In an article published online in Risk Management Magazine on August 23, 2021, Partner Natalie Mark discusses contractual solutions to account for the rising costs of lumber.
“Lumber prices have soared in an unprecedented way, increasing over 275% in the construction industry since May 2020. This has caused significant financial hardships for unprepared owners, suppliers, subcontractors, builders and contractors,” she writes. “In an effort to protect against having to foot the bill for the rising costs of lumber (or any other type of raw materials), there are several viable contractual solutions that should be considered in your construction contract.”
Mark walks through contractual strategies to deal with inflated lumber prices, including pre-ordering lumber and incorporating that fixed price into the contract, utilizing price escalation clauses, shared price clauses, and force majeure clauses.
“Everyone should engage in pre-contract negotiations and determine what type of construction contracts and clauses work best for them,” she concludes. “Failure to do so can result in a loss of profits, higher legal fees and delayed construction.”