What Is Time And Materials Pricing?
Construction contracts contain compensation mechanisms, or the terms explaining how the owner will pay the contractor. Time and materials (T&M) pricing is an agreement that the cost of additional work will be based on the time it takes the contractor to complete the work and the price of materials used for completion. Often this is referred to as a “cost-plus” basis. Many contracts will specifically state the contractor’s markup for materials (typically 10% to 20%) to the T&M portion of the contract.
T&M pricing may also be used as a basis for calculating change orders made after a fixed-price contract is entered. If the owner and contractor cannot agree on the price of a particular change order, they may default to the T&M pricing guideline set out in the original contract. If the owner and contractor were able to negotiate the T&M pricing at the beginning of the contract, when there were still good feelings, the change order pricing is less likely to be perceived as a price gouge (by the owner) or eating the cost (by the contractor).
How Are Time And Materials Disputes Handled In North Dakota?
T&M disputes are handled in the same manner as any contract dispute. The parties must look to the language of the contract. If it is clear and unambiguous, the plain intent of the language of the contract will control. If the contract is not clear and contains ambiguous language, the court will construe any ambiguity against the party who drafted the contract and created the ambiguity.
If the contract completely lacks language on T&M disputes, then the court will consider any change made outside of the original contract as an oral modification to the contract. If that occurs, who’s right and wrong will be determined at a trial. Among the considerations for the trier of fact will be the history of contracting between the parties, the course of conduct of the parties during the construction project, the common industry practices for any T&M charges, and the reliance of one party on any oral statements made by the other party.
Conclusion
It is important for owners, contractors, and subcontractors to put all time and materials pricing in writing at the beginning of the construction project. When these prices are clearly identified and agreed upon at the beginning, any disputes arising later between the parties will be quickly resolved. When facing construction contract disputes in North Dakota, understanding the available legal remedies is crucial. Consult with experienced legal professionals at SW&L Attorneys to learn appropriate legal avenues. If you need to consult with an attorney about enforcing your rights in a construction project or you are currently involved in litigation concerning a construction project, please contact us!
