TORONTO — Disruptions in steel supply is only the latest in what seems to be a perennial problem with supplies in the construction industry suggests construction lawyer Annik Forristal, a partner with McMillan.
She distinguishes between situations in which contracts are already in place and new contracts being negotiated:
“For existing contracts, where a steel supplier’s ability to perform has been impacted by unanticipated events like delay in supply or fluctuations in steel prices, its ability to recover increased costs and obtain schedule relief will depend on the terms of the contract. Fixed fee/stipulated price contracts and unit price contracts, for example, typically place the risk of market fluctuations on the supplier, fabricator, or contractor…
“Suppliers should certainly get legal advice where necessary.
“On new contracts, the best advice is to avoid locking in on firm prices and fixed delivery dates wherever possible. While this may seem strange to customers, we do seem to be in an environment in which some sharing of the material supply risk is an appropriate and responsible thing to do — far better to pay a bit more if necessary and/or receive steel a bit later than necessary, than to squeeze the supplier to the point of insolvency.
“There are imaginative ways to structure the contract to achieve this, including price escalation clauses (with or without an upset limit), schedule relief clauses and the like.”