hundred four euros, is agreed upon as remuneration. The blue-highlighted positions from own work according to the Excel list are not included in the amount.

§3 Labor and material price adjustment clauses

Labor and material price adjustment clauses (material and transport adjustment clauses) are agreed upon as follows. In the event of price changes in material procurement > 20%, the affected services must be renegotiated. The agreed prices are – except for § 2 para. 3 VOB/B and other price adjustment possibilities provided for in the VOB/B as well as those resulting from general legal principles – fixed prices.

I view the wording very critically:

[*]From which baseline is the percentage increase calculated? If the prices in the fixed price were deliberately calculated too low, one would immediately exceed the 20% threshold when compared with the correct prices.
[*]Only increases are renegotiated, but not discounts?
[*]What does renegotiate mean? In case of a construction stop, the contractor could put us under extreme pressure and negotiate in his favor. A predefined procedure would be better in this case.
[*]At the end, there is also a reference to all other possible price increase options, which is very non-transparent to me again...

I would prefer to have a legal contract review carried out.

Do you also see these wordings critically?

I am grateful for any constructive response!

Did you have similar wording in your contract?

From which zero point is the percentage increase calculated? If the fixed prices were deliberately calculated too low, one would immediately exceed the 20% when compared with the correct prices.

The date still has to be fixed so that a basis is available.

Only the increases are renegotiated, not the discounts?

The adjustments go in both directions.

What does renegotiate mean? In the event of a construction stop, the contractor could put us under extreme pressure and negotiate in his favor. A predefined procedure would be better in this case.

Renegotiate means renegotiate. Predefined procedure means, from 20% price change you take over all further price changes (except the first 20%) - something like that? Then you can’t negotiate anymore either.

In the end, there is also the reference to all possible further price increase possibilities, for me again very non-transparent...

Why should a contract be concluded according to VOB at all? I don’t understand. There is the consumer construction contract according to the Building Code, which is very consumer-friendly. VOB only causes problems in the private sector.

I would preferably also like to have a legal contract review carried out.

YES YES YES!!!

The timing still needs to be fixed so that there is a basis.

Do you mean that the raw material price at point X is defined as the zero point and the percentages are calculated from there?
I thought it works like this: he puts a wood price of 50 euros into the calculation (which is actually already at 55 euros right now). If he then orders the wood 3 months later, the price is 60 euros and it is renegotiated?

Renegotiating means renegotiating. Predefined procedure means that after a 20% price change you take all further price changes (except the first 20%) - something like that? Then you can no longer negotiate.

Well, but what leverage do I still have in renegotiation? If the contractor orders a work stoppage until an agreement is reached, it could potentially take forever. In the end, he has completely different ideas about the renegotiation and you inevitably end up in court?

Why should a contract be concluded according to VOB at all? I don’t understand. That’s what the consumer construction contract according to the Building Code is for, which is very consumer-friendly. VOB only causes problems in the private sector.

The contractor builds privately and commercially, probably that’s why. I would also prefer the Building Code, but I don’t know if he would even agree to it if he has always used a contract according to VOB...

The contractor builds privately and commercially, that's probably why. I would also prefer the Building Code, but I don't know if he would even agree to it since he's always used a contract according to VOB...

Even lawyers advise against entering into VOB contracts with private individuals.

Do you mean that the raw material price is defined as zero at point X and the percentages are calculated from there?
I thought it works like this: he puts a wood price of 50 euros on the invoice (which is actually currently at 55 euros). Then, if he orders the wood 3 months later, the price is 60 euros and it is renegotiated?

Actually, he has to disclose his entire calculation, since it’s not just about wood but down to nails and whatever else. Talk to him about how he envisions it.

Well, but what leverage do I have left in renegotiations? If the contractor orders a work stoppage until an agreement is reached, it could potentially take forever. In the end, he has completely different expectations of the renegotiation and you inevitably end up in court?

According to VOB and the directive of the Ministry of Construction, it’s not that easy even for the general contractor. There are rules on what has to be proven (up to submission of invoices).

Aside from all the wishes of the general contractor, I personally would not enter into a contract according to VOB. For me, that is a direct knockout criterion – Building Code consumer construction contract or the general contractor should look for customers elsewhere.

P.S. Price escalation clauses are inadmissible in consumer construction contracts, by the way.

(...)
The adjustments go in both directions.
(...)

In theory, yes. In practice, the client would first have to even realize that prices have dropped by more than 20%, then prove it to the general contractor if necessary, and most likely sue...

So in practice, the clause only knows one direction: It will be more expensive in case of doubt, cheaper rather not.