Alert duty
Additional work means extra work for a contractor and therefore more costs. That makes sense. But the question is who pays for those costs. The contractor or the client? Under the law, the contractor has a duty to warn. He must inform the client in a timely manner that additional work will result in additional costs. If the duty to warn is fulfilled, the costs will be borne by the client. Forewarned is forearmed, so to speak.
But what exactly does this duty to warn entail? Should the contractor also provide advance insight into the exact cost of the extra work? Or can the contractor suffice with the mere notice that the additional work will result in a price increase? This regularly arises in practice. Judges ruled differently on this issue.
Supreme Court provides clarity
Recently, the Supreme Court (HR July 1, 2022, ECLI:NL:HR:2022:989) tied the knot. The outcome favors contractors. In short, the contractor does not have to submit the arithmetic to the client in advance by himself. It is sufficient for him simply to state that the additional work will result in a price increase. If the client wants to know exactly what it is going to cost, he should take the lead and have a conversation with the contractor about it.
Additional work
Additional work is an addition or change in the agreed work desired by the client. When building a house, for example, one might think of additional dormer windows compared to the original design. Or, for example, the choice of a better or more luxurious material than originally envisioned. The law provides that in such a case, the contractor must promptly alert the client to the need for a resulting price increase, unless the client should have understood that need by itself.
The Supreme Court’s decision
The Supreme Court has clarified how the law should be interpreted on this point. The point is that the client knows in advance that the additional work desired will cost him money. Indeed, consent to additional work does not automatically also mean consent to a price increase, the Supreme Court said. If the client cannot himself suspect that the extra work is going to lead to extra, the contractor has a duty to warn. The client must be protected from financial surprises. However, this protection does not go so far as to also require the contractor to pre-calculate in advance to the client exactly what the additional work will cost. If the client does want to know, he should take the initiative and discuss this with the contractor.
Price
But what if, although the client was well informed, the price was not discussed with the contractor? In that case, a “reasonable price” is due for the additional work. In that case, the pricing should follow the prices that the contractor normally negotiates for similar work and what is common in the market.
Practical
The Supreme Court ruling favors contractors. It provides additional tools for collecting an overtime claim. At the same time, it still remains important to properly record arrangements for additional work in writing (e.g., by e-mail). This can be used to prove in retrospect that the client agreed to the additional work and knew it would result in a price increase. In turn, to avoid unpleasant surprises, the client would do well to seek clarification from the contractor in advance as to the exact extent of the price increase. Again, the advice is to put agreements in writing.
Cost-increasing circumstances?
In addition to additional work, a price increase may also be at issue in so-called cost-increasing circumstances. These are circumstances that come to light after the conclusion of the contract and cannot be attributed to the contractor. An extraordinary increase in commodity prices comes to mind. In that situation, the contractor is subject to a similar duty of warning as for additional work. Therefore, the Supreme Court ruling may also be relevant in cost-increasing circumstances. That would mean that even in that situation, the contractor does not have to state in his warning exactly how much the client will have to pay extra. Whether this parallel can be drawn will have to be seen in case law.
This contribution was written by mr. Michiel van Essen, affiliated with the Real Estate Practice Group.
