February 24, 2022 – You are living it daily: price volatility, inflation, supply chain… all immeasurable impacts on your ability to perform your electrical subcontract. And, to top it off, this is likely your first pandemic, so you have no previous experience upon which to draw.

What do you do? Well, here are some things to consider.

First, take inventory of your risk profile. If you are experiencing unanticipated price increases for key material items, verify whether you have any recourse in your current contract, then measure and assess the amount of the price increase.

Normally, the risk of price increases rests with the sub. You can address this risk by qualifying your bids to account for the risk and make it a shared risk with a measured benchmark (Legal Desk, EBMag May 2021). If you do not have an express recourse in your contract, then you may have to look to an implied recourse.

Second, give notice—immediately. Set out, in great detail, your rationale for claiming an increase in your subcontract price, and provide that notice upstream to either the GC or construction manager (or the owner, when you are contracting directly with them). Notice of a potential claim is almost always an element to any recourse. Notice allows all parties to mitigate the issue of increased costs.

Third, whether there is an express provision or some form of implied provision in your subcontract to seek recourse, you must establish a causal link between the impact arising out of the pandemic and the increased material costs.

Sounds like nonsense, but it is still required for seeking legal recourse. For example, did delays in the project move you to increased material pricing? Further, what accounts for the price increases between the date you submitted your price and the date you purchased your materials?

You need to compile the specific causal links, as they will be the grounds for entitlement to a potential price increase claim.

Lastly, change your corporate culture. Do not assume you are entitled to any recourse. Force majeure is not an implied term to a contract and, even should you have such a clause in your contract, the typical recourse is an extension of time—not an increase in your subcontract price.

(Besides, an extension may actually hurt you more if prices continue to rise on materials you have yet to purchase.)

Rejecting a sense of entitlement permits you to better assess and manage the risk during the bid process, perhaps by qualifying your bid (which, in itself, is a risk that could see you disqualified for being non-compliant).

Dan Leduc is a partner in the law firm of Norton Rose Fulbright LLP, and practices exclusively in the area of construction law. He is always happy to take on new clients from anywhere in Canada. Email him at
dan.leduc@nortonrosefulbright.com.

This column—along with more great content—appears in the February 2022 edition of Electrical Business Magazine. Back issues are located in our Digital Archive.