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Mason Hester and Austin Moormen are lawyers at the Dallas law management office, Munsch Hardt. Opinions are typical of the authors.
The construction industry, and the largest market, faces uncertainty in the eyes of the evolving tariff landscape. This confusion is not surprising, given the institution and the reversal of varied rates in recent months.
Mason Hester
Courtesy of Munsch Hardt
The threat of increasing prices has caused many contractors and subcontractors to begin to increase their prices by up to 20%, while others delay potential contracts until the situation is stabilized. A contractor who hired a contract on April 1, 2025 could be made on the basis of significantly different prices than today.
However, business cannot stop. Parts of the construction industry must continue to effectively prices and participate in commercially viable contracts with the owners. What can contractors do to protect the potential increase in the time and costs of the project caused by these rates?
Cost Plus and GMP
In this case, cost-plane contracts are your friend. According to this type of agreement, you can argue that the rates are part of the cost of the work and the materials and transmit these costs to the owner.
Austin Moorman
Courtesy of Munsch Hardt
It is important to remember, however, that even in a cost-plain contract, the contractor may possibly have the duty to use reasonable efforts to minimize the costs caused. You must also be careful to review the contract to ensure that the rates are not on an exception on the compensable costs list.
This is where the details matter. If the contract has a guaranteed maximum price component and the increase in costs overcomes it, you could end up eating them.
Outside of this, rates may also delay the project schedule due to the shortage of materials. In this case, the clause of the force of the force of the contract must be reviewed as another potential path for the relief.
Forfeal sum
Existing contracts of a ski pass, also known as “fixed” or “stipulated” sum contracts, have a more difficult situation. Generally, in Texas If a contractor agrees to build an improvement for a fixed amount, the contractor assumes all the risks of the increase in later prices at work. The flipside is that they get the benefits of a decrease in prices.
In these cases, you must review the contract for a price climbing clause, which became more and more popular during Covid-19 Pandemic.
Standard Industry Contract Options
There are other potential avenues of relief, especially in the commonly used industry contracts.
For example, at the American Institute of Architects A201 that covers the General Conditions, a common template that uses owners and contractors, the word “rate” is never mentioned.
But Section 3.6 states that “the contractor will pay sales, consumer, use and similar taxes for the work provided by the contractor that is legally promulgated when the offers are received or the negotiations are concluded …”
This could be a great start there. This language provides a basis for contractors to argue that a rate is a tax rate and the contractor is only responsible for the taxes that exist at the time the offer was completed, not those that arise later.
Other options
Similarly, A201 contains a force majeure clause. While in an ideal world, the word “rate” would be included in this clause and provide an adjustment to the contract price, it could be argued that the rates are in the field of force majeure.
We are not saying that it will be a disposition, but it is a possibility. The answer will depend on the words that surround the FM clause, depending on the facts of each case and on whether the rates are within the same type of damage provided by the “labor disputes”, “fire” or “other causes beyond the control of the contractor” mentioned in the clause.
If there are no of these contractual provisions, the owner may still be willing to execute a change order. At least it is worth doing. If the owner does not want, you can still get an exception according to the guidelines provided by the Department of Commerce as a last resort.
Gather your data now
Regardless of what is in the contract, contractors must provide detailed documentation related to price increases to support their argument. This could include statements of suppliers related to the increase in costs caused by the rates, as well as the tests that the contractor did all the possible steps to minimize the costs.
If you have not yet signed any contract, the previous ones represent some of the contractual provisions you want to look for.
In addition, if you are still in negotiations, make sure that your force and price climbing clauses include the word “rates”. A broader language must also be taken into account as “any other actions by government authorities”.
And all of these provisions should “go down” to subcontractors, that is, sections that indicate that subcontractors will obtain additional time and money resulting from the rates, but only to the extent that the owner grants it to the contractor.
This situation changes rapidly and is still a relatively new and evolving area of the law. The above is only intended to provide a quick summary. But when these problems are raised for you and your company, if you at least know what to look for, it will be a step forward for the inevitable call with your lawyer.
