Material prices are rising: what the construction contract allows and what it does not

Who bears the price risk?

In principle the contractor (Auftragnehmer). Anyone who submits a quote calculates the material and wage prices up to completion. The client (Auftraggeber) pays the agreed price. That is the core of a fixed price and a lump-sum price.

§ 2 para. 7 no. 1 VOB/B says it clearly: If a lump sum is agreed as the remuneration for the work, the remuneration remains unchanged. If only procurement costs change during the course of the work, that is no reason for a price change.

When is an adjustment possible nonetheless?

1. Considerable deviation of the work

If the work carried out deviates so considerably from the work provided for in the contract that holding to the lump sum cannot reasonably be expected, then on request there is compensation taking account of the additional or reduced costs (§ 2 para. 7 no. 1 sentence 2 VOB/B, with reference to § 313 BGB). The starting point is the basis of the price calculation.

This concerns changes to the work, not general price increases.

2. Change of quantity or work

With unit price contracts, the contractual unit price applies if the quantity carried out deviates by no more than 10 per cent. For the excess above 10 per cent, a new price must be agreed on request, taking account of the additional or reduced costs (§ 2 para. 3 no. 1 and 2 VOB/B). If the quantity falls short, a rule on increasing the unit price applies (no. 3).

For changed or additional work, § 2 paras. 5 and 6 VOB/B apply (new price formation, timely announcement of the claim to additional remuneration for additional work). In a BGB contract, §§ 650b and 650c BGB govern the right to give instructions and the adjustment of remuneration according to the costs actually required, with reasonable surcharges. More on this at Nachtrag in a construction contract.

3. Disruption of the basis of the contract (§ 313 BGB)

If circumstances that have become the basis of the contract have changed seriously after the contract was concluded and the parties would not have concluded the contract, or would have concluded it with different content, an adjustment can be demanded to the extent that one party cannot reasonably be expected to hold to the unchanged contract, taking all circumstances into account, in particular the contractual or statutory allocation of risk.

This is the exception. Price increases are part of the normal entrepreneurial risk. An adjustment comes into consideration only for extraordinary developments, and the hurdles are then high. If escalation clauses are agreed or excluded, this counts in the allocation of risk.

Escalation clauses: the right tool

A price escalation clause ties the remuneration to price developments. A distinction is made between:

• Material price escalation clause: refers to certain materials (for example steel, copper, insulation materials).
• Wage escalation clause: refers to changes in wages under collective agreements.

The public sector uses them under fixed principles: the Federal Government’s procurement manual provides for a material price escalation clause, for example, when materials are particularly price-sensitive, the period between quote and completion is at least 10 months (6 months in justified exceptional cases) and the share of material costs reaches at least 1 per cent of the estimated contract sum (VHB Bund, price principles). These are rules for federal construction projects that bind private clients only if incorporated into the contract. They are, however, a good orientation for your own clauses.

A usable clause governs:

1. Which materials are covered.
2. Base price and reference date (for example the price on the day the quote was submitted).
3. Which index or evidence applies (producer price index, supplier invoice).
4. Threshold (from which change the price escalates) and period.
5. Duty to provide evidence.
6. Settlement (surcharges, VAT).

Protection in the quote

Before you send a quote:

• Limit the validity period: “This quote is valid until …”. The longer you are bound, the greater the risk.
• Price reservation for materials with strong fluctuations, provided the customer accepts it.
• Set delivery times and deadlines realistically. A delay can mean additional risk.
• Show material items separately, so that changes can be traced.
• Propose an escalation clause, especially for long construction periods.

And the supply chain?

If material is not available, that is in principle the contractor’s procurement risk. A hindrance comes into consideration only if the cause lies in the client’s sphere of risk or there is force majeure (§ 6 para. 2 VOB/B). On this and on giving notice: Behinderungsanzeige.

After the contract is concluded: how to proceed

1. Read the contract: fixed price, lump sum, escalation clause, price reservation?
2. Clarify the cause: price increase alone or a change to the work?
3. Make contact: negotiate objectively, present evidence (supplier prices, index).
4. Agree in writing: Nachtrag or contract amendment.
5. Without agreement: legal review before you stop work.

Frequently asked questions

Sources and status

• § 2 paras. 3, 5, 6 and 7 VOB/B – remuneration (2016 version, checked against the statutory text in the BauWalker corpus)
• § 6 para. 2 VOB/B – hindrance
• § 313 BGB – disruption of the basis of the contract
• §§ 650b, 650c BGB – right to give instructions, adjustment of remuneration
• VHB Bund (reading version 2023), principles on price reservations and material price escalation clauses. An administrative provision for federal construction projects, not a statute.
• Stand: 19.10.2026. Case law on adjustment under § 313 BGB in the case of price jumps was not evaluated here.
• Quotations of statutory text are given in translation; the German wording is authoritative.