Due to the war events in Ukraine and the global sanctions imposed on Russia in this context, the prices of many construction materials have risen, in some cases considerably. About 30 % of construction steel comes from Russia, Ukraine and Belarus. In addition, there is the high proportion of pig iron (40 % from these countries) and various other raw materials that are necessary for steel alloying. Around 30 % of the local bitumen supply is also dependent on Russia. Likewise, the cost of energy and fuel has risen considerably.
These developments have extreme implications for future construction projects. Particular care will have to be taken to consider the scheduling and pricing implications of supply shortages and cost increases of key construction materials. Problematic is the adjustment of already agreed upon construction contracts. In principle, such existing contracts are to be adhered to and the services are to be carried out by the companies as contracted. Notwithstanding this, the war events in Ukraine and the material shortages and material price increases caused directly or indirectly by them may also have legal consequences in this respect.
Extension of contract periods, section 6 of the Construction Tendering and Contract Regulations – Part B (VOB/B)
If, as a result of the war in Ukraine, construction materials from the affected product groupscannot be procured by the enterprise or cannot be procured at least temporarily, a case of force majeure or another unavoidable event within the meaning of section 6 subsection 2 no. 1 c) VOB/B is to be assumed. As a legal consequence, the completion deadline is extended for the duration of the materials’ non-deliverability plus an appropriate surcharge for the resumption of the work, section 6 (4) VOB/B. On the building principal’s side, this does not give rise to any claims for damages or compensation against the contractor. Conversely, the client is also not in default of acceptance toward subsequent trades subsequent trades if their performance has to be postponed for the aforementioned reasons (BGH, judgement of 20.04.2017, VII ZR 194/13).
Price adjustment pursuant to section 313 of the German Civil Code (BGB)
If the materials can in fact be procured for the aforementioned reasons, but the contractor would have to pay significantly higher purchase prices than calculated in the contract with the client, this can lead to a claim by the contractor for price adjustment.
The building principal and the contractor concluded the contract in the expectation that the necessary materials could be procured in principle and that their prices would only be subject to the general imponderables of economic life. They would not have concluded the contract with this content if they had known that the coming war events in Ukraine would have such an unforeseeable influence on the price development. Although the construction contract generally assigns the material procurement risk to the contractor’s sphere of risk, this does not apply in cases of force majeure. Significant price increases in the course of the Ukraine war are cases of force majeure. A case-by-case assessment must then be made and it must be carefully worked out for which material item and to what extent cost increases are entailed. On the one hand, it is not a prerequisite that the contractor is threatened with insolvency without a contract adjustment, but on the other hand it is not sufficient if the higher material prices exhaust the calculated profit. The extent to which a price adjustment is to be made is then again left to the consideration of the individual case. In its ruling of January this year on the rent adjustment in the course of the COVID 19 pandemic (judgement of 12.01.2022, XII ZR 8/21), the Federal Court of Justice (BGH) stated that in any case a distribution of the cost risk in equal parts is not permissible without considering the individual case. This consideration will have to be applicable to a price adjustment for material prices in cases of force majeure. However, only the pure material prices are the basis for the adjustment. Surcharges such as for profit, risk and construction site overheads are not taken into account.
The problems outlined are currently the subject of discussions and legal disputes at almost all large construction sites. SPIEKER & JAEGER’s construction lawyers are extensively active in this area. Early legal support with the aim of finding an amicable solution between the parties involved in the construction is the primary objective, but not – in the truest sense of the word – at any price.